CB Richard Ellis issues its quarterly Warsaw Office Market 2Q 2009 report, covering all aspects of office market in Warsaw, including demand, supply, rents, yields and trends.
The economy downturn has a negative influence on the condition of real estate market. The demand for modern office space in Warsaw has significantly fallen with total take up in the first half of 2009 amounting to 109,000 m2. This constitutes a 55% drop in comparison to corresponding period of 2008. Large share of the take-up are renegotiations. Demand is generated mainly by companies less vulnerable to the economic downturn. The average deal size has decreased by 30% to 810 m2 while in 2008 it was around 1,167 m2.
Supply of new office stock in 1H 2009 amounted to 174,000 m2 bringing total stock to over 3.15 million m2. Three of twelve completed projects are located in Central areas. The construction activity on the office market has significantly slowed down. According to our estimations, around 600,000 m2 of office space planned to be delivered in 2009 and 2010 was postponed.
'Because of the turmoil on the world's financial markets and tight credit policy, investors are quite cautious with regard to investment decisions. The falling demand has influenced the further development of the office market in Warsaw. On the other hand the trend of subleasing the office space becomes more and more common. We estimate that around 50,000 m2 is being offered by their current occupiers to sublease. Potential tenants have a wide range of office space in existing and well located buildings to choose instead of waiting for pipeline projects.' said Olga Drela, Research and Consultancy Analyst at CB Richard Ellis.
The total vacancy rate for Warsaw office space increased to 6% compared to 3% recorded at the end of 2008 and 4.5% - in Q1 2009.
Prime headline rents in Warsaw indicate decreasing trend. In the City Centre they dropped to the level of EUR 23 24 /sq m /month. In Non-Central locations for the best projects, headline rents are oscillating at around EUR 15 16 /m2/month. Effective rates are around 20 - 25% lower.
The investment market is still restrained by the global financial crisis. In the first half of 2009 only three transactions were concluded on the Warsaw office market. Prime yields are estimated at around 6.75% and we expect them to grow to 7.0% for the near future.