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Warsaw’s office market still in a good shape.

Jones Lang LaSalle summarised the office market data and trends in Warsaw and the other main Polish cities after Q1 2012.

The first three months of 2012 looked very positive in terms of office space take-up in Warsaw. In Q1 over 125,000 sq m were leased (comparing to 574,000 sq m in the entire 2011) of which 40,000 sq m constituted lease renewals. The situation on the demand side in Warsaw is expected to remain positive throughout the entire 2012. The most significant deals signed in Q1 included ING (pre-let of over 12,000 sq m in Plac Unii), Societe Generale (renewal of 4,100 sq m in Saski Point), GFK Polonia (new deal of 3,600 sq m in Ludna 2), Wolters Kluwer (pre-let of 3,400 sq m in Wola Center), Sage (new deal of 3,000 sq m in Airtech) and ZTM (pre-let of 2,450 sq m in JM Tower).

Total take-up in major office markets (excluding Warsaw) in Q1 2012 amounted to more than 100,000 sq m (up 40 percent compared to quarterly average of 2011) with Tri-City and Kraków clearly taking a lead in respect of occupier activity. Major lease transactions included: Bank BPH (pre-let of 18,800 sq m in Euro Office Park, Tri-City), Delphi Poland (pre-let of 8,400 sq m in Enterprise Park, Kraków), IBM (renegotiation of 5,500 sq m in GTC office complex, Kraków) and Motorola Solutions (pre-let of 4,500 sq m in Green Office C, Kraków). Interestingly, in Q1 2012 over 40 percent of concluded transactions were pre-lettings.

Approximately 47,800 sq m were delivered to the market in Warsaw in Q1, including Mokotów Nova phase II (15,000 sq m), JM Tower (11,900 sq m) and Airtech (8,900 sq m). After a significant drop in new supply in 2011 (only 120,000 sq m), 2012 looks set to improve this situation on the supply side. In addition, Q1 2012 brought almost 26,000 sq m of new office space to major office markets (excluding Warsaw), with the vast majority of this coming from three buildings: Green Towers bld. A in Wrocław, Fronton and Jasnogórska Mix, both in Kraków. Currently around 405,600 sq m of office space remains under active construction across Poland (excluding Warsaw), the majority of which can be found in Wrocław, Tri-City and Poznań, where office space under construction is equal to around 28 percent, 27 percent and 26 percent of the existing office space supply on these markets respectively. 
At the end of Q1 2012, approximately 7.3 percent of the modern office stock in Warsaw was vacant (7.1 percent in the CBD, 7.5 percent in the City Centre Fringe and 7.2 percent in Non-Central locations). This means that the overall q-o-q vacancy increased by 0.6 b.p. Quarterly vacancy rates remained stable in Kraków, Wrocław, Poznań and Katowice whilst slight decrease was seen in Łodź and Tri-City (averaging 16.9 percent and 7.0 percent vs. 19.1 percent and 8.4 percent in Q4 2011, respectively). Due to large volume of pipeline, we expect vacancy rates to increase slightly in Warsaw and some other regional markets.

Prime headline rents in Warsaw remained stable comparing to the end of 2011. Prime office space in Warsaw City Centre now fetches between € 22 and € 25 / sq m / month. Some triple A buildings quote even higher rents. The best Non-Central locations, such as Mokotów, are being leased at € 15 to € 15.50/ sq m / month. In South-West region headline rents reach even € 16/ sq m/ month. In the majority of regional office markets in Poland prime headline rents remained stable during Q1 2012 and currently range from €11 to €13 / sq m / month in Łódź to €16 / sq m / month in Poznań. We see a potential to increase in effective prime rents in Wrocław and Kraków.

Patricia Lannoije, Head of Research and Consultancy at Jones Lang LaSalle comments: “The construction activity is underpinned by a strong demand. According to the estimates of Jones Lang LaSalle, around 220,000 sq m (of which 32 percent is pre-leased) will be delivered in Warsaw in Q2-Q4 2012 (vs. low completions of 120,000 sq m added in the entire 2011). Another 195,000 sq m of modern office space will realistically enter the major office markets (excluding Warsaw) over Q2-Q4 2012 (40 percent is already prelet), in addition to 26,000 sq m completed in Q1 2012.”

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