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Property Times Warsaw Office Q3 2014 Lower volume of pre-lets DTZ Research November 2014 Contents Development activity 2 Demand 2 Vacancy and rents 3 Map - office subzones in Warsaw 5 Author Katarzyna Lipka Associate Director, Consulting & Research + 48 22 222 3132 [email protected] Contacts Kamila Wykrota Director, Head of Consulting & Research + 48 22 222 31 33 [email protected] Magali Marton Head of EMEA Research + 33 1 49 64 49 54 [email protected] Hans Vrensen Global Head of Research +44 (0)20 3296 2159 [email protected] After completion of almost 250,000 sq m during the first three quarters of 2014, the office stock in Warsaw reached 4.4 million sq m. The development activity remains strong with almost 700,000 sq m of office space being currently under construction. As a result the amount of new completions over the next two years is likely to remain at a high level. Leasing activity on the Warsaw market was slightly weaker than recorded in 2013. Renegotiations and renewals were still a common market practice, whereas the volume of pre-lets dropped significantly, mainly a consequence of growing amount of space available within existing buildings. Resulting from strong supply, the vacancy rate in Warsaw reached 13.8%, which represents a growth by 3 pp in one year. At the end of Q3 2014, prime asking rents in the central zones in Warsaw ranged from EUR 22 to 25 per sq m per month and in locations out of the city centre they were at a level of EUR 14-15.5 per sq m per month. Figure 1 Take-up by type Source: DTZ, WRF, f-forecast 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2006 2007 2008 2009 2010 2011 2012 2013 Q1-Q3 2014 New transactions + expansions Pre-lets Renewals and renegotiations
Transcript of Property Times Warsaw Office Q3 2014 - outsourcingportal.eu · Warsaw Office Q3 2014 Property Times...
Property Times Warsaw Office Q3 2014
Lower volume of pre-lets
DTZ Research
November 2014
Contents
Development activity 2
Demand 2
Vacancy and rents 3
Map - office subzones in Warsaw 5
Author Katarzyna Lipka Associate Director, Consulting & Research + 48 22 222 3132 [email protected]
Contacts Kamila Wykrota Director, Head of Consulting & Research + 48 22 222 31 33 [email protected] Magali Marton Head of EMEA Research + 33 1 49 64 49 54 [email protected] Hans Vrensen Global Head of Research +44 (0)20 3296 2159 [email protected]
After completion of almost 250,000 sq m during the first three quarters of 2014, the office stock in Warsaw reached 4.4 million sq m.
The development activity remains strong with almost 700,000 sq m of office space being currently under construction. As a result the amount of new completions over the next two years is likely to remain at a high level.
Leasing activity on the Warsaw market was slightly weaker than recorded in 2013. Renegotiations and renewals were still a common market practice, whereas the volume of pre-lets dropped significantly, mainly a consequence of growing amount of space available within existing buildings.
Resulting from strong supply, the vacancy rate in Warsaw reached 13.8%, which represents a growth by 3 pp in one year.
At the end of Q3 2014, prime asking rents in the central zones in Warsaw ranged from EUR 22 to 25 per sq m per month and in locations out of the city centre they were at a level of EUR 14-15.5 per sq m per month.
Figure 1
Take-up by type Source: DTZ, WRF, f-forecast
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New transactions + expansions
Pre-lets
Renewals and renegotiations
Warsaw Office Q3 2014
www.dtz.com Property Times 2
Development activity After a record-breaking 2013, when almost 300,000 sq m of modern office space was completed, the annual supply in 2014 is likely to be even higher. In the first three quarters of this year 250,000 sq m of office space was delivered to the market bringing the total stock to 4.4 million sq m. Further 70,000 sq m is expected for Q4 2014. With almost 700,000 sq m of modern office space being currently under construction, the amount of new completions in 2015 and 2016 is likely to reach similar high levels as over the last two years. Approximately 75% of the office stock in Warsaw is located in four largest subzones: Fringe and Core (central zones) as well as Upper South and South West (covering predominantly Mokotów and Ochota districts). The vast majority of space scheduled for completion until the end of 2016 is also situated in these areas. This will result in strengthening their dominant position as main business hubs in Warsaw.
Demand Total volume of transactions in the first three quarters of 2014 reached 422,000 sq m, which represents a decrease of approx. 18% in comparison to the corresponding period of 2013. Take-up (excluding renegotiations and renewals) amounted to 280,000 sq m – down by 23% compared to Q1-Q3 2013. The Upper South subzone again proved to be the most popular location among tenants, with a 33% share in the total take-up volume. Tenants, similarly to the last four years, often decided to stay in their current locations and as a result renewals and renegotiations accounted for a large part of the total take-up (34%). Pre-lets were not as common as during 2011-2013, as amount of space available in existing buildings is increasing. Take-up over the last two years reached a level similar to ones recorded in 2007 and 2008. The much lower net absorption indicated that a large part of relocations is linked to optimisation process rather than expansion mood.
Figure 2
Existing and planned office supply by subzones (‘000 sq m) Source: DTZ, WRF
Figure 3
Annual level of new supply (‘000 sq m) Source: DTZ, WRF, (f) Forecast
Figure 4
Take-up (excluding renegotiations and renewals) and net absorption (‘000 sq m) Source: DTZ, WRF
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Warsaw Office Q3 2014
www.dtz.com Property Times 3
Vacancy Due to the high level of supply, the vacancy rate in Warsaw was constantly growing since 2011 and reached 13.8% at the end of Q3 2014. In comparison to the values recorded last quarter, the availability ratio in the central subzones grew by 1.3 pp (to 14.9%) whereas it remained unchanged at 13.3% in non central locations. Similarly to Q2 2014, the highest vacancy rate was recorded in the North subzone (22%), as a result of delivery of a large office project, still partially unoccupied. The lowest indicator was noted for the South East and stood at 7% at the end of Q3 2014.
Rents At the end of Q3 2014, prime asking rents in the central zones in Warsaw ranged from EUR 22 to 25 per sq m per month. They reached EUR 14-15.5 per sq m per month in locations out of the city centre. The current market conditions - record level of supply and growing availability ratios - favour tenants and lead to strong competition between landlords. As a consequence, they offer considerable incentives packages, including rent-free periods and fit-out contributions. In this context, effective rents are on average 10% to 20% lower than asking values. It should be mentioned that rental pressure is stronger in older and less well positioned buildings.
Figure 5
Vacancy rate in Warsaw, 2000 - 2014 Source: DTZ, WRF
Figure 6
Vacancy rate by subzone, Q3 2014 Source: DTZ, WRF
Figure 7
Prime asking rents in Warsaw by subzones, EUR per sq m per month Source: DTZ, WRF
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Warsaw Office Q3 2014
www.dtz.com Property Times 4
Table 1
Major office buildings completed in Q1 – Q3 2014
Building Office area (sq m) District Developer / Owner
Gdaoski Business Center 1 (buildings A&B)
44,500 North HB Reavis
Eurocentrum Office Complex I 38,700 South West Capital Park
Warsaw Spire B 20,000 Fringe Ghelamco
Nimbus Office 19,000 South West Immofinanz Group
Park Rozwoju I 16,000 Upper South Echo Investment
Atrium 1 15,700 Core Skanska Property Poland
Table 2
Major pipeline office projects scheduled for Q4 2014 and 2015
Building Office area (sq m) District Developer / Owner
Postępu 14 33,700 Upper South HB Reavis
Royal Wilanów 28,000 South East Capital Park
Spektrum Tower 27,300 Core Europa Capital
Domaniewska Office Hub 27,000 Upper South PHN
Multimedialny Dom Plusa 23,000 Upper South White Stone Development
Warsaw Spire C 20,000 Fringe Ghelamco
Ocean Business Park 17,600 Upper South Kronos Real Estate
Table 3
Major leasing transactions concluded in Q1-Q3 2014
Tenant Office area
leased (sq m)
Building District Type of transaction
Raiffeisen Bank 19,500 Prime Corporate Center Fringe Pre-let
Netia 13,200 Marynarska Business Park Upper South Renewal
Citi Service Center Poland 12,600 Marynarska 12 Upper South New transaction + expansion
PWC 10,800 International Business Centre Fringe Renewal
Media Saturn Holding 8,000 Blue City Offices South West Renewal
Moneygram 7,300 Konstruktorska Business
Center Upper South New transaction
Główny Inspektorat Transportu Drogowego
7,050 Equator I South West New transaction
Urząd Lotnictwa Cywilnego 6,600 Flanders Business Park A South West Renewal
Sąd Okręgowy, Sąd Rejonowy
6,000 Płocka 9/11 West New transaction
Source: DTZ, WRF
Warsaw Office Q3 2014
www.dtz.com Property Times 5
Map - office subzones in Warsaw
Map 1 Office stock in Warsaw by subzone, end Q3 2014
Size of the market, end of Q3 2014
Warsaw Office Q3 2014
www.dtz.com Property Times 6
Definitions
Modern office stock Units built since 1989 or refurbished to at least B class. Take-up
Agreed that deals should be recorded in the quarter they are signed. This includes new leases, pre-lets, expansion of space and owner occupied deals but excluding lease renewals / renegotiations.
Net absorption
Net change in physically occupied space between two periods of time taking into consideration vacated and newly constructed office space in the same area.
Prime rent
Prime headline rent that could be expected for a unit of standard size – 500 – 1,000 sq m – commensurate with demand in each location, highest quality and specification in the best location in a market.
Standard lease terms
Rent Monthly rent, paid in advance, quoted in EUR, paid in PLN Frequency and basis of indexation of rent
Annual, based on European CPI or HICP index
Service charge
Paid by tenants, connected with the costs and expenses related directly to the maintenance of the common areas on the property (at the level of the factor of the share of the total useable office area of building) Quoted and paid in PLN
Typical lease length
5 years
Incentives
Rent free periods Fit out contributions
Rent guarantee period 3 months bank guarantee or deposit Standard space delivery conditions
Landlords cover fit out cost of the common areas on the property and standard fit out of the leased area.
Warsaw Office Q3 2014
www.dtz.com Property Times 7
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This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, DTZ can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced or referred to without prior approval. Any such reproduction should be credited to DTZ.
© DTZ November 2014
