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Summary of Q3 and the forecast for the rest of the year according to Colliers International:

GENERAL OVERVIEW

  • At the end of September 2013 the total supply of modern office space in nine major markets in Poland amounted to 6.24 million m2.
  • New supply delivered to the market reached 161,500 m2, which was an increase of 31% in comparison to the corresponding period of 2012.
  • Tenants' activity in Q3 amounted to ca. 250,000 m2. Pre-let agreements constituted a significant share in the total transaction volume (37%).
  • Rental rates remained unchanged in Q3 2013.
  • At the end of Q3 2013 the overall vacancy rate for major office markets stood at 11.4%.

SUPPLY

  • Warsaw – at the end of Q3 2013 the total supply of modern office space amounted to 4.07 million m2, 70% (2.81 mln m2) of which was located outside the city center. From July to September, six projects totalling 94,300 m2 were delivered to the market. The largest investments completed during the period included: Miasteczko Orange (43,700 m2, South West), Wola Center (27,500 m2, West ) and Żoliborz One (8,700 m2, North).
  • Regional cities – the total supply of modern office space in eight major regional markets amounted to 2.1 million m2. In Q3 2013, developers completed projects of a total area of 70,000 m2. The highest growth in stock was noted in Poznań (14,700 m2), Kraków (13,600 m2), and Wrocław (13,300 m2). Office buildings completed in Q3 included: Malta House (14,700 m2, Poznań), Quattro Business Park C (12,200 m2, Kraków), Lastadia (11,500 m2, Szczecin) and the first phase of West House 1B (6,000 m2, Wrocław). Wrocław – the total supply of modern warehouse space increased in Q1 2013 by 44,300 m² to over 765,500 m². Currently, there are three projects under construction with a total area exceeding 35,300 m².

DEMAND

  • Warsaw – demand for office space recorded in Q3 2013 amounted to 184,600 m2, which was the best result since the beginning of 2013. New lease agreements constituted 54% (99,200m2) of the registered activity. The share of pre-let transactions in the total volume reached the level of 37.3%. The highest level of tenants’ activity was recorded in the following zones: Upper South (74,000 m2), West (26,900 m2) and South West (23,700 m2). The average deal size in the city centre was 704 m2, while outside the city center it accounted for 1,307 m2. The biggest agreements signed during the discussed period included: Polkomtel (pre-let, 22,600 m2, Konstruktorska 4), BZ WBK (pre-let, 11,800 m2, Atrium 1), Sygma (renegotiation / extension, 6,400 m2, Trinity Park) and Sanofi-Aventis (renegotiation / renewal, 5,500 m2, North Gate).
  • Regional cities – the total leasing activity registered in Q3 2013 is estimated at a level of ca. 65,000 m2. The share of new agreements amounted to 74%, while renegotiations / renewals reached 15%. Expansions of the current tenants constituted 11% of the recorded demand. Similar to Warsaw office market, pre-let agreements constituted an important share (37%). The strongest tenants’ activity was recorded in Katowice, Kraków and Poznań. The largest lease transactions concluded in Q3 included: IBM in A4 Business Park (pre-let, 9,000 m2, Katowice), Eurobank in Wratislavia Center (renegotiation / renewal, 6,100 m2, Wrocław), ING Services Polska in GPP Business Park (pre-let, 5,600 m2, Katowice) and BPH in the Avia office building (pre-let, 3,100 m2, Kraków).

VACANCY

  • Warsaw – at the end of Q3 2013, the vacancy rate for all Warsaw office zones stood at 10.9% (against 8.1% at the end of September 2012). The vacancy in the central zones amounted to 10.5%. In case of non-central locations the vacancy rate accounted for 11%. The highest rates were recorded in the South-West (13.6%), West (13.1%) and North (12.5%) zones.
  • Regional cities – similar to previous quarter, the lowest vacancy rate was registered in Kraków (3.3%). The highest rates were recorded in Szczecin (23.1%) and Łódź (19.5%).

RENTAL RATES

  • Warsaw – in Q3 2013, the rents for office space remained stable. The asking rents in the city centre varied from EUR 17 to 25/m2 per month. Rental rates in non-central zones stood between EUR 12 and 16 EUR/m2 per month.
  • Regional cities – rental rates in regional markets recorded no significant changes. The average rents ranged from EUR 11 to EUR 16/m2 per month. The highest rents were recorded in Poznań (EUR 13-16/m2 per month) and Wrocław (EUR 11-16/m2 per month). With the average rents at a level of EUR 11.5-13.5/m2 per month, Łódź remained the most competitive market in terms of rental costs.

FORECAST

  • At present, over 1 million m2 of office space is under construction. Ca. 550,000 m2 is being constructed in Warsaw. Among regional cities, the strongest construction activity is observed in Kraków (129,200 m2), Wrocław (88,500 m2), Katowice (73,000 m2) and Tricity (70,300 m2).

In Q4 2013, the office stock will grow by 150,000 m2. Ca. 43% of new supply will be delivered to the Warsaw office market. The biggest investments that are going to be completed in the capital are Plac Unii (41,300 m2) and Oxygen Park II (8,900 m2). The overall vacancy rate will continue an upward trend. Due to relocations of the current tenants to newly completed schemes, a rise in vacancy in older office buildings is expected. Rental rates are forecasted to demonstrate a slight downward tendency in the upcoming months.” – comments Paweł Skałba, Partner at Colliers International, Office Agency.