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Market in MinutesKatowice offices May 2017

Savills World Research Poland Offices

SUMMARYOverviewg Katowice is the fourth largest regional office market in Poland. Office stock in the city at the end of Q1 2017 stood at 447,100 sq m with over 1/3 of supply completed since 2014.

g We expect the office stock to increase by 43,000 sq m by 2018 year-end of which only 7,700 sq m will be completed this year.

g Demand for office space since the beginning of 2016 to March 2017 stood at 47,600 sq m.

g Availability of office space in Katowice at the end of Q1 2017 stood at 14.6%, down 2.8 pp when compared y-o-y.

g The vacancy rate in the city is expected to decrease by the end of 2017 as development activity is lower than in previous years.

g Prime headline rents in Katowice are in range of EUR 13.50 - 14.00 per sq m/month and are expected to remain stable over the next 18 months.

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“Being the heart of agglomeration inhabited by over 2.1 million people, one of the largest academic centres in the country and the centre of one of the largest industrial areas in Europe, Katowice is an attractive location for IT and SSC companies.” Tomasz Buras, Head of Poland, Savills

Photo by Alex Wisniewski / UM Katowice

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Market in Minutes | Katowice office market

KatowiceKatowice's population stands at close to 300,000, but the city is the heart of a conurbation inhabited by over 2.1 million people, which makes it the second most densely populated region in Poland. It is located in the south of Poland, by A4 motorway which links Ukraine with Germany via Krakow, Katowice and Wroclaw.

The city is also the capital of Silesia voivodeship and with Gliwice, Dabrowa Gornicza, Sosnowiec and Chorzow (part of the conurbation) is one of the strongest education centres in the country with 36 higher education institutions and almost 126,500 students enrolled in 2016.

Katowice is located in close proximity to three international aiports, including one in Pyrzowice, just 30 km north of Katowice city centre. The Katowice airport serviced over 3.2 million passengers in 2016, up by 5% when compared year-on-year.

Katowice and Silesia historically are the industrial centre of the country, but currently it is gaining on popularity among the business services sector and as a cultural zone, which consist of one the best concert halls in the world NOSPR, the International Congress Centre, Spodek Arena and Silesia Museum. Some of the cultural events organised in the city include: Rawa Blues Festival, Tauron Nowa Muzyka Festival, Mayday and OFF Festival.

The unemployment rate in Katowice at 2.8% (March 2017) was one of the lowest in the country, whereas the region's average stood at 6.5%.

The average monthly salary in Katowice stood at PLN 5,262 / EUR 1,247 (2015) and the voivodeship's average was PLN 4,221 / EUR 1,000.

Stock & supplyKatowice is the fourth largest office market among regional cities with over 1/3 of supply completed since 2014.

The main office locations in the city are concentrated along in the City Centre in the area of Korfantego St., Chorzowska St., Sokolska St. and Rozdzienskiego with Silesia Star, Altus, Nowe Katowickie Centrum Biznesu, Centrum Chorzowska 50 and Opolska 22. Other investments are also located close to the A4 motorway in the southern parts of the

city at Gornoslaska Av, Sowinskiego St. and Francuska St. where Centrum Biurowe Francuska, A4 Business Park, Atrium and Millenium Plaza are located.

Supply of office space in Katowice is estimated at 447,100 sq m, having increased by over 55,600 sq m in the last 15 months. During the first three months of 2017 only 4,000 sq m of office space was delivered to the market, and for the remaing part of the year another 7,700 sq m are expected to be delivered. The

current year will be thus one of the least dynamic years in terms of office development, also when compared with other regional cities.

Overall, there is only 29,000 sq m of office space under construction across the city, half of the development activity from 2015.

On the other hand, the office pipeline for 2018 is higher with over 35,300 sq m of office space to be delivered including TDJ Estate's .KTW I (18,200 sq m) and the fourth building at Silesia

GRAPH 1

Vacancy by age of building

GRAPH 2

New supply, letting activity and vacancy

Graph source: Savills, PORF

Graph source: Savills, PORF

“New supply at 11,700 sq m in 2017 will be one of the lowest ever recorded in Katowice and the lowest when compared with other major regional cities.” Wioleta Wojtczak, Head of Research, Savills

0%

8%

16%

24%

32%

40%

0

20,000

40,000

60,000

80,000

100,000

<2000 2000-2003 2004-2007 2008-2010 2011-2013 2014-2015 2016-Q12017

sq m

Stock (sq m) Vacancy rate (%)

0%

6%

12%

18%

0

25,000

50,000

75,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 2017

sqm

New Supply (sq m) Letting activity (sq m) Vacancy (%)

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May 2017

Business Park by Skanska (12,000 sq m). However, delivery date might be postponed as the construction process of some of the projects has not started.

Letting activity & net absorptionKatowice is a popular destination for IT and SSC companies which create majority of service centres in Katowice. Those two are joined by R&D and BPO centres.

Since the beginning of 2016, gross take-up in Katowice reached 47,600 sq m of which ca. 25% took the form of pre-leases and 10% of all transactions were due to expansions.

Some of the largest transactions from the last 15 months include: Rockwell Automation in A4 Business Park (pre-lease; 7,400 sq m), BPSC in Brema building (pre-lease; 4,300 sq m), Navo Orbico and Distribev Orbico in Silesia Business Park (new lease; 2,700 sq m).

Over 70% of total volume of letting activity between January 2016 and March 2017 was concluded in buildings erected in 2015 and later proving new projects are attractive for office occupiers due to their standard and quality. Only 6% of take-up was realised in buildings older than 10 years.

Net absorption in 2016 almost doubled when compared with 2015 and stood at 35,800 sq m. The 10-year annual level of net absorption amounts to 23,100 sq m.

Vacancy rate Availability of office space in Katowice in Q1 2017 stood at almost 65,200 sq m which translates into a vacancy rate of 14.6%, the highest when compared with other regional office markets. The rate has dropped by 2.8 pp when compared year-on-year.

Almost one third of the vacant space is located over three projects with availability of office space in excess of 5,000 sq m.

The highest vacancy of 32% was recorded in the newest builings built between January 2016 and March 2017, proving the commercialisation process is longer and leases are signed after the building is completed and not always during the construction process. Outlook

New supply of office space at the lowest level since 2011

The office market in Katowice is expected to exceed 0.5 million sq m in 2019 as development activity in the city is currently at the lowest level observed since 2011.

By the end of 2018, the market will grow the least when compared with the six largest office markets outside of Warsaw. This, together with a healthy demand for office space, will result in the vacancy rate to drop especially since a quarter of the pipeline has been already commited to.

The key driver for office demand is the city's unique location with an access to 5 million people in the Silesian voivodeship, availability of skilled workforce and a friendly business environment.

RentsPrime headline rents are now in the range of EUR 13.50 – 14.00 per sq m/month and are expected to remain stable over the coming months.

In addition to rents, tenants are obliged to pay a service charge which is in most cases quoted in PLN to limit losses from changes in exchange rates. The service charge level varies between PLN 13.00 – 16.50 per sq m/month.

Landlords are offering incentives such as a rent-free period and a fit-out budget, thus effective rents are ca. 15% - 20% lower than headline rents.

TABLE 1

Selected pipeline projects in Katowice

Table source: Savills

GRAPH 3

Letting activity by type (2016-Q1 2017)

Graph source: Savills, PORF

Expansion10%

Lease renewal / Renegotiation

5%

New lease / Relocation

56%

Pre-lease25%

Sublease4%

Building Developer Office size (sq m) Date

Warszawska 23 Cream 1,500 2017

Brema Brema 6,150 2017

Dabrowki 16B Metropolis 2,100 2018

Johna Baildona 66 II Opal 3,000 2018

Silesia Business Park D Skanska 12,000 2018

.KTW I TDJ Estates 18,250 2018

GPP IV Konrad Bloch Gornoslaski Park Przemysłowy 7,500 2019

Baildon Business Park I Echo Investment 12,300 2019

Market in Minutes | Katowice office market

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Savills ContactsPlease contact us for further information

Tomasz BurasManaging DirectorHead of Poland+48 (0) 22 222 40 00tburas@savills.pl

Dorota EjsmontHead of Landlord Representation +48 601 383 310dejsmont@savills.pl

Jarosław PilchHead of Tenant Representation+48 694 497 800jpilch@savills.pl

Wioleta Wojtczak Head of Research+48 600 422 216wwojtczak@savills.pl

KEY INFORMATION - Q1 2017

DEVELOPMENT ACTIVITY

AVERAGE SIZE OF PROJECTS UNDER CONSTRUCTION

47,200

SPACE UNDER CONSTRUCTION ACROSS THE CITY

28,900SQ M SQ M

NUMBER OF PROJECTS UNDER CONSTRUCTION

VOLUME OF GROSS TAKE-UP 2016-Q1 2017

AVERAGE SIZE OF TRANSACTION 2016-Q1 2017

SHARE OF LEASE RENEWALS 2016-Q1 2017

47,600 880 5% SQ M SQ M

LETTING ACTIVITY

Savills plcSavills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 700 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East.

This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.

Savills PolandQ22Jana Pawła II Av. 22 00-133 Warsaw

Marek PaczuskiDirector, Investment Department+48 666 042 891mpaczuski@savills.pl

Kamil Kowa Head of Valuation & Consultancy+48 510 201 209kkowa@savills.pl

SUPPLY

447,100 33%OFFICE STOCK

SHARE OF BUILDINGS COMPLETED BETWEEN 2014 - Q1 2017 IN STOCK

SHARE OF BUILDINGS OF OVER 10,000 SQ M

50%SQ M