Office Market Update Provincial cities in Poland

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Dina Hall
6 years ago
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1 Office Market Update Provincial cities in Poland H1 27 General overview of the office market Warsaw still dominates the Polish office market, holding a 71.8% market share of the total modern office stock. However, the second-tier cities, start to catch up and gain on importance. Existing modern office stock, H1 27 Existing and pipeline office supply in major Polish cities ,9% 6,4% 4,5% 5,2% 4,5% 4,% 2,6% Kraków Wrocław Tricity Katowice Poznań Łódź Warsaw As a consequence of higher availability of cheaper labour base and lower rents, large international companies tend to choose provincial cities for their BPO centres, creating a bulk of demand. This in turn results in a sharp fall in vacancy rates in all of the cities from 15-2% in to % at the end of H1 27. Vacancy rates, H Kraków Wrocław Tricity Katow ice Poznań Łódź Existing supply 26 Piepline supply 27* Pipeline supply 28* Rents in the regional cities have been growing over the last six months however they are still relatively lower when compared to Warsaw. Prime headline rents range from 14 to 18 per sq m per month. Headline rents in major Polish cities Łódź Poznań Katow ice Wrocław Łódź 5,5% Tricity Kraków Warsaw 4,% Warsaw Tricity 2,2% Kraków Poznań Wrocław 1,3% 1,2% 1,5% Source: DTZ Reserach Major completions, H1 27 Katow ice 1,12%,% 1,% 2,% 3,% 4,% 5,% 6,% In order to keep up with the increasing demand for office space, developers are more and more active in regional cities. Excluding Warsaw, the most dynamic and mature office markets in Poland include Kraków and Wrocław, followed by Tricity, Katowice, Poznań and Łódź. In Kraków the office stock increased by 4, sq m in H1 27 and further 1, sq m will be delivered to the market over H Once completed, the pipeline supply in Wrocław will result in almost a twofold increase of stock within the next two years. City Trinity Park II Warsaw 24, Lumen (Złote Tarasy) Warsaw 23,5 IO-1 Warsaw 23, International Business Center II Warsaw 19,4 Wiśniowy Business Park F Warsaw 16,1 Newton Kraków 1,3 KBP 4 Kraków 1, Rondo Business Park (phase I) Kraków 9,4 Andersia Tower Poznań 8,6 Arkady Wrocławskie Wrocław 8,

Kraków Over H1 27 Kraków office market has continued its booming performance. With almost 4, sq m delivered, the total office stock reached 263,8 sq m.

2 Kraków Over H1 27 Kraków office market has continued its booming performance. With almost 4, sq m delivered, the total office stock reached 263,8 sq m. The major office schemes completed in the first six months of this year include: Newton at ul. Armii Krajowej / Przybyszewskiego, KBP 4 in Kraków Zabierzów and the first phase of Rondo Business Park at ul. Lublańska. We forecast that by the end of 27 office stock in Kraków is likely to increase by further 1, sq m. Altogether in 27 approximately 5, sq m of office space will come to the market, which is the highest annual supply ever recorded. A record breaking 9, sq m is likely to be completed in 28 (projects such as Galeria Kazimierz Office Building, second phase of Rondo Business Park), however some 3,-35, sq m may be delayed to 29. Kraków office supply, * 14 6 Kraków Business Park Prime rents in Kraków increased to per sq m per month and landlords tend to offer lower incentives, which makes the effective rental levels higher than ever before. Over the next months the rents may further grow by another 2-3. After completion of all projects scheduled for delivery in 28-H1 29, rental levels are likely to remain stable ( 17-2 per sq m per month). Major existing office schemes in Kraków Until * 28* 29* Annual supply Cumulative supply Most of the office stock in Kraków (approximately 8%) is concentrated outside the city centre. Demand for office space in the city has been growing since 24 and reached approximately 35, sq m in 26. We forecast that the takeup level will go up substantially and in 27 is likely to reach 7,- 8, sq m. The bulk of demand is coming from international companies, which choose the city to open their BPO centres here or are expanding the already existing service centres. The most recent examples include: Shell, HSBC and Capgemini. The strong demand for office space results in falling vacancy rate, which stands at 1.5% and in the best office buildings is close to %. Moreover, pre-lets have become a common practice on the market with most of the schemes being 9-1% leased before completion. Philip Morris 25, 23 Cracovia Business Center (Błękitek) 14, 1998 Centrum Biurowe Lubicz 13,8 2 Euromarket Centrum Biurowe 13,7 21 Wadowicka 8a 1,3 2 Centrum Biurowe Galileo 1,3 22 Newton 1,3 27 Kraków Business Park 1 1, 23 Kraków Business Park 4 1, 27 Major pipeline office schemes in Kraków Due for completion Centrum Biurowe Azbud 22, 28/29 Cystersów Gallery 22, 29 Zabłocie Business Park 15, 29 Galeria Kazimierz Office Building 12,6 28 Kraków Business Park 8 12,5 28/29 Kraków Business Park 1 12,5 28/29 Edison 1,3 28

3 Wrocław The total stock in Wrocław is estimated at 166,9 sq m together with 8, sq m delivered to the market in H1 27 (Arkady Wrocławskie). Provided all the projects scheduled for 27 are completed on time, a further 6, sq m will come to the market by the end of 27 (projects such as Bema Plaza, Silver Forum and Legnicka Business House). We forecast that over 28 the office supply in Wrocław is likely to grow by 1, sq m, however completion of some projects may be delayed to 29. Major office schemes planned for delivery over the next year, include: Grunwaldzki Center, Globis and Cuprum Business Center. The amount of space in the pipeline for will largely depend on the market situation and absorption pace of the space completed in 28. Wrocław office supply, * Until * 28* 29* 1997 Annual supply Cumulative supply Bema Plaza Prime rents in Wrocław reach per sq m per month and they are likely to remain stable over the next 6-12 months. On average, rental levels range from per sq m. Major existing office schemes in Wrocław Wrocławski Park Biznesu 15,7 24 Centrum Orląt 13,7 22 Quattro Forum 9,9 23 DTC Renoma 1, 24 Arkady Wrocławskie 8, 27 Millenium Tower 6,1 21 Pod Złotym Dębem 6, 1999 Wratislavia Center 5,2 21 Centrum Biznesu Magdalena 5,2 21 Key concentration clusters of office space in Wrocław are the city centre, areas along ul. Legnicka and Strzegomska as well as the southern part of Wrocław along Powstańców Śląskich. The demand for office space in Wrocław is very strong and in a large part created by international companies, renting office space for their BPO operations (e.g. Siemens, Volvo, Google, HP, GE Money Bank, UPS). It is above all, a result of investor friendly policy of the local authorities as well as well educated, relatively inexpensive labour base. As a result, the vacancy rate stands at only approximately 1.2%. We forecast that it will remain relatively stable or increase slightly to 4-5% in H2 28 due to large pipeline supply. Major pipeline office schemes in Wrocław Due for completion Sky Tower 36, 21 Grunwaldzki Center 26, 28 Bema Plaza 23, 27 Centrum Południowe 2, 21 Silver Forum 15, 27 Centrum Biurowe Karkonoska (building "A") 15, 29 Zachodnie Centrum Biurowe (phase I) 14, 29 Centrum Biurowe Globis 13,7 28

Tricity According to recent market research, the total office stock in Tricity, including owner occupiers and older refurbished buildings, amounts to 181,6 sq m, out of which approximately 95, sq m

4 Tricity According to recent market research, the total office stock in Tricity, including owner occupiers and older refurbished buildings, amounts to 181,6 sq m, out of which approximately 95, sq m is located in Gdańsk, 81,7 sq m in Gdynia and 4,9 sq m in Sopot. Taking into consideration only purely modern speculative office schemes, the supply in Gdańsk can be estimated at 64, sq m and in Gdynia at 75, sq m. Over the volume of new deliveries in the Tricity office market ranged from 15,-18, sq m annually. In H1 27 no building came to the market and the office space scheduled for completion this year amounts to 11,9 sq m (Hossa project at Grunwaldzka Street in Gdańsk and the first phase of ŁuŜycka Office Park in Gdynia). By the end of 28 a further 42, sq m is likely to be delivered, out of which 33, sq m is currently under construction (projects such as first phase of Arkońska Business Park and Ka5 office building). We estimate the space to be completed in 29 at 42,3 sq m. Tricity office supply, * Until * 28* 29* 1997 Annual Supply Cummulative supply Prime asking rents in Tricity have gone up to per sq m per month and are likely to further increase by 1-2 over the next 6-12 months Major existing modern office schemes in Tricity Prokom HQ (Gdynia) 15,3 24 Allcon Park A, B 1, 1998, 25 Baltic Business Centre (Gdynia) 9, Centrum Biurowe Władysława IV (Gdynia) Tryton in Gdańsk 8,6 21 Artus Park (Gdańsk) 7,9 21 Alfa Plaza Business Center (Gdynia) 7,7 21 Sadowa Business Park (Gdańsk) 6,5 26 Gdyńskie Centrum Biznesu (Gdynia) 6, Major pipeline office schemes in Tricity The areas of concentration for office space include the city centre of Gdańsk and Gdynia as well as Wrzeszcz and Oliwa districts in Gdańsk. The office market in Tricity has already attracted a number of international companies, such as Reuters, Compuware and Intel which decided to set up their BPO centres here. Others are currently in the process of looking for suitable office space. Similar to other second-tier cities pre-lets are a common practice. Office space scheduled for delivery in is already partially leased or reserved. We forecast that the demand for office space will increase further. As a result the vacancy rate, which currently stands at 2.2%, will remain very low over the next months. Arkońska Business Park I, II, III, IV (Gdańsk) Due for completion 25, Tryton (Gdańsk) 23, 29 ŁuŜycka Office Park I, II, III, IV 17, Abrahama office building (Gdańsk) 8,5 28 Hossa office project (Gdańsk) 7,6 27 Ka5 3,8 28

Katowice Office space in Katowice, including owner occupiers and refurbished buildings, amounts to 157,4 sq m Only around 55% of the stock figure can be classified as speculative office supply.

5 Katowice Office space in Katowice, including owner occupiers and refurbished buildings, amounts to 157,4 sq m Only around 55% of the stock figure can be classified as speculative office supply. No modern office schemes were delivered to the market in H1 27. By the end of this year the total stock should grow by 7,6 sq m after completion of the second building of Park Przemysłowy Euro Centrum and Górnośląski Park Przemysłowy. Further 29, sq m is scheduled for delivery in 28, most of which are old, renovated buildings. We are aware of at least 8,-9, sq m of office space in planning stage due for completion in 29, however their delivery will largely depend on the situation on the market. Katowice office supply, * Before * 28* 29* 1997 Annual Supply Cummulative Supply Office space in Katowice is concentrated in the city centre and most of the pipeline projects are located along Chorzowska Street as well as in the area of the A4 motorway. Due to strong economic growth in Poland as well as improving road infrastructure and substantial skilled labour potential in the city and the whole agglomeration, we have recorded a high level of interest in office space in Katowice. Over take-up level reached approximately 15,-2, sq m annually. As a result of strong demand and very low level of new supply delivered to the market in the last 18 months, the vacancy rate dropped to only 1.12% as at the end of H1 27. DTZ forecasts that availability of office space in Katowice will remain at a similar level for months. Prime asking rents in the city have increased slightly to per sq m per month. Average rents range from per sq m per month. As a result of insufficient office supply, the rental levels for the best quality office space may go up by another 1-2 per sq m per month over the next 6-12 months. Major existing modern office schemes in Katowice Katowice Centrum (Opolska 22) 2, 24 Chorzowska 5 15,6 21 ING Bank Śląski HQ 15,3 22 Altus 13,2 23 Millenium Plaza 1,9 21 NBP (Oddział Okręgowy) 8,6 26 Plus Centrum 7, 1998 Major pipeline office schemes in Katowice Due for completion Mikołowska GTC 17, 28/29 Echo Investment project (phase I) 15, 29 Silesia Office Towers (phase I) 15, 29 Ghelamco office project 12, N/A Francuska GTC 1,5 28/29 Silesia Atrium/ Reinhold City Plaza (phases I&II) Silesia Atrium / Reinhold City Plaza 1, 28 Silesia Office Centre 8, 28

Poznań The total office stock in Poznań in H1 27 increased by 11, sq m and reached 142,2 sq m. Projects completed over the first six months of 27 include Andersia Tower at Pl.

6 Poznań The total office stock in Poznań in H1 27 increased by 11, sq m and reached 142,2 sq m. Projects completed over the first six months of 27 include Andersia Tower at Pl. Andersa with 8,6 sq m of office space as well as R&B House at Rajtczaka Street (2,4 sq m). Further 27,4 sq m is planned for completion in 28, out of which 23, sq m is currently under construction (Ataner Business Centre, Nowe Garbary Office Centre and the first phase of Malta Office Park). The office stock in Poznań will increase by 64, sq m in 29, provided all projects are completed according to schedule. Poznań office supply, * Malta Office Park * 28* 29* Annual supply Cumulative supply Most of the office buildings in Poznań are situated in the city centre with proximity to the main railway station and the Poznań International Fairs. The demand for office space in Poznań is created in large part by international companies, which decide to open their BPO centres here. They include Arvato Services Bertelsman, Kleffmann & Partner, GlaxoSmithKline, Microsoft as well as the most recent Franklin Templeton Investment, which opened its IT and administrative back office in Andersia Tower and Carlsberg, which is going to set up an accounting centre in Garbary Office Centre. All the above mentioned factors resulted in the increase of rental levels. Prime asking rents range from per sq m per month, which is 1-2 more then at the end of the previous year. The average asking rents are between per sq m per month. We forecast a further increase by another 1-2 per sq m of asking rents in prime office buildings over the next two years. Major existing modern office schemes in Poznań Poznań Financial Center 15,3 21 PGK Centrum II 14,3 23 Centrum Biurowe Globis 13, 23 Budynek biurowy Delta 11, 23 Andersia Tower 8,6 27 Kupiec Poznański 8, 21 PGK Centrum I 8, 1999 Bazar Poznański 6,5 2 Major pipeline office schemes in Poznań As a result of increasing demand and insufficient supply of modern office space, the vacancy rate has decreased to only 1.3% (from 3.1% at the end of 26). Preletting is a visible trend on the market - 96% of office space in Andersia Tower was let before completion and the projects scheduled for delivery in 28, are already pre-let to a large extent. Consequently, the vacancy over the next months will remain at a very low level (around 2%). Due for completion Malta Office Park (three phases) 28, Centrum Obsługi Biznesu Bałtyk 9,1 29 Ataner Business Centre 9, 28 Nowe Garbary Office Center 7, 28

7 Łódź Łódź, in comparison to other analysed provincial cities in Poland, has the smallest amount of modern office stock. At the end of June 27, the total supply was close to 95, sq m, with only around 35% classified as purely modern speculative office space. Over 27 the office supply in Łódź should increase only by 7,5 sq m and in 28 a record breaking 41, sq m of office space is likely to be delivered to the market. The most competitive schemes to be completed within the next months include: Forum 76 Business Center, Textorial Park as well as Centrum Finansowe Kopcińskiego. In 29 such projects as first phase of Cross Point and GTC office buildings are to come to the market. Łódź office supply, * Cross Point Due to scarcity of high quality office buildings, prime rents have gone up from per sq m per month to Average rental levels range from 1 to 12 per sq m per month As a result of strong demand and undersupply of modern office space, rents in prime office buildings are expected to increase further by another 2-3 per sq m per month over the course of * 28* 29* Annual supply Cummulative supply Major existing office schemes in Łódź Orion 9,2 24 Piotrkowska 27 8, śeligowskiego 8/1 7,5 26 Centrum Biznesu 7,4 21 Łódź has became a very popular location among companies looking for office space appropriate for their service centres. BPO centres, which have already been opened here, include: Philips, General Electric Controls and Accenture. We also observe growing interest in modern office space among companies, which want to relocate to larger, more modern and efficient buildings (recent examples of transactions on the Łódź office market is BRE Bank renting the whole Oktagon Building). Strong demand for modern office space is reflected in relatively low vacancy rate, which is currently 5.5%, with majority of available office space located in two buildings: śegligowskiego 8/9 and Centrum Targowa 35. Major pipeline office schemes in Łódź Completion date Echo Investment Piłsudskiego 3, 29 Kościuszki GTC 27, 28/29 Cross Point (phase I) 12,8 29 Red Tower 11,5 28 Textorial Park (three phases) 11, Forum 76 Business Centre 7, 28

About DTZ DTZ is a leading global real estate advisory and consultancy firm with more than 11, staff with offices in 14 cities across 45 countries.

8 About DTZ DTZ is a leading global real estate advisory and consultancy firm with more than 11, staff with offices in 14 cities across 45 countries. The company provides services for leading multinational companies, major financial institutions, developers, investors and governments. DTZ has a long history of dealing in global property markets, dating from 1784 when the predecessor firm was founded in the UK. Since then, the company has rapidly developed and expanded its portfolio of services and global locations and has become the world-renowned company it is today. The company has been present in Poland since 1994, being a part of DTZ Holdings plc, a publicly quoted company listed on the London Stock Exchange since In Poland, the company operates as DTZ Polska Sp. z o.o. and DTZ Management Polska Sp. z o.o. Both companies have their head office in Puławska Financial Center in Warsaw. As a consequence of the merger between DTZ and Donaldsons in July 27, DTZ is now the largest real estate adviser in Poland. The company now comprises more than 165 employees providing integrated services through investment consulting, agency, brokerage, valuation, research, building services, corporate finance and property management. DTZ Research is an integrated team of over 1 analysts dedicated to property market research. The team produces a wide variety of market reports on the resident and commercial sectors for occupiers, developers and investors across the world. The team has developed a range of research products of strategic value to corporates, developers and investors across all the main and emerging real estate markets around the world. The focus of our effort is on thought leadership and the provision of services that add value to our clients through the creation of leading edge, real estate investment and business solutions worldwide. An important part of this strategy is the success of our rolling R&D programme centred on the impact of social, economic, political and environmental change on real estate. For more information, please contact: Erik Drukker, Deputy Managing Director, Head of Office Agency: erik.drukker@dtz.com Anna Staniszewska, Director Consulting & Research, CEE: anna.staniszewska@dtz.com Katarzyna Lipka, Market Analyst: katarzyna.lipka@dtz.com DTZ Polska Sp. z o.o. Ul. Puławska 15, Warsaw Tel Fax info@dtz.pl

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