Office occupier take-up increased by 21% in the first three quarters of 2010 compared to the same period of last year, bringing the region's year-to-date office take-up close to 2 million m², according to the latest data from CB Richard Ellis (CBRE).
The majority of CEE's major office markets such as Moscow, Warsaw and Bucharest saw a strong revival in demand in leasing activity with 1.2 million m² leased in Moscow alone. Budapest and Prague, however, registered a year-on-year decline in office take-up and that combined with negative net absorption so far in 2010 reflects that most occupier activity still focuses on renegotiations of existing leases.
Jos Tromp, Head of CEE Research & Consulting, commented: "Despite the fact that a small majority of the markets are still seeing development pipelines slowing down as a result of restricted financing and limited absorption several markets such as Moscow, Warsaw, Prague and Zagreb have recently started to witness increased development pipeline figures where mainly due to limited supply, interesting opportunities are arising for banks and developers. However, before these developments become available to the market increases to stock levels will be less significant than in previous years. New supply in Warsaw and Budapest will be close to historic lows until 2012 at least."
The office stock in CEE has increased by 1.5 million m² so far this year. Depending on some large developments due to be completed in the fourth quarter (Q4) of 2010 across the region, the annual completion level for 2010 is likely to reach 2.2 million m² which will be around one third lower than last year's level. Despite generally lower development activity in Central Europe (CE) and Eastern Europe (EE), markets such as Bucharest and Sofia are expected to see continuing high levels of development completions becoming available to their markets in the short to medium term.
Overall CEE's vacancy rate was stable compared to the previous quarter (Q2 2010) and currently stands at 15.5%. Individual markets, however, can differ significantly from this trend. Vacancy rates in EE cities have already started improving since the beginning of the year following sharp increases during 2009. CE's average vacancy rate has started improving more recently but is still above the level of a year ago. Currently the vacancy rate among CE capitals is the lowest in Warsaw with 8%, the same indicator stands at 11%, 13% and 21% for Bratislava, Prague and Budapest, respectively. Due to the large amount of new supply being delivered earlier this year, South Eastern Europe's vacancy rate is up considerably on the same period in 2009.
Tromp adds: "With several market's fundamentals remaining under pressure, rental growth is not yet visible in most of CE's and SEE's markets. However, following rental growth in Moscow and Kyiv earlier this year, Warsaw's prime rents increased in Q3 2010 reflecting strong economic performance, relatively low vacancy levels and some increased development activity."
Source: CB Richard Ellis