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WARSAW
OFFICE
MARKETVIEW
Q3 2014
2
ECONOMY
Population
38.5 m
GDP growth (2015 forecast)
3.2%
CPI (Y-o-Y, September 2014)
-0.3%
Reference interest rate
2.0%
Unemployment rate
(September 2014)
11.5%
Source: Oxford Economics, 2014
Unemplyment rate in selected European cities
Unemployment rate in selected cities
12%
10%
8%
6%
4%
Source: Oxford Economics, 2014
Prague
Bucharest
0%
Warsaw
2%
Stockholm
Transport infrastructure in Warsaw has developed rapidly over the last few years, distinctly
enhancing the city’s impression as a modern and engaging metropolis. This is exemplified
by such infrastructure investments as the second metro line construction, Warsaw’s
southern bypass, the construction of new bridges and tram routes, the renovation of the existing road system and the extension of the airport.
Q3 2014
Vienna
The average monthly salary in the enterprise sector in Warsaw totals around EUR 1,200.
The capital city has also the highest purchasing power in the country with the GFK’s
PPIndex per captia at 173 in relation to the country’s average (100) and 79 in relation to
the European average (100).
Measure
Budapest
With 1.7 million inhabitants living within the city limits and 3.2 million people in the whole
agglomeration, Warsaw is the biggest urban area, the capital city as well as the economic
and cultural centre of the country.
The labour market in the city has been constantly growing with the unemployment rate
at 4.5%, in comparison to 11.5% registered for the whole country at the end of the third
quarter of 2014. An important factor within the labour market is the BPO / SSC sector
(innovative business services), which accounts for around 19,000 workplaces in the
capital, as reported by ABSL. Warsaw is positioned as 32 in terms of its BPO / SSC
attractive environment according to Tholons Top Outsourcing Destinations 2014 ranking,
which is four positions higher than in comparison with the previous year’s results.
Polish economy
Berlin
The GDP Growth amounted to 1.6% in 2013, tied for seventh highest in the EU,
although the result was the lowest since 1.4% tallied in 2002. The Central Bank of Poland
announced that the country’s GDP grew at the rate of 3.3% Y-o-Y at the end of the
second quarter of 2014. Initial projections indicate that the GDP growth will fall below
3% in the third quarter, though the 3.2% Y-o-Y growth forecast for the year is expected
to be met. A general improvement of the labour and investment markets is considered a
major catalyst for this development. CPI inflation has remained persistently low at a level
of -0.3% in the third quarter. The reference interest rate have been decreased in October
and currently stand at 2%.
PROPERTY INVESTMENT
Wis ła
S
CHOSZCZÓWKA
Ż a ńs i
a a
KOBYLAK
TARCHOMIN
DĄBROWA
E
BIAŁOŁĘKA
5
MŁOCINY
14
BIELANY
TARGÓWEK
PRAGA
PN.
3
ŻOLIBORZ
REMBERTÓW
BEMOWO
STR.
MIASTO
WESOŁA
GROCHÓW
WOLA
PRAGA
PD.
ŚRÓDMIEŚCIE
ANIN
WAWER
OCHOTA
18 23
STR. MIŁO
MIĘDZYLESIE
SIEKIERKI
URSUS
RADOŚĆ
MOKOTÓW
8
MIED
WŁOCHY
STEGNY
ALEKSAN
WILANÓW
W
-OKĘCIE
isł
15
a
URSYNÓW
FALENICA
POWSIN
aa
3 500
3 000
2 500
2 000
1 500
1 000
500
0
2009
2010
2011
2012
Other cities
2013 Q1-Q3
2014
Warsaw
Source: CBRE, Sept 2014
Prime office yields in selected cities
Dublin
London
Berlin
Brussels
Warsaw
Madrid
Prague
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Budapest
Office schemes in Poland have been a popular asset among investors in recent years. This can be backed by its 42% share in transaction volume between years 2010-2014.
Office schemes such as Rondo 1 (EUR 297 million), New City (EUR 127 million),
Mokotow Nova (EUR 121 million), or Senator (EUR 120 million) were traded in Warsaw
in recent past.
Investors’ demand is relatively strong and focused both on the prime assets as well as the
value-add opportunities. Deutsche Asset & Wealth Management, Starwood, Blackstone,
WP Carey, and Segro are the biggest spenders so far this year having spent almost EUR
1.1 billion altogether.
Warsaw continues to capture most of investors’ attention. Prime assets remained of major
interest, although investors are showing a growing appetite for non-central locations
and secondary schemes with asset management potential. As prime commercial assets
available for purchase are still at a premium, this should have profound implications
for the further development of the investment market. Therefore, secondary assets and
markets should gain more popularity. Yields remain relatively stable throughout the main
sectors. Prime office, retail, and industrial yields are estimated at 6.00%, 5.90%, and
7.00% respectively.
Property investment volume
(EUR million)
Moscow
The investments into commercial properties have always been crucial for the development
of the market as a whole. Warsaw’s real estate is one of the key targets for all institutional
funds and private investors, looking to diversify their investment portfolio across Europe.
Low market risk and the relative strength of economic fundamentals enables Poland
and its capital city to be seen as a promising destination and continue to attract foreign
companies. Total investment volume in the commercial property sector exceeded EUR 3.2 billion in 60
transactions last year. A figure of nearly EUR 2.1 billion was recorded in Q1-Q3 2014,
which shows a 9% decrease in volume in comparison to the corresponding period last
year.
Source: CBRE, Q3 2014
3
4
OFFICE MARKET IN WARSAW
Total modern office stock in Warsaw amounts to almost 4.4 million sq m, out of which
30% is located in the City Centre. Currently, there are 46 new office schemes under
construction totalling over 660,000 sq m. That puts Warsaw among the top five
European cities (after Paris, London, and Moscow) with the highest office development
activity. The biggest schemes under construction in Warsaw include Warsaw Spire A & C
(80,000 sq m) developed by Ghelamco and Q22 (52,000 sq m) by Echo Investment.
Vacancy rates forecasts/scenarios in
Warsaw
pessimistic
realistic
optimistic
24%
22%
20%
18%
16%
14%
12%
10%
8%
Q4 2016
Q3 2016
Q1 2016
Q2 2016
Q3 2015
Q4 2015
Q1 2015
Q2 2015
Q3 2014
Q4 2014
Q1 2014
Q2 2014
4%
Q3 2013
6%
Q4 2013
Over 75% of developed office space is concentrated in the three biggest office zones –
the City Centre, Mokotow, and Jerozolimskie & Okecie. Strong developer activity is
also registered in the Wola district, in the vicinity of Rondo Daszynskiego. The new
infrastructure improvements have had a direct impact on the office locations. The office
zones are constantly increasing as a result of the construction of the second metro line,
new road connections, and ring roads. The City Centre expands, while the boundaries
between the southern zones are melting, giving space to one big “airport zone”, with
significant potential to grow in importance and join the ranks as one of the most
important business districts in Europe.
Source: CBRE, Q3 2014
The vacancy rate in Warsaw surged to the level of 13.8% at the end of Q3 2014, in
comparison to 10.9% registered in the corresponding period in 2013. The increased level
of vacant space is caused mainly by a relatively high number of speculative deliveries and
a high propensity of office tenants to relocate from B-class schemes to modern A-class
buildings. Strong activity from developers will contribute to a further growth in the level
of vacancy. In the long run, the new space should be gradually absorbed by the market.
Prime office rents in Warsaw
(EUR/sq m/month)
Central
locations
Prime headline rents in Warsaw have reached EUR 24.5 - 25.5/sq m/month in the City
Prime headline rents 24.5 - 25.5
Centre and EUR 14 - 15/sq m/month in the Non-Central locations. The prime rental level
Prime effective rents 19.5 - 21.5
in City Centre has registered a decline since the beginning of the year, caused mainly
by a high level of competition among office developers. Average rents are around
Average headline
20.5 - 22.5
EUR 20/sq m/month (central) and EUR 12/sq m/month (non-central) with an increasing
rents
number of offered incentives lowering the effective rates even by 25% below the level
Source: CBRE, Q3 2014
of headline rents. This trend should continue at least until 2016.
Increasing levels of activity from office developers is strongly connected with a robust
demand from tenants. In Q3 2014 leasing activity in Warsaw reached 162,900 sq m.
As much as 430,000 sq m was leased over the last three quarters. The large number
Leasing Activity in Warasw
of new schemes being constructed along with on-going leasing processes could soon
yield record numbers in this regard. Tenants still want to expand and improve the
standard of their premises, triggering strong demand for new office space.
Non-central
locations
14 - 15
11 - 12
11 - 13
The largest lease transactions since the beginning of 2014 included a pre-let agreement
signed by Raiffeisen Bank at Prime Corporate Center (19,500 sq m), a renewal contract
signed by Netia at Marynarska Business Park (13,200 sq m), as well as a renewal with
an expansion of Marynarska 12 by Citibank (12,600 sq m). The demand for office space
remains strong, hence it is expected that the total demand in 2014 should meet the result
registered in 2013.
In the first three quarters of 2014, office absorption amounted to 132,000 sq m in respect
to the 250,000 sq m of office space delivered in the same period. This translates into
a surge in the vacancy level.
Completions (sq m)
0
50 000
Source: CBRE, Q3 2014
100 000
Absorption (sq m)
150 000
200 000
250 000
80,400 SQ M NEW AGREEMENTS
47,000 SQ M RENEWALS
30,200 SQ M PRE-LETS
7,900 EXPANSIONS
1,900 SQ M OWNER OCCUPATION
Source: CBRE, Q3 2014
Office zones in Warsaw
NORTH
PRAGA
WOLA
CITY CENTRE
JEROZOLIMSKIE
&OKECIE
MOKOTOW
PULAWSKA
Rondo 1 (DAWM)
WILANOW
& SADYBA
Office zones
Stock (sq m)
Vacancy rate
City centre
1,325,000
14.9%
Central Business District
493,000
15.5%
City Centre Fringe
832,000
14.5%
Non-central locations
3,040,000
13.3%
Mokotow
1,180,000
11.8%
Jerozolimskie & Okecie
799,000
15.8%
Wola
314,000
11.9%
Wilanow & Sadyba
197,500
7.1%
Pulawska
176,500
10.9%
Praga
Source: CBRE, 2013
173,500
13.6%
North (Zoliborz and Bemowo)
199,500
22.1%
Total
4,365,000
13.8%
Nowy Swiat 2.0 (MARS FIZ)
Source: CBRE, WRF, Q3 2014
5
Plac Unii (BDI/L&W)
6
CBRE sp. z o.o.
Rondo ONZ 1
00-124 Warsaw
Poland
www.cbre.pl
CBRE Poland
Colin Waddell
Managing Director
Tel. + 48 512 000 012
E: [email protected]
Research & Consultancy
Joanna Mroczek
Director
Tel. +48 500 000 583
E: [email protected]
Capital Markets
Mike Atwell
Head of Capital Markets, CBRE CEE
tel. +48 500 100 018
E: [email protected]
Industrial & Warehouse Agency
Patrick Kurowski
Director
Tel. +48 509 696 926
E: [email protected]
Office Agency
Daniel Bienias
Senior Director
Tel. +48 501 433 618
E: [email protected]
Retail Agency
Beata Kokeli
Senior Director
Tel. +48 605 998 898
E: [email protected]
Lukasz Kaledkiewicz
Senior Director
Tel. +48 501 501 586
E: [email protected]
Magda Fratczak
Director
Tel. +48 508 083 498
E: [email protected]
Development Consultancy
Mikolaj Martynuska
Senior Director
Tel. +48 501 433 718
E: [email protected]
Valuation
Maciej Wojcikiewicz
Senior Director
Tel. +48 501 746 503
E: [email protected]
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Research and Consulting
This report was prepared by the CBRE Poland Research & Consulting Team which forms part of CBRE Global Research and Consulting – a network of preeminent researchers and consultants who collaborate to
provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe.
Disclaimer
CBRE sp. z o.o. confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make
no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.