Boost in office space

Transcription

1 PROPERTY TIMES Boost in office space Warsaw Office Q1 216 May 216 Contents Contents 1 Supply 2 Take-up 2 Absorption 2 Vacancies 3 Rents 3 Definitions 4 Standard lease terms 4 The total office stock in Warsaw reached 4.75 mn sq m at the end of Q Approximately 3% of existing office space is located in the city centre. The top subzones are Upper South (1.31 mn sq m) and Fringe (.89 mn sq m)*. In the first three months of this year, 6 projects were put into use with total office space of 113,1 sq m. The supply for the remaining three quarters is estimated at ca. 33, sq m, of which 65% is still unleased. Take-up amounted to 142,2 sq m in Q1 216, which is less by 26, sq m than in the same period last year. The total amount of leased area fell by almost 7,7 sq m; however, this seems like a temporary decrease in the light of last year s high growth. At the end of March 216, the vacancy rates in Warsaw reached 14.1%, 1.9 pp. higher than the value recorded at the end of 215. This is a result similar to the one recorded in mid-215, when vacancy rates amounted to 14%. Prime office rents remained stable, not exceeding the level of EUR 24/sq m/ per month in central locations and EUR /sq m/month in non-central locations. Due to the high level of pipeline supply, vacancy rates may rise by the end of 216, which means that the tenants will keep their strong negotiating position. * see map on p. 4 Author Bolesław Kołodziejczyk Senior Consultant Consulting & Research boleslaw.kolodziejczyk@cushwake.co m Kontakty Kamila Wykrota Director, Consulting & Research kamila.wykrota@cushwake.com Magali Marton Head of EMEA Research magali.marton@cushwake.com Figure 1 Gross annual demand (sq m) Tysiące Q1 216 Renegotiations s Expansion Space for own use cushmanwakefield.com PROPERTY TIMES 1

2 Supply In Q ,1 sq m of modern office space was delivered in Warsaw, 53,9 sq m more than in the same period of 215. As a result, total office stock at the end of March amounted to almost 4.75 mn sq m Over 59% of space was delivered in non-central locations (NCL), with the new supply shared over two zones: South West 1 (47,6 sq m) and North (19,7 sq m). The largest projects delivered were the second phase of Eurocentrum Office Complex (Capital Park, 25, sq m), Astrum Business Park I (IRYDION, 22,6 sq m), Atrium 2 (Skanska, 2,2 sq m), Prime Corporate Center (Golub GetHouse, 2,1 sq m) and Building C of the second phase of Gdański Business Center II (HB Reavis, 19,7 sq m). Developers are planning to deliver ca. 33, sq m by the end of the year, over 5% of which to be constructed in the city centre. Major projects planned for completion in 216 include Warsaw Spire Tower (Ghelamco, 61, sq m), Q22 (Echo Investment, 5, sq m) and the next stage of the second phase of Gdański Business Center II (HB Reavis, 29,3 sq m). Take-up In the first three months of the year, leases were signed for the total of 142,2 sq m, which is over 15% less than in Q s accounted for over 66% of the total volume, with renegotiations and expansions amounting to 26% and 5%, respectively. The most popular zone was Core (23%of take-up). High levels of activity were recorded also in South West 1, Fringe and West, with an average of 16%. There has been a significant decrease in the market share of Upper South (down by 26 pp.) as compared to the same period last year, which might suggest that the tenants are losing interest in the zone. Taking into account past data indicating lower tenant activity levels at the beginning of the year, as well as lease transactions planned for the rest of the year, gross take-up is expected to reach last year s levels. Absorption Statistics show a decrease in total area leased. Net absorption was negative, at -7,7 sq m. There has been a massive outflow of tenants from the Upper South zone (-47,8 sq m), while South West 1 and North recorded a significant growth (15,1 sq m and 12,1 sq m, respectively). This result seems like a temporary decrease in the light of last year s exceptionally high growth, when the levels reached a record-breaking 283, sq m. Figure 2 Annual supply Tysiące Table 1 Major office buildings completed in Q1 216 Table BUILDING/ SUBZONE Eurocentrum Office Complex phase II OFFICE SPACE (SQ M) DEVELOPER 25, Capital Park Astrum Business Park I 22,6 IRYDION Atrium 2 2,2 Skanska Prime Corporate Center 2,1 Gdański Business Center II (Building C) Golub GetHouse 19,7 HB Reavis Major leasing transactions concluded in Q1 216 TENANT OFFICE SPACE (SQ M) Allegro 7,6 Q22 BUILDING IT company 7 5 Atrium 2 TYPE OF TRANSACTION Mettler Toledo 4 5 Platan Park Renegotiation and expansion Stanley Black&Decker Q1 216 Central locations (CL) 4 4 Proximo Faza 1 Grupa Pracuj 4 3 Proximo Faza 1 Non-central locations (NCL) Prochem 4 Astrum Business Park I Space for own use Phillip Morris 3 5 Gdański Business Center II (Building D) cushmanwakefield.com PROPERTY TIMES 2

3 Vacancies As the supply of space is higher than tenants absorption potential, the average vacancy rate for Warsaw reached 14.1%. This result is almost 1.9 pp. higher than in December 215 and nearly 1.1 pp. higher than in Q Most vacant space was located in buildings in Upper South (229,8 sq m, up by 48,6 sq m) and Fringe (123,5 sq m, up by 16,9 sq m). Average vacancy rates for central locations amounted to 14.2%, with 14.1% in non-central locations (up by.8 pp. and 2.3 pp., respectively, compared to December 215). Lowest vacancy rates were recorded in West (7%) and Lower South (9.2%). However, these zones are still not popular with office developers. By the end of 216, due to high pipeline supply and a 35% level of leased space in projects under construction, we expect a further growth of average vacancy rates by ca. 2 3 pp. on the current values. Figure 3 Vacancy rates by subzones, Q1 216 r. Upper Sounth (US) South West 1 (SW1) Core Warsaw (average) Fringe South West 2 (SW2) North (N) South East (SE) West (W) Lower South (LS) East (E) % 5 % 1 % 15 % 2 % Rents Current market situation continues to favour the tenants. This concerns both the companies that are already renting space and those that are planning to lease modern office space in order to spurt their growth. Base rents in the centre remained unchanged, amounting to EUR 24/sq m/month in prime buildings. Modern office buildings in attractive non-central locations generally stayed within the EUR /sq m/month limit, only in exceptional cases reaching EUR 16.5/sq m/month. The only zone to report a decrease in rent rates was Upper South, where average prime rents fell to EUR 14/sq m/month down from EUR recorded in December 215. Due to strong competition on the market, developers and landlords continue to offer attractive incentive packages to their tenants, including rent-free periods and above-standard fit-out contributions. This allows the tenants to significantly lower the total leasing cost, both at the time of renegotiating current leases and when relocating to new buildings. Effective rates are still ca. 25% lower than nominal rates, and their level in new projects depends to a large extent on how advanced the project, as well as how large and prestigious the tenant. Figure 4 Prime asking rents by subzones (EUR/sq m/month) Q Central locations (CL) Non-central locations (NCL) Continuing high levels of supply in 216 will result in a growing competition and thus an increasing downward pressure on rents, especially in the case of older buildings in less attractive locations. cushmanwakefield.com PROPERTY TIMES 3

4 Definitions Standard lease terms Modern office stock Units built since 1989 or refurbished to at least B-class. Rent Monthly rent, paid in advance, quoted in EUR, paid in PLN Take-up Net absorption Agreed that deals should be recorded in the quarter they are signed. This includes new leases, pre-lets, expansion of space and owner occupied deals, but excluding lease renewals/renegotiations. Net change in physically occupied space between two periods of time, taking into consideration vacated and newly constructed office space in the same area. Frequency and basis of indexation of rent Service charge Annual, based on European CPI or HICP index Paid by tenants, connected with the costs and expenses related directly to the maintenance of the common areas on the property (at the level of the factor of the share of the total usable office area of building). Quoted and paid in PLN Prime rent Prime headline rent that could be expected for a unit of standard size (5 1, sq m) commensurate with demand in each location, highest quality and specification in the best location in a market Typical lease length Incentives 5 years Rent-free periods Fit-out contributions PORF Office space zones Polish Office Research Forum (PORF) consists of six real estate services firms: CBRE, Colliers International, Cushman & Wakefield, JLL, Knight Frank and Savills. The representatives of these companies aim to standardize indices published through collection and comparison of quarterly data. Rent guarantee period Standard space delivery conditions 3 months bank guarantee or deposit Landlords cover fit-out cost of the common areas on the property and standard fit-out of the leased area. cushmanwakefield.com PROPERTY TIMES 4

5 EMEA John Forrester Chief Executive +44 () john.forrester@cushwake.com Office Agency Richard Aboo richard.aboo@cushwake.com Consulting & Research Kamila Wykrota kamila.wykrota@cushwake.com Valuation Mark Freeman mark.freeman@cushwake.com Poland Charles Taylor Head of Poland charles.taylor@cushwake.com Retail Agency Renata Kusznierska renata.kusznierska@cushwake.com Asset Services Christopher Rasiewicz christopher.rasiewicz@cushwake.com Occupier Services Ian Scattergood ian.scattergood@cushwake.com Poland Alan Colquhoun Chair alan.colquhoun@cushwake.com Industrial & Logistics Agency Tom Listowski tom.listowski@cushwake.com Capital Markets James Chapman james.chapman@cushwake.com Project Management & Consultancy Andrew Frizell andrew.frizell@cushwake.com Disclaimer This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, Cushman & Wakefield can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part,be published, reproduced or referred to without prior approval. Any such reproduction should be credited to Cushman & Wakefield. 216 Cushman & Wakefield LLP. All rights reserved. To see a full list of all our publications please go to cushmanwakefield.com or download the Research App Cushman & Wakefield (Lumen) Złota 59 Warszawa, -12 tel fax info.poland@cushwake.com Cushman & Wakefield (Metropolitan) Plac Pilsudskiego 1 Warszawa, -78 tel. fax info.poland@cushwake.com cushmanwakefield.com cushmanwakefield.com PROPERTY TIMES 5