The FINANCIAL -- The office market has faced an upturn combined with an increasing
demand, as a result of which the volume of available office space has
fallen but rental rates have climbed, according to data published by
Jones Lang LaSalle (JLLS).
Over 123,000 m² of office space was leased in Warsaw in Q2 2011, while the total take-up in H1 2011 was 321,000 m², compared to the demand of 220,000 m² in the corresponding period of 2010. The supply of new office space increased, albeit moderately, in H1 2011, as only four projects were completed, totalling 28,400 m²: Mokotowska Square, Palac Mlodziejowskiego, Platinium Business Park IV and Raclawicka Point.
According to JLLS, projects scheduled to complete by the end of 2011 will add 111,700 m² to total office space volume, with most of the planned space (over 74,000 m²) located in non-central locations in Warsaw. A major part of these projects are speculative. Developers decided to start new office buildings without pre-leases, hoping that they will be able to fill the supply gap anticipated for 2011 and 2012, which has been created in the wake of a limited number of construction starts in 2008 and 2009.
As at the end of Q2 2011, vacancy rate for office space in Warsaw was approx. 6.2% of total modern office space stock, but the ratio for the city centre was 6.7%. The volume of unoccupied office space will continue to decline, which will automatically push rents up, according to JLLS. Rents for prime office space in the centre of Warsaw are within the range of €22-25 per m² per month. Non-central sites fetch €15-15.5 per m² per month.
In H1 2011, demand growth was also reported for other major cities in Poland where 160,000 m² of office space was leased, with Krakow and Poznan being leaders in tenant activity. Demand for office space in the regional centres is strongly driven by business service centres which grow more and more numerous. From March to June 2011, the vacancy ratio did not change in Krakow (flat at 10.9%), but it did drop in the Tri-City (to 10.2%), Poznan (to 11.4%), Katowice (to 15.3%) and Lodz (to 18.6%). Prime rents for office space in regional cities range from €11-13.5 per m² to €15.5 per m² per month in Wroclaw, which was the only regional city where rents increased. Approx. 340,000 m² of office space is under construction in these agglomerations at the moment, with Wroclaw, Krakow and the Tri-City accounting for the majority of space underway. A total of about 95,000 m² of office space is expected to be delivered by the end of 2011.
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