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HighlightsThe Polish economy has shown a marked resilience to the global economic •
slowdown, being the only EU state to record positive economic growth in 2009.
Nevertheless,Warsaw’soccupationalmarkethasbeenadverselyaffected.
A record 281,000 sq m of new supply was delivered to the market in 2009, •
taking the overall vacancy rate to 7.9% at the end of 2009, up from just 3.7% at
the start of the year.
Reduceddemandandsignificantlevelsofnewsupplyarereflectedinfalling•
rental levels, with prime rents in the CBD of €294 per sq m per annum at the end
of 2009, a fall of 15% from the end of 2008.
Aselsewhere,theglobalfinancialcrisiscausedaconsiderableslowingof•
investmentactivityinPoland.However,primeofficeyieldsstabilisedfromthe
middle of 2009 and are currently in the 7.00-7.25% range.
H2 2009
WARSAWOfficemarketreport
developer caution has meant the delay of many additional schemes in the pipeline, with only 150,000 sq m of space scheduled for completion in 2010. This should at least should bring about a stabilisation in the vacancy rate.
The combination of considerable new supply and reduced levels of occupier demand has putsignificantdownwardpressureonrentallevels. This is particularly true in the CBD, where prime rents have reduced by over 15% since the end of 2008 to €294 per sq m per annum as at end 2009. However, rents have fallen more softly outside the CBD, with prime rents in Mokotów and Al. Jerozolimskie reducing by 9% and 8% respectively over the period.
H2 2009WarsawOfficemarketreport
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Figure 1
Warsaw vacancy rate%
Market commentaryPoland’s economy has displayed a marked resilience to the global economic downturn, resulting partly from its balanced internal market and low dependence on exports. Although GDP growth in 2009 was a modest 1.7%, it nevertheless singled Poland out as the only country in the EU to register positive growth last year. However, unemployment continues to rise steadily, at 11.9% as at end 2009 up from 9.5%, while a return to the strong economic growth seen in recent years ultimately rests on Europe’s recovery as a whole.
While the Polish economy may have outperformed its European counterparts, Warsaw’sofficemarkethasundoubtedlybeennegatively impacted by the global downturn. Officedemandhasreducedsubstantiallyfrom18 months ago, with total take-up of circa 97,000 sq m in 2009, 78% below the cycle high of 445,000 sq m in 2008. As tenants have sought to rationalise their use of space and reduce costs, sub-letting activity has also become a more notable feature of the market over the last 12 months.
A record 281,000 sq m of new supply was delivered to the market in 2009, 13% more than the total for 2008, with much of the focus of new development outside the CBD, particularly in Mokotów. This has prompted a sharp up-turn in the overall vacancy rate, increasing to 7.9% as at end 2009, from just 3.7% at the end of 2008. However,
Table 1
Selected leasing transactions signed in H2 2009
Property Submarket Tenant Size (sq m) Transaction type Sector
Poleczki Business Park Other Agencja Restrukturyzacji i Modernizacji Rolnictwa
15,500 Pre-let Public sector
Poleczki Business Park Other PORR S.A. 4,080 Pre-let Construction sector
Catalina Other Fiat Auto, Fiat Bank, Fidis Leasing
3,100 Pre-let Finance/banking
Park Postępu Mokotów (incl.SłużewiecPrzemysłowy)
GłównyInspektoratTransportu Drogowego
1,600 New Public sector
Skylight CBD IDM 1,200 New Media/marketing
Skylight CBD Pure Health & Fitness 1,170 New Other
Centrum Królewska CBD Ambasada Królestwa Danii 1,100 New Public sector
North Gate Other At Media 910 New Services
Source: Knight Frank
200
250
300
350
400
450
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Figure 2
Prime office rents€ per sq m per annum
Source: Knight Frank
Considerable new supply and reduced levels of occupier demand have put significant downward pressure on rental levels
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
Investment marketAswithelsewhere,theglobalfinancialcrisis has adversely impacted on investment activity in Poland with total turnover in 2009 of €716m, 40% below the 2008 level. This was largely accounted for by a handful of majortransactionsand,ofthesixofficedealsrecorded in the Warsaw market in 2009, the largest comprised GLL Partners’ purchase of Marynarska Point from Skanska for circa €71m,reflectingayieldofc.7.5%.
Investmentinterestisconfinedtoprimeproduct,comprisingfullyletofficesinthebestlocations.Primeofficeyieldscurrentlystand at c.7.00% to 7.25%, albeit this is largely based on sentiment given the lack of transactions in the market. The outlook is more positive for 2010, with expectations of a greaterdegreeofdebtfinancingbeingmadeavailable to investors, which should help to stimulate transactional activity.
Table 2
Key investment transactions in H2 2009
Property Size (sq m) Vendor Purchaser Price (€m)
Marynarska Point 26,000 Skanska Opportunities Real Estate
71.0
Cristal Park 10,300 Yareal Polska Azora 30.0
RodanOfficeBuilding 1,768 Rodan Development
BPHFIZSektoraNieruchomości 2
3.0
Source: Knight Frank
Metropolitan Building
Poland data
Poland population 38.48m
Warsaw Metropolitan area population
2.79m
Poland GDP growth 2009/2010 forecast
1.7%/2.2%
Polandinflation, annual change
3.6%
Poland unemployment rate 11.9%
Poland National Bank Reference rate
3.5%
PLN/EUR exchange rate 4.13
PLN/USD exchange rate 2.87
Source:PolandStatisticalOffice/IMF December 2009 data quoted Warsaw CBD
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2009
Figure 3
Prime office yields %
Source: Knight Frank
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6
2005
2006
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2008
2009
Figure 4
Poland investment volumes €bn
Source: Knight Frank
H2 2009WarsawOfficemarketreport
5
Table 3
Market data
Area Prime rent (€ per sq m per annum)
Stock (sq m)1
Vacancy rate (%)2
Vacant space (sq m)
CBD 294 1,193,400 8.0 80,100
Mokotów (incl.SłużewiecPrzemysłowy)
186 889,000 10.0 78,000
Wola 240 234,300 2.0 3,600
Al. Jerozolimskie 204 288,000 5.5 15,500
Other - 608,600 7.5 36,300
Warsaw total - 3,213,300 7.9 213,5001.Includingowneroccupiedstock2. Vacancyratesreflectvacantspaceinleasableofficepremises,excludingowneroccupiedstockSource: Knight Frank
Nowy Dom Jabłkowskich
0
200
400
600
800
1000
1200
CBD
Al. J
eroz
olim
skie
Mok
otów
(inc
l. Sł
użew
iec
Prze
mys
łow
y)
Wol
a
Oth
er
Figure 5
New supply by location 000s sq m
Source: Knight Frank
To end 2003 2004 2005 2006 2007 2008 2009
0
5
10
15
20
25 2009
2008
2007
2006
2005
2004
OtherWolaMokotowJerozCBD
CBD
Al. J
eroz
olim
skie
Mok
otów
(inc
l. Sł
użew
iec
Prze
mys
łow
y)
Wol
a
Oth
er
Figure 6
Submarket vacancy rates%
Source: Knight Frank
2004 2005 2006 2007 2008 2009
0
20
40
60
80
100
120
140
160
180
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 7
Offices under construction by submarket and completion date 000s sq m
Source: Knight Frank
2010 2011
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