Q2 2015 - ReNews.pl

At a glance
WARSAW OFFICE MARKET REVIEW
Q2 2015
Despite substantial increase in the take-up level last quarter, vacancy grew due to the increased level of
new supply. Tenants benefit the most from attractive lease terms by signing pre-lease agreements. These
trends will continue in the short to medium term.
INEVITABLE WAVE OF NEW SUPPLY COMES
TO THE MARKET
Compared with a moderate level of new deliveries in Q1 2015
amounting to 60,000 sqm, the second quarter recorded 90,000 sqm
of completions, bringing the overall stock of modern office buildings
in Warsaw to a level of 4.55 million sqm at the end of H1 2015.
In terms of subzones, the Upper South dominated the market. The
34,000 sqm Postępu 14 office building by HB Reavis was the largest
scheme completed in Q2 2015. The next largest was Park Postępu II
by Echo Investment comprising a total of 16,000 sqm.
Around 600,000 sqm is currently under construction to be delivered over the next 24 months. Some 30% of this volume translates
into 180,000 sqm which will be completed by the year-end, including Domaniewska Office Hub (28,000 sqm) and Royal Wilanów
(27,900 sqm).
Tenants have recognised the market momentum and are continuing to sign extremely competitive deals. This trend results in
healthy level of take-up, estimated at 175,000 sqm in Q2 2015,
a 60% increase vs Q1. Renegotiations accounted for an additional
50,000 sqm.
The biggest transaction in Q2 was Samsung preletting 21,200 sqm
in Warsaw Spire. Other significant deals included 12,500 sqm by
Aviva, 6,200 sqm by CUPT and 4,100 sqm by BGŻ BNP Paribas, all of
which were concluded in Gdański Business Center II.
Due to a diverse offer of available office space, occupiers are likely
to take advantage of their strong negotiating position which will
result in a continuing strong level of take-up over the next 18-24
months amounting to around 400,000 sqm (excluding renegotiations).
Annual office take-up
sqm
sqm
500,000
500,000
450,000
450,000
400,000
400,000
350,000
300,000
250,000
250,000
BNP Paribas Real Estate, WRF
350,000
300,000
200,000
150,000
100,000
50,000
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015(f) 2016(f)
BNP Paribas Real Estate, WRF
Annual office supply
OCCUPIERS TAKE ADVANTAGE OF
FAVOURABLE CONDITIONS
200,000
150,000
100,000
50,000
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015(f) 2016(f)
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AT A GLANCE - WARSAW OFFICE MARKET REVIEW - Q2 2015
VACANCY RATE IS SET TO INCREASE FURTHER
PRESSURE ON RENTS AHEAD
Compared with Q1 2015, the vacancy rate increased by 1 p.p. by the
end of June, reaching 14.9%. The majority of space available was in
centrally located office buildings where the vacancy ratio stood at
15.7%, and vacancy in non-central areas was around 14.0% by the
end of Q2 2015. The bulk of vacant space was in mature schemes
completed before 2003.
Due to a large pipeline supply to be delivered over the next 24
months, the vacancy is expected to grow to 16.5% by the year-end
and to 17.5-18.0% by 2016.
The prime and well-managed schemes should remain relatively resistant to negative market trends but may face fierce competition
to retain occupiers.
Due to a surge in increased competition, landlords are being forced
to offer attractive packages to occupiers. In case of some large prelets of over 3,000 sqm, effective rental rates can be up to 25-30%
lower than headline rates.
While truly prime properties or boutique office buildings in the city
centre still offer €22 to €24 per sqm/month as asking rents, the
average rates have decreased by €1-2 from previous quarters. Well
located schemes of a reasonable standard are priced at €17-19 per
sqm/month headline with rent reductions by 10-15% for mid-size
tenants.
Prominent non-central office buildings quote €14-15 per sqm/
month, while average headline rates in these areas range from
€11-13 per sqm/month.
Rents are expected to bottom out at the end of 2016, when vacancy
rates are expected to peak.
Prime and average rents
Vacancy rate
Central
Non-Central
18.00%
€ 28.00
16.00%
€ 26.00
14.00%
€ 24.00
12.00%
€ 22.00
10.00%
€ 20.00
BNP Paribas Real Estate, WRF
€ 30.00
8.00%
6.00%
4.00%
2.00%
0.00%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015(f) 2016(f)
City Centre (prime)
City Centre (average)
Out of Centre (prime)
Out of Centre (average)
BNP Paribas Real Estate, WRF
Average
20.00%
€ 18.00
€ 16.00
€ 14.00
€ 12.00
€ 10.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015(f) 2016(f)
Major office buildings planned for the next 36 months (listed by office area)
Project
Total office area (sqm)
Subzone
Developer
Ghelamco
2015
Warsaw Spire A, C
80,000
City Centre
Domaniewska Office Hub
28,000
Upper South
PHN
Royal Wilanów
27,900
South East
Capital Park
Spektrum Tower
27,300
Core
Europa Capital
Multimedialny Dom Plusa
23,000
Upper South
White Stone Development /
MF Capital
Astrum Business Park
22,600
South West
Prochem
Eurocentrum Delta
20,000
South West
Capital Park
Core
Echo Investment
2016
Q22
50 000
Gdański Business Center, ph. II
50,000
North
HB Reavis
Mokotów One
30,000
Upper South
Apricot Capital Group
Proximo
28,400
West
Hines
EC Powiśle
26,400
City Centre
Hochtief Development
Prime Corporate Center
21,000
City Centre
Golub Gethouse
Atrium 2
20,800
Core
Skanska
Wołoska 24
20,000
Upper South
Ghelamco
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AT A GLANCE - WARSAW OFFICE MARKET REVIEW - Q2 2015
WARSAW OFFICE SUBZONES
C
CC
N
E
W
US
SE
LS
SW
N
US
SE
LS
BNP Paribas Real Estate, WRF
SW
EXISTING SUPPLY (m²)
0
250,000
E
C CC
W
Core
City Centre
North
East
West
Upper South
South East
Lower South
South West
LEGEND
500,000
750,000
1,000,000
1,250,000
1,500,000
SUBZONES
RAILWAY
EXISTING METRO LINE
METRO LINE UNDER CONSTRUCTION
AIRPORT LINE
PLANNED SUPPLY (m²)
180,000 - 250,000
120,000 - 180,000
60,000 - 120,000
0 - 60,000
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AT A GLANCE - WARSAW OFFICE MARKET REVIEW - Q2 2015
Definitions
Total supply/stock – the total office space completed or renovated after
1990 in the private and public sector. It includes owner occupied space.
Annual supply – office space completed in one year.
Pipeline supply – office space under construction or planned (with the
building permit in place).
Take-up – the total floor space, excluding renewals and renegotiations,
which was let or pre-let, sold or pre-sold to tenants or owner-occupiers.
Vacancy rate – percentage ratio of total vacant space to total supply.
Prime rent – the top open-market rent that could be expected for a unit
of standard size, of the highest quality and specification and in the best
location in a market at the survey date.
Average rent – the average rent rate counted based upon rents quoted
in a representative sample of buildings.
General office market practice*
General occupancy costs
Lease structure
Market rent
Usually quoted in EUR
Lease duration
3-7 years
Frequency
Monthly
Renewal
VAT on rent
23%
Indexation
Annual Euro CPI or PL CPI
Fixed-term leases can include an automatic
renewal clause, requesting a 6–12 months’
notice
Rent-free period
3–9 months(1)
Expansion option
Negotiable
Fit-out budget
€180-250 – granted by the Landlord. usually
includes construction, furniture, wiring,
design fees. The Tenant covers any expenses
above the budget.
Termination
Fixed-term leases may include a break
option, which allows the Tenant to end
the lease with a cancellation penalty
Right to sublet
Subleasing is subject to the Landlord’s
written consent and sometimes restricted
Delay in premise
delivery by Landlord
The Tenant pays no rent for the duration of
delay, and can terminate the agreement if
agreed in the contract
Late holdover by
Tenant
Penalty, negotiated and stipulated in the
contract, usually 100–200% of rent for every
day of delay
Signage
Signage costs depend on the Landlord’s policy
Service charge
€4.50-6.00 per sqm paid in PLN, sometimes
in EUR
Items included in
the service charge
Water, security, heating, air-conditioning,
cleaning of common areas and all other
maintenance and operational costs of the
building and common areas, property taxes,
building insurance and building security
Items covered by
the Tenant per meter
Electricity, telecommunications
Items covered by
the Landlord
Structural repairs, repairs to common parts,
building insurance, local taxes and sewerage
charges
Guarantee/deposit
Car parking
Transaction costs
Agent’s fees
New leases/pre-leases: 12–16% of annual
rent paid by Landlord or Tenant
Renewal: 8.33%–15% paid by Tenant
Sublease: 8.33% paid by Tenant or Subtenant
Six months’ rental deposit or bank
guarantee
Legal fees
Each party pays their own lawyers. Draft
lease agreement prepared by the Landlord.
€80- €250 per parking space depending on
location. Paid additionally by the Tenant.
Notary fees
Optional cost, applies mainly to the acquisition of property
* Exceptions to market practice occur
(1) Depends on lease-length and other incentives offered by the Landlord
CONTACTS
Anna Staniszewska Director, Research & Consultancy CEE, [email protected]
Erik Drukker Managing Director, Agency & Valuations, [email protected]
Michael Richardson MRICS Director, Corporate Solutions CEE, [email protected]
Małgorzata Fibakiewicz MRICS Director, Tenants Representation, Office Agency, [email protected]
Michał Orłowski MRICS Director, Landlord Representation, Office Agency, [email protected]
Izabela Mucha MRICS Head of Valuation CEE, [email protected]
BNP Paribas Real Estate Poland Sp. z o.o.
al. Jana Pawła II 25, 00-854 Warsaw
Tel. +48 22 653 44 00
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www.realestate.bnpparibas.pl
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