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News Release

Warsaw

Mokotów district exceeds 1 million sq m of modern office space. Office demand and rents remain stable in major Polish cities

According to the Jones Lang LaSalle office market summary of Q1 2013


Warsaw, 25th April 2013 – Jones Lang LaSalle presents its office market report summarising Q1 2013 in Warsaw and other major Polish cities. Set out below are the key findings from the research paper:                                                                                                                                                                                                                                                                                                                                                                           

Demand: Office demand in Warsaw continues its strong pace with 98,700 sq m net demand (excl. renewals) and 155,500 sq m gross demand registered in Q1 (increase of 16% and 24% respectively year on year). The pre-letting activity remains strong, representing some 30% of the Q1 net demand. The largest new transactions were pre-lets/pre-sales, including the owner occupation transaction by Konsalnet (8,200 sq m) and the pre-letting by Schneider (7,000 sq m, Park Rozwoju, Mokotów). The largest renewals - both in Mokotów - were registered by BNP Paribas (11,000 sq m, Trinity Park II) and by Play (9,600 sq m, Marynarska BP, of which the latter also included an expansion of its occupied space).
Almost 100,000 sq m was leased in major office cities  in Poland (excluding Warsaw) in Q1 2013, up 7% compared to last quarter (the net take-up of 79,300 sq m was up by 3% compared to Q4 2012), with Kraków, Wrocław and Katowice clearly leading in occupier activity. Almost 40% of all deals signed in Q1 2013 were pre-lets, with largest being Getin Holding (ca. 12,000, Sky Tower, Wrocław), Polski Koks (6,150 sq m, Polski Koks HQ, Katowice), Getin Bank (6,000 sq m, LC Corp Tower, Katowice), Brown Brothers Harriman, 4,700 sq m Orange Office Park – Amsterdam, Kraków) and Netia (3,500 sq m, West House 1B phase I, Wrocław). Other major deals signed last quarter were: Google (renewal and expansion for 3,650 sq m in Rynek 12/13, Wrocław), Pekao SA (a new deal for 2,900 sq m, Bit Komputer, Kraków), Geoban (renewal and expansion for 2,800 sq m, Łużycka Office Center, Tri-City) and UBS (new deal for 2,750 sq m, Green Office C, Kraków).

Supply: In Q1, 72,600 sq m was completed in Warsaw and in Q2-Q4 238,000 sq m is expected to be completed, predominantly on a non-speculative basis. A decrease in completion is expected in 2014 totalling 230,000 sq m. Developers’ activity is slightly decreasing year on year but remains at the relatively high level with 576,000 sq m under construction. It is also worth noting that this quarter, total office stock in the Mokotów district has exceeded 1 million sq m.
Q1 2013 brought 98,000 sq m of new office space to the market outside Warsaw, of which 40% was in Wrocław (inter alia, 28,500 sq m in Sky Tower and 10,700 sq m in Green Towers B) and 32% in Tri-City (two office building within the Olivia Business Centre – Olivia Tower, 14,240 sq m and Olivia Point, 9,600 sq m). Other new major additions to the market include Baltic Business Park (9,870 sq m) and Piastów Office Center A (7,000 sq m), both in Szczecin. Interestingly, Wrocław joined Kraków in terms of modern office stock exceeding 500,000 sq m.
Currently around 427,800 sq m of office space remains under active construction in the major Polish cities, of which 71,100 sq m is likely to be completed in Q2 2013 (60% of which is already secured with pre-let agreements). The majority of recently commenced projects can be found in Kraków, Tri-City, Wrocław and Poznań.

Vacancy rate: The high construction activity in Warsaw pushed vacancy up further to 9.9% at the end of Q1 2013 of which 9.6% in Central and 10.0% in Non-Central districts.
Quarterly vacancy rates remained stable in Katowice, Kraków and Wrocław, whilst slight decrease was seen in Łodź (averaging 11.7% vs. 13.7% in Q4 2012). Other major office markets in Poland have recorded an increase in vacancy levels. Due to the relatively extensive completions expected in Q2-Q4 2013, vacancy rates may increase in some markets.

Rents: The high vacancy rate puts rents under a downward pressure. Prime headline have been revised slightly downward over the quarter in the Central districts to € 22.0-24.5 / sq m / month. The best Non-Central locations, such as prime buildings in Mokotów, are fetching €15.0 /sq m / month. Rental conditions are becoming more favourable for tenants.
As for other major Polish cities, prime headline rents currently range from €11 to €13 / sq m / month in Łódź up to €16 / sq m / month in Poznań. Some markets may see slight downward rental pressures in Q2-Q4 2013.

Tomasz Czuba, Head of Office Leasing, Jones Lang LaSalle, comments: “This year, we have been noticing a relatively large demand office space from tenants. On the other hand, the total volume of new completions in Warsaw is forecast to peak in 2013, with a total annual amount of approximately 308,000 sq m. Almost half is expected in Mokotów, with the South West district - Aleje Jerozolimskie, Żwirki i Wigury and the airport - accounting for a further 30% of total volume. By the end of this year, Warsaw will hit the 4 million sq m mark in modern office space supply. Relatively high construction activity in the capital city, despite ongoing tenant demand, continues to underpin the upward trend in the vacancy rate during 2013. It is worth noticing that 62% of the pipeline, planned to be completed in the coming months, is already pre-let. The high level of pre-lettings is driven by a search for quality space and there may be an uptick in vacancy rates in second hand buildings”.