The office market - the third quarter of 2011

Analysts say that the situation of the native market is stable, and the prospects - encouraging.

Jones Lang LaSalle summarized the condition of the native office market at the end of the third quarter of 2011. Another quarter confirms that the situation in the office market in Poland is stable, and the prospects for most markets are promising - said Mateusz Polkowski, Senior Analyst at Jones Lang LaSalle. The proof is very active developers, remaining at a high level of demand for office and an increase in rents, not only in the capital but also in Wroclaw and Krakow.

The Warsaw market 
In the capital city of the real estate market there was a high level of demand for office space, but compared to the previous quarter, the activity of tenants in the July-September period was lower. In this period, more than 119 thousand square meters were leased, representing a decrease of 37 percent with respect to 321 thousand commissioned between April and June. Leasing a total of 440 thousand sq m in the first three quarters may lead to exceeding the record level of lease registered in 2010 (549 thousand sq m).
The biggest new contract was signed by Mostostal. The company now occupies 7.8 thousand sq m in Adgar Business Centre II. The rental market transactions noted the increasing role of pre-lets, which accounted for almost a quarter of the contracts. The largest pre-lease contracts amounted to: 7.1 thousand square meters by Imtech (Eurocentrum), 4.55 thousand square meters by PTU (Mokotów Nova) and 4.2 thousand sq m by WSiP (Equator II).
A small amount of investment in the first two quarters resulted in widening of the gap between demand showed by investors and tenants, and the amount of office space offered by developers. Analysts predicted an improvement of supply situation in the second half of the year, which will be realized by the commission of 111 thousand sq m of new office space in Polish capital. The third quarter ended with the transfer of nearly 60 thousand sq m of offices, and the anticipated new supply in 2011 is expected to reach only 130 thousand square meters (lowest level in six years). It should be emphasized that a large part of the recently implemented projects were speculative and that Warsaw remains the most active market in this regard.
The largest objects commissioned: Phase I of the investment Mokotów Nova (25 thousand sq m) and Equator II (21.3 thousand sq m). In the center of Warsaw tenants received Pasaż Lipińskiego (3.5 thousand sq m), Prosta Tower office building (54 thousand sq m), and Nowy Dom Jabłkowskich (2.8 thousand sq m).
With the end of September, the vacancy rate averaged 6.7 percent. This ratio remained virtually unchanged compared to the previous quarter. Although analysts predicted an upward trend, headline rents remained stable. Rents for prime space in the center range from 22 to 25 EUR per sq m / Month. For the best office space rents can be higher. Outside the center, one can rent an office for 15-15,5 Euro / sq m / Month - defines the analysts of Jones Lang LaSalle.
Regional markets
By the end of the third quarter leases related to regional markets amounted to 228 thousand sq m. The highest activity of tenants was observed in Wroclaw and Tri-City. Pre-let agreement, which included, among others leasing of 8 thousand square meters of the Group Energa in the Olivia Gate building (Gdańsk) and 4.7 thousand square meters by Tieto in Aquarius Business House (Wrocław). They accounted for nearly 30 percent of all transactions executed at this time. Major contracts finalized in the third quarter, should also include: a new agreement by the company in the BPO sector investment in Krakow Bonarka4Business (6.7 thousand sq m) and the extension of the lease by Credit Suisse in Wrocław (5.9 thousand sq m at Grunwald Center). Jones Lang LaSalle analysts predict that with the maturing of the Polish market it is the extension of contracts that will have an increasing share of demand.
Resources of offices in major cities remained almost unchanged. Only in the Tri-City the supply increased by 1.55 thousand sq m. According to estimates, by the end of the year, 76.9 sq m will be delivered. This would be the highest value recorded since the second quarter of 2010, when almost 99 thousand sq m were supplied to the market. The major office projects planned for the fourth quarter include Olivia Gate in Gdańsk (15.9 thousand sq m) Park Biznesu Teofilów I (8.6 thousand sq m) in Lodz and Poznan's Malta Office F (6.5 thousand sq m).
The best office buildings rents range from 11-13,5 Euro / sq m / Month in Lodz, and up to 15.5 Euros / sq m / Month in Wrocław. In 2012, further increases in rents are expected in Wroclaw and Krakow. Other regions are expected to remain stable rents.

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