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HighlightsThe steady improvement seen in Poland’s economy over the last year has been •
reflected in a clear revival of office demand. H1 take-up was 222,900 sq m,
an increase of 30% on H2 2009, with renegotiations accounting for 35% of
leased space.
The vacancy rate reached a five year high of 9.6% at the end of H1 2010. •
However, availability is now peaking with many schemes in the pipeline unable
to commence due to the ongoing restrictions on finance.
Prime headline CBD office rents have now stabilised, reducing by just 2% in •
H1. However, increased tenant demand is already manifesting itself in rising
effective rents, indicating that headline rents will record positive growth in 2011.
Investor sentiment has improved although interest remains highly defensive •
and focused on prime assets. With such stock in short supply, prime yields
contracted by 25bps in H1 to stand at c.7.0%.
H1 2010
WARSAW Office market report
H1 2010WarsawOffice market report
2
Table 1
Selected occupational transactions signed in H1 2010
Property Submarket Tenant Size (sq m) Transaction type Sector
Renaisssance Tower Wola Orange 17,400 Renewal IT/Telecommunication
Empark Mokotów (incl. Służewiec Przemysłowy)
PZU Group 12,500 New Professional Services
UBC Mokotów (incl. Służewiec Przemysłowy)
Hewlett-Packard Polska
10,400 Renewal IT/Telecommunication
Brama Zachodnia Al. Jerozolimskie Ericsson 5,000 Renewal IT/Telecommunication
Adgar Plaza II Mokotów (incl. Służewiec Przemysłowy)
Mostostal Warszawa 3,300 New Construction/Real Estate
Wolf Marszałkowska CBD HSBC 3,000 Pre-let Finance/Banking
Mokotów New City Mokotów (incl. Służewiec Przemysłowy)
GTS Energis 3,000 Pre-let IT/Telecommunication
Warsaw Towers CBD Accenture 2,160 Renewal Professional Services
Source: Knight Frank
Renewed confidence in the economy has been reflected in a clear revival of office demand.
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600
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8
12
16
20
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009 H
120
10
Figure 1
Warsaw office take-up and vacancy rate000s sq m %
Source: Knight Frank
Take-up Vacancy rate
Market commentaryPoland was the only EU economy to avoid
recession in 2009, while the country’s rate
of growth is forecast to accelerate to 2.7%
in 2010 and 3.2% in 2011 as levels of private
consumption and fixed investment recover.
Poland’s unemployment rate also reduced
from 11.9% to 11.6% during H1, although
labour and credit markets are expected to
remain relatively subdued over the next two
years, preventing a repeat of the exceptional
pattern of economic growth seen in Poland
prior to the downturn.
Renewed confidence in the economy has been
reflected in a clear revival of office demand.
H1 take-up was 222,900 sq m, an increase of
30% on H2 2009, with demand driven by IT,
pharmaceuticals and professional services
companies. Renegotiations accounted for a
significant 35% of H1 take-up, with several
major occupiers opting to renew their existing
leases, including Orange at Renaissance
Tower (17,400 sq m) and HP at University
Business Centre (10,300 sq m). As in previous
years, activity was focused outside the core
CBD area, with PZU’s 12,500 sq m acquisition
at Empark Sirius in Mokotów being the largest
new lease agreement in H1.
The vacancy rate reached a five year high of
9.6% at the end of H1 2010, rising steadily
from a low of 3.7% at end 2008. Availability
is highest in the Mokotów (10.9%) and Wola
(10.8%) subdistricts, the former due to the
substantial new supply delivered during
the height of the downturn and the latter
due to relatively high quoting rents at newly
completed schemes. However, availability
is now peaking as much of the development
currently underway is already pre-leased,
while many additional schemes in the pipeline
are unable to commence due to the restricted
supply of finance. Indeed, with only three new
developments commencing in H1, a potential
supply shortage is expected to reappear by
the end of 2011 assuming take-up remains at
robust levels.
Prime headline CBD office rents have now
stabilised, reducing by just 2% in H1 to stand
at €288 per sq m per annum, following a
more extreme fall of 15% in 2009. Outside
the CBD, rental levels for the best quality
space range between €216 - €240 per sq
m per annum having demonstrated much
less volatility throughout the course of the
downturn. Increased tenant demand is already
manifesting itself in rising effective rents
and this provides an indication that headline
rents may well return to positive growth by the
middle of next year.
Łomianki
Bielany
Białołęka
Targówek
Praga PłBemowo
Mokotów
Śródmieście
Żoliborz
Ożarów
Pruszków
Janki
Piaseczno
Port LotniczyWarszawa Okęcie
Józefosław
Ursynów
Ursus
Włochy
Ochota
Wola
www.KnightFrank.com
3
Mokotów (incl. Służewiec Przemysłowy)
Warsaw region
Zajezdniatramajowa,Mokotów
Marynarska
Woronicza
Rodz
iny
Wirazow
a
Al. Wilanowska
Konstruktorska
Domaniewska
Suw
ak
Woł
oska
Służewiec
His
zpań
skic
h
Warsaw CBD
Prosta
NościAl. Prym
asa Tysiącllecia
Górczewska
Al. Solidar
Wolska
Palace of Cultureand Science
OgródSaski
WARSZAWACENTRALNA
Praga
Mariensztat
Powisle
Mirów
Al. Jana Pawla II
Marszalkow
ska Al. Jerozolimskie
Prosta Świetokrzyska
Al. Ujazdow
skie
Wola
KASPRZAKA
Warszawa
ZachodniaWarszawa
Zachodnia
Prosta
Ności
Wolska
Al. Prymasa Tysiąclecia
Górczewska
Wolska
Al. Solidar
Al. Jerozolimskie
Prosta
NościAl. Prym
asa Tysiącllecia
Górczewska
Al. Solidar
Wolska
Wiktoryn
Warszawa
Zachodnia
ParkSzczesliwicki
Szczesliwicki
Ochota
Al. Jero
zolim
skie
Grój
ecka
Grzymały
4
Table 2
Key investment transactions in H1 2010
Property Vendor Purchaser Size (sq m) Price (€m)
Horizon Plaza IVG Immobilien Union Investment Real Estate
35,900 102.0
Harmony Office Centre Eko Park Commerz Real 19,300 56.0
Trinity Park III Ghelamco SEB Asset Management
32,400 84.3
Source: Knight Frank
Poland data
Poland population 35.14m
Warsaw Metropolitan area population
2.79m
Poland GDP growth 2009/ 2010 forecast
1.8%/2.7%
Poland inflation (July 2010 annual change)
2.0%
Poland unemployment rate 11.6%
Poland National Bank Reference rate
3.5%
PLN/EUR exchange rate 4.15
PLN/USD exchange rate 3.40
Source: Poland Statistical Office/IMF June 2009 data quoted unless otherwise stated
0
2
4
6
8
10
12
14
16Jerozolimskie Av.
Mokotów (Incl. S_u_ewiec Przemsy_owy)
Wola
CBD
H2
2005
H1
2006
H2
2006
H1
2007
H2
2007
H1
2008
H2
2008
H1
2009
H2
2009
H1
2010
Figure 3
Submarket vacancy rates%
Source: Knight Frank
CBD Al. Jerozolimskie Mokotów Wola (incl. Służewiec Przemsyłowy)
0
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100
150
200
250
300 Other
Wola
Mokotów (incl. S_u_ewiec Przemys_owy)
Jerozolimskie Av.
CBD
2004 2005 2006 2007 2008 2009 H1 2010
Figure 4
New supply by location since 2004000s sq m
Source: Knight Frank
CBD Al. Jerozolimskie Mokotów Wola Other (incl. Służewiec Przemsyłowy)
Investment marketTotal investment volume in Poland was €629m in H1 2010, a notable improvement on activity compared with 2009. Offices accounted for 57% of total H1 turnover, with two major transactions in Warsaw taking place in the period, comprising Union Investment’s purchase of Horizon Plaza for €102m from IVG Immobilien and SEB Asset Management's €84.2m purchase of Trinity Park III from Ghelamco. The wider recovery of global market conditions and positive outlook for the Warsaw occupier market should ensure that total volumes improve again into H2, with the total for 2010 set to far exceed the low of €719m in 2009.
Despite a notable improvement in sentiment, investment interest remains highly defensive and focused on prime assets, although buying opportunities for such assets are in short supply. Consequently, prime office yields contracted by 25bps in H1 to stand at c.7.25%. With this situation certain to persist over the short term, prime office yields are expected to experience a degree of further compression during H2, by a maximum of 50bps.
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450
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2008
2009 H
120
10
Figure 2
Prime office rents€ per sq m per annum
Source: Knight Frank
UBC II
H1 2010WarsawOffice market report
5
Table 3
Figures at the end of H1 2010
Area Prime rent (€ per sq m per annum)
Stock (sq m)1
Vacancy rate (%)2
Vacant space (sq m)
CBD 288 1,209,517 9.3 92,369
Mokotów (incl. Służewiec Przemysłowy)
216 928,077 10.9 89,148
Wola 240 234,330 10.8 18,842
Al. Jerozolimskie 228 288,063 5.4 15,504
Other - 649,790 9.9 51,789
Warsaw total - 3,309,777 9.6 267,6521 Including owner occupied stock 2 Vacancy rates reflect vacant space in leasable office premises, excluding owner occupied stockSource: Knight Frank
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200
War
saw
tota
l
CBD
Al. J
eroz
olim
skie
Mok
otów
(inc
l. Sł
użew
iec
Prze
mys
łow
y)
Wol
a
Oth
er
Figure 5
Offices under construction by submarket and completion date 000s sq m
Source: Knight Frank
2010 2011 2012
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2007
2008
2009 H
120
10Figure 6
Prime office yields %
Source: Knight Frank
0
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620
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2006
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2009 H
120
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Figure 7
Poland investment volumes €bn
Source: Knight Frank
Trinity Park III
Riverside Park
Investment interest remains highly defensive and focused on prime assets.
RESEARCH
Warsaw Joseph BorowskiManaging Partner +48 (22) 596 50 50 [email protected]
Monika A. DebskaChairman of the Board +48 (22) 596 50 50 [email protected]
Magdalena CzempińskaResearch +48 (22) 596 50 50 [email protected]
LondonChris BellManaging Director, Europe+44 (0) 207 629 [email protected]
Matthew ColbourneSenior Analyst+44 (0) 207 629 [email protected]
Claire HigginsHead of Commercial Research+44 (0) 207 629 [email protected]
Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs.
Knight Frank Reports are also available at www.knightfrank.com
© Knight Frank LLP 2010
This report is published for general information only. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be accepted by Knight Frank Research or Knight Frank LLP for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank Research.
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