H1 2012 in a nutshell as per Colliers’ report:

Overview

  • In H1 2012 the total stock of modern office space in Poland amounted to ca. 5.45 million m2. The new supply completed during the first six months of the year reached ca. 163,000 m2, which was a 67% growth in comparison with H1 2011. Over 80% of newly developed space was delivered in Warsaw, Wrocław and Tricity.
  • The leasing activity recorded in H1 2012 totalled 490,000 m2, which was a slightly better result as compared to the same period of 2011. Booming construction activity across all office markets encouraged tenants to sign pre-lease agreements, which represented over 30% of total demand.
  • The overall vacancy rate was relatively stable during the first half of the year and stood at 8.4%.
  • The rental rates in schemes under construction stage demonstrated a downward trend. Rents in the existing office buildings remained stable.
Supply
  • Warsaw – thanks to delivery of ca. 93,000 m2 of office space that entered the market in H1 2012, the total stock reached 3.69 million m2. Over 80% of new supply was completed within non-central locations – mainly Upper and Lower South. The largest schemes that entered the market during the discussed period were: Poleczki Business Park II (21,000 m2, LS), Platinium Business Park V (11,600 m2, US), phase II of Mokotów Nova (15,000 m2, US) and Airtech Business Park II (8,900 m2, W).
  • Regional cities – in H1 2012 the eight major office markets saw completion of 70,000 m2 of space. Wrocław, with new supply exceeding 28,000 m2, recorded the largest increase in total stock. New completions in Kraków and TriCity accounted for 15,000 m2 and 20,000 m2 respectively. Smaller cities such as Łódź, Katowice and Lublin experienced minimal or no changes in office supply. Among projects delivered to the regional markets within H1 2012 were: Green Tower (11,600 m2, Wrocław), BCB Business Park (9,200 m2, TriCity), Fronton Office Centre (5,700 m2, Kraków).
Demand

  • Warsaw – the total transaction volume recorded in H1 2012 approximated 300,000 m2. The market activity accelerated in Q2 2012 as the take-up level exceeded 172,000 m2. The highest tenants’ activity was registered in Upper South, South West and City Centre-Fringe. Mokotów (Upper South), with over 120,000 m2 of leased space, remained the most sought-after office location in Warsaw. Pre-lets and renegotiations/renewals dominated among the largest lease agreements concluded during H1 2012: T-mobile in T-mobile Office Park (27,000 m2, pre-let), ING Bank Śląski in Plac Unii (12,100 m2, pre-let), Axel Springer in Trinity Park (9,100 m2, renewal), Axa in Warsaw Trade Tower (7,000 m2, renewal).
  • Regional cites – the total take-up registered in H1 2012 approached 193,000 m2, which represents a 24% growth in comparison with the same period of 2011. New deals constituted 68% in total demand. Renegotiation and renewals accounted for 18%, while pre-lease agreements recorded a 34.5% share. The strongest leasing activity was recorded in Kraków (70,000 m2) and TriCity (52,000 m2). The biggest lease transactions closed in H1 2012 were: BPH in Euro Office Park (18,800 m2, pre-let) in TriCity, State Street in CB Kazimierz (9,600 m2, renewal) in Kraków and Delphi Poland in Enterprise Park (8,400 m2, pre-let) in Kraków. 
Vacancy/availability
  • Warsaw – during H1 2012 the overall vacancy rate in Warsaw maintained a weak upward trend and at the end of June stood at 7.4%. Since the beginning of the year the vacancy rate in the Central Business District grew by 1.5 percentage points and amounted to 8.2%, whereas non-central locations experienced only a slight increase to 7% (0.3 percentage points).
  • Regional cities – the vacancy rates in the majority of regional markets remained relatively stable. The lowest rates were recorded in Szczecin (4.8%) and Wrocław (5.1%). During the first half of the year the vacancy rate in Łódź demonstrated a strong downward trend (from 24.2% at the end of 2011 to 17%).
Rents
  • Warsaw – in Q2 2012 the average asking rent in Central Business District amounted to €22.2 m2/month and demonstrated a slight downward trend in comparison with the first quarter of the year. In case of non-central locations, the office space was offered from €12 m2/month to €17 m2/month.
  • Regional cities – rental rates in the regional markets showed no significant changes during the first six months of the year. The average headline rents vary from €12 m2/month to €15.5 m2/month.
Pipeline
  • At the end of H1 2012 nearly 1 million m2 of office space was under active construction. Over 0.5 million m2 is to be delivered to the Warsaw market. Among the regional cities the largest amount of constructed space was in Wrocław, Szczecin and Kraków.

Due to significant amount of new space planned for H2 2012, the vacancy rate in Warsaw will probably continue its upward trend. In case of regional cities, the enormous new supply will translate into temporary increases in vacancy.” – comments Anna Duchnowska, Director, Office Agency, Landlord Representation.

Colliers' prognosis
  • H2 2012 will bring a significant growth in total office stock. Assuming that developers will complete their projects on schedule, the planned supply for H2 2012 is expected to surpass 400,000 m2. Over 60% of new supply will be delivered within the regional cites, mainly Szczecin, Poznań and Kraków.
  • Demand for office space is expected to remain stable in the upcoming two quarters, both in Warsaw and regional cities.
  • Rental rates in existing office schemes will remain stable, while schemes under construction will offer office space at more competitive price.