CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world's largest commercial real estate services firm (in terms of 2011 revenue). The Company has approximately 34,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.
According to experts at CBRE, the leading global property adviser, in the first three quarters of 2012 total investment volume in the Polish commercial property sector stood at over 1.5 billion. Based on the number of ongoing transactions, the total volume at the end of 2012 should ultimately reach 2 billion.
Prime office buildings are still the most popular assets attracting core investors. Ten office transactions generated 30% of the total investment volume, while in Q3 the most significant office purchases included Twarda Tower in Warsaw by Europa Capital and a portfolio of two office buildings by Kulczyk Silverstein Properties. Industrial volume has also increased significantly. With limited availability of prime assets, more opportunistic investors are expected to enter the market generating demand for secondary assets. Prime yields remain stable at 6.00% for retail, 6.25% for office and 7.50% for logistic assets.
Strong demand for offices outside Warsaw's Central Business District
Office stock in Warsaw increased by 56,000 m² in Q3 2012 and reached over 3.7 million m². Most recent deliveries included Senator and two phases of Wilanow Office Park. With a further 680,000 m² of office space under construction, this makes it one of the largest pipelines in Europe.
Average vacancy rates are up to 8.1% in the last quarter, with non-central locations registering 7.8%. In 2013, the vacancy rate could exceed 10%, potentially significantly impacting average rental rates in the most competitive locations. Prime headline rents have remained stable top assets in Warsaw Central Business District are commanding 2527/m²/month, while non-central locations offer office space for 1416/m²/month, with effective rates as much as 30% lower. Total take-up in the last quarter reached 157,700 m². The largest leases in Q3 included Assecco's new headquarters in Wilanow Office Park (20,400 m²) and a pre-lease of 12,400 m² by Poczta Polska in a newly planned building at 37c Domaniewska St.
Daniel Bienias, Director of the Office Agency at CBRE, said:
"Although the Warsaw office market has been performing relatively well, a major demand driver is the quest for cost reductions. Companies are seeking to consolidate and looking for new, more flexible headquarters at lower rent. As a result, non-central locations are attracting more tenants and the fringe of the city centre has gained popularity due also to a more diversified offer."
Supply shortage driving up retail rents
The Warsaw retail market remains one of the least saturated amongst Polish agglomerations, with 1.33 million m² of modern space. The low vacancy rate of 1.6% of total stock of units, available mainly in the oldest and poorly performing centres, indicates that demand is outstripping supply. In 2012, supply of new space is extremely scarce with only two new projects located in Warsaw's suburbs. The first one Galeria Brwinowska (10,000 m² of GLA) was delivered in Q1 in Brwinow, the second one will be the first phase of Auchan Gallery in Lomianki (33,600 m² of GLA in total) to be opened by the end of the year.
In 2013, two further schemes will be delivered in Warsaw: Galeria Miejska Plac Unii, with 15,300 m² of retail GLA and Factory Annopol, a new outlet centre in Bialoleka district. Lack of available retail space is increasing upward pressure on rents in the best s