Research & Forecast Report Q1 2015 - Colliers International

Research & Forecast Report Poland April 2015

Research & Forecast Report Q1 2015

Contents Economy ..................................................... 3 Office ........................................................... 4 Industrial .................................................... 6 Retail ........................................................... 8

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Research & Forecast Report | Q1 2015 | Poland | Colliers International

Economy General overview > According to estimates by BZ WBK analysts, in Q1 2015, GDP growth remained at 3.1% and was slightly higher than in Q4 2014. > In the first months of 2015 there has been an appreciation of the Polish zloty. A decline in the EUR exchange rate to the level of PLN 4.0 was noted and it was the lowest level since June 2014.

> It is expected that employment in the enterprise sector will increase and this trend will continue in 2015. > According to estimates by BZ WBK analysts, CPI inflation and core inflation will gradually rise in the coming months. It is expected that CPI inflation will reach the level of 0.7% y-o-y at the end of 2015. > The Monetary Policy Council is not expected cut interest rates further in the near future.

GDP growth rate (%)

> In March, the Monetary Policy Council decided to decrease the reference interest rate by 50 bp to 1.5%. > Deflation in Poland still persists. According to data published by the Central Statistical Office, the consumer inflation index (CPI) decreased to minus 1.5% y-o-y at the end of the first quarter. > At the end of March 2015, industrial production increased by 8.8% y-o-y. Retail sales also grew by 3%. In both cases these results are better than analysts estimated. Source: Colliers International, based on Central Statistical Office, BZ WBK

> The Ministry of Labour and Social Policy informed that the unemployment rate stood 11.7% at the end of Q1 2015. At the end of March 2015, the average employment in the enterprise sector amounted to 5.6 million and was 1.1% higher y-o-y.

Unemployment rate and inflation (%)

> There was also a rise in the average monthly gross salary, which amounted to PLN 4,214.14 and was 4.9% higher y-o-y.

Prognosis > In the coming months the economic situation will continue to improve. Analysts predict that average GDP growth in 2015 will be approx. 3.6%. Source: Colliers International, based on Central Statistical Office, Ministry of Labour and Social Policy

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Office

>

In the first three months of 2015, gross demand stood at 263,000m2. The net absorption of office space was estimated at a level of 104,800 m2.

General overview

>

New deals constituted the highest share of demand (68.6%); however, renegotiations/extensions still made up a significant part of the market’ activity (22.1%). Tenants, despite the option of relocating, often decide to remain in their present location, mainly due to attractive conditions offered by the current owner.

>

The share of pre-lease agreements stood at 18%.

>

Base rents remained stable. The average rates in Warsaw varied from EUR 11 to EUR 24/m2 per month, while in regional cities rents ranged between EUR 10 and EUR 15.5/m2 per month. The downward pressure on effective rental rates is continuing. Moreover, increasing competition is making developers offer better concessions, not only in terms of financial conditions, but also legal provisions in lease agreements.

>

At the end of the first quarter 2015, the total supply of modern office space in the nine major markets in Poland exceeded 7 million m2. Developers completed 143,600 m2 of office space.

>

Currently, approx. 1.2 million m2 of new offices are under construction, 673,300 m2 of which in Warsaw.

>

Regional cities are still characterised by a high level of activity among developers (over 570,000 m2 under construction). Most of the new supply is being constructed in Kraków, Wrocław and Tricity.

>

In the majority of major office locations, we can currently observe a tenants’ market (except Kraków and Łódź, where vacancy rates are at levels below 10%).

Key office figures (Q1 2015) Existing supply (m 2)

New supply (m 2)

Vacancy rate

Space under construction (m 2)

Demand (m 2)

Rental rates (m2/month)

4,450,100

59,200

13%

673,300

168,300

EUR 11-24

Kraków

627,400

10,000

5.4%

145,200

15,000

EUR 13.5-15.5

Wrocław

531,900

13,800

11.8%

156,400

18,600

EUR 12-15

Trójmiasto

402,000

5,200

12.9%

112,800

17,400

EUR 13-15

Poznań

327,100

41,900

25.8%

37,100

4,000

EUR 12.5-15

Katowice

287,300

9,100

12.5%

34,000

18,500

EUR 12-14

Łódź

244,700

3,200

8.6%

48,300

17,200

EUR 11.5-13.5

Szczecin

City Warszawa

102,400

1,200

16.6%

28,700

4,000

EUR 11-14

Lublin

98,300

-

14.6%

10,600

750

EUR 10-13

Total

7,071,200

143,600

12.8%

1,246,400

263,750

*office space for lease, excluding owner-occupied properties

Source: Colliers International

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– > Strong construction activity in regional cities encouraged companies to sign pre-lease agreements, which made up 24.6% of total demand in Q1.

Supply >

New supply delivered to the Warsaw office market stood at 59,200 m2. Over half of the newly completed space was located in two non-central zones – Upper South and West. The largest office buildings delivered included Pacific (17,600 m2), Karolkowa Business Park (14,600 m2) and Dzielna 60 (6,800 m2).

> The office stock in regional markets grew by 84,500 m2. >

Due to the completion of the first phase of the Business Garden complex (41,900 m2), Poznań recorded the largest increase in stock among regional cities. Other schemes delivered during the period included Bonarka 4 Business E (10,000 m2, Kraków), A4 Business Park II (9,100 m2, Katowice) and the Hieronimus office building (5,300 m2, Wrocław).

Demand

>

In Q1 2015, the overall vacancy rate for major office markets recorded a slight increase to 12.8% (against 12% at the end of March 2014).

>

The overall vacancy rate in Warsaw stood at 13%. The vacancy rate in the city centre reached 14.5%, whereas in non-central locations it was 12.4%.

>

A record growth in the vacancy rate in Poznań (to 25.8%) was the result of a high level of new office space that entered the market in Q1 2015. The opposite was observed in Łódź, where the vacancy rate dropped to 8.6%. Traditionally, the lowest rate was recorded in Kraków (5.4%).

Prognosis

> In Q1 2015, the total transaction volume in Warsaw was 168,300 m2, while net absorption amounted to 64,000 m2 (+9.7% y-o-y). The highest tenant activity was registered in the Mokotów district (61,500 m2) and in the city centre (51,000 m2).

The largest lease transactions concluded in Q1 2015 TENANT

Vacant space

AREA (m 2)

LOCATION

>

By the end of 2015, 570,000 m2 of modern office space will be delivered to the market. Warsaw, Tricity and Kraków will record the largest increases in stock.

> The rising vacancy rate combined with a high level of construction activity will a major impact on developers’ investment plans. New projects are less likely to start without secured pre-lease agreements. >

It is predicted that in the upcoming quarters, the Łódź office market will witness increasing activity among developers as tenants will actively look for lease options in planned investments (due to limited space in existing buildings).

PZU

17,500

Konstruktorska Business Center, Warsaw

HP

10,400

University Business Center II, Warsaw

P4

10,200

Marynarska BP, Warsaw

PKP CARGO

7,600

A4 Business Park II, Katowice

>

The overall vacancy rate is expected to trend upwards.

Benefit Systems SA

6,000

Warsaw Spire C, Warsaw

>

IT company

5,900

West House 1 A, Wrocław

The Upper-South zone (Mokotów) will remain the most sought after office location in Warsaw.

Delphi

5,800

Enterprise Park D, Kraków

>

Although modest decreases are still possible, base rents will stabilise; strong downward pressure on effective rates will continue throughout the year.

Capgemini Polska

5,600

Silesia Business Park B, Katowice

Sygnity

5,500

Royal Wilanów, Warsaw

Thyssen Krupp

4,900

Olivia Business Centre, Tricity


>

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Gross demand in the eight regional cities surpassed 95,000 m2. New deals made up 73.7% of total activity, while renegotiations/renewals constituted only 10.7%. The share of expansions and owner-occupier deals was 6.1% and 9.5% respectively.


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Industrial General overview > In Q1 2015, the supply of industrial space in Poland exceeded 9.1 million m2. This was a result of completions of fifteen projects totalling 273,000 m2 during the first three months of the year. > The period under analysis was characterised by a relatively high level of tenant activity. In the Polish market as a whole, tenants signed 118 agreements for over 635,000 m2. In comparison, the demand recorded in the corresponding period of the previous year totalled 480,000m2.

Total supply and vacancy rates in major markets

> A further 65,700 m2 of industrial space was leased in Q1 2015 within short-term agreements, which are not included in the general statistics. This type of transaction was most popular in Warsaw (39,600 m2). > Demand recorded in the first three months of 2015 was characterised by a relatively large share of expansions, which constituted 14% of transaction volume (twice as much as in 2014). > At the end of March 2015, approximately 480,000 m2 of modern industrial space in Poland remained unleased. The vacancy rate has decreased slightly in comparison to December 20015 and is 5.3%. > The majority of regional markets experienced a stabilisation of rental rates.

Supply > The total amount of space delivered in Poland in Q1 2015 was 273,000 m2. > The highest level of activity among developers was observed in the Poznań market, where 150,000 m2 was delivered (almost 60% of new supply). > In comparison to Poznań, the other Polish industrial markets saw modest levels of new supply. The second largest amount of newly delivered space was 30,200 m2 completed in the Upper Silesia region. > The largest completions in the first three months of 2015 include Goodman Poznań II Logistics Centre (BTS project developed for ITM, 82,400 m2), the first phase of Panattoni Park Poznań IV (35,000 m2) and another building within SEGRO Logistics Park Poznań, Komorniki (a BTS for Volkswagen, 32,000 m2). > Approximately 97% of the industrial space completed in Q1 2015 was already leased at the end of March 2015.


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Demand in major markets in Q1 2015

Available space >

A decrease in vacancy rates was observed in the majority of regional markets. As a result, the figure for the Polish industrial market as a whole decreased slightly compared to the end of 2014 and was 5.3% at the end of March 2015.

>

The largest changes were noted in the smallest markets, as was expected. Examples of large declines in the vacancy rate in Q1 2015 include a decrease from almost 30% to 3% in the Toruń and Bydgoszcz region.

>

An increase in the vacancy rate was observed in Szczecin (from 0% to 8.8%). However, in numerical terms the change was rather moderate: currently the market offers 14,000 m2 of unleased space.

Prognosis >

At the end of Q1 2015, 606,000 m2 of modern industrial space remained under construction, of which approximately 75% had already been secured by leasing agreements. Almost all projects currently under construction will be completed in 2015.

>

The most significant completions scheduled for 2015 include the next phase of Panattoni Park Wrocław III (53,300 m2), Panattoni BTS Bielsko-Biała for GE (45,000 m2) and 46,000 m2 being built within P3 Mszczonów (BTS for ID Logistics).

>

Worthy of mention are the growing number of semispeculative industrial projects launched in the market.

>

It is forecast that he vacancy rates in the majority of regions will remain stable in the upcoming months, while fluctuations may be observed in smaller regional markets.


Selected lease transactions in Q1 2015 PROJECT

AREA (m2)

TYPE OF DEAL

Fiege

P3 Mszczonów

25,400

expansion

Pilkington Automotive

Panattoni BTS Tarnobrzeg

21,000

BTS, expansion

Faurecia

Panattoni BTS Gorzów

12,000

BTS, expansion

IKEA

Prologis Park Szczecin

10,400

new deal

Prologis Park Wrocław III

7,700

renegotiation

TENANT

Selena


Demand >

The demand recorded in the first three months of 2015 was 30% higher than in Q1 2014 and reached 635,800 m2.

>

The highest amount of tenant activity was observed in the Warsaw market (three zones) and exceeded 172,000 m2. This was approximately 27% of the demand recorded in the Polish market as a whole in Q1 2015.

>

>

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The second market in terms of transaction volume was Upper Silesia, where 124,500 m2 was leased within 24 transactions. The most significant expansions recorded in Q1 2015 include the lease of a further 24,500 m2 by Fiege (3PL sector) in P3 Mszczonów and two expansions by manufacturing sector companies: Pilkington Automotive (21,000 m2 in Tarnobrzeg) and Faurecia, (12,000 m2 in Gorzów Wielkopolski.

Effective rental rates (EUR/m²/month) EFFECTIVE RENTAL LEVEL (EUR/m²) MIN. (EUR/m²)

MAX. (EUR/m²)

Warsaw zone I

3.40

4.90

Warsaw zone II

2.00

2.90

Warsaw zone III

2.00

2.90

Upper Silesia

2.00

3.00

Poznań

2.20

3.00

Central Poland

2.00

2.90

Wrocław

2.40

3.20

Tricity

2.50

3.50

Kraków

3.70

4.60

Toruń/Bydgoszcz

2.20

2.80

Szczecin

2.80

3.50

REGION



>

Retail General overview >

We are observing growing popularity of ‘omnichannel commerce’, which is a response to the development of technology and communication channels.

Supply

In the first three months of 2015, shopping centres with a total area of 115,300 m2 were delivered to the Polish market. The total stock of modern retail space reached about 10.5 million m2 at the end of March.

>

Almost half (45%) of the supply delivered to the market in Q1 2015 was located in big cities (200,000-400,000 inhabitants).

>

During the first three months of the year one large retail project was completed – Tarasy Zamkowe in Lublin (38,000 m2). New, smaller schemes include Galeria Sanok (7,000 m2) and Era Park Wieluń (6,000 m2).

>

Extensions of existing projects played a significant role in new supply, constituting 51% of delivered space. The most important include the completion of the next phase of the extension of Magnolia Park in Wrocław, which took place in March, as well as opening of a new part of Atrium Copernicus in Toruń. Also in March, the enlarged CH Ogrody shopping centre in Elbląg opened.

Evolution of retail stock in Poland 2005-2015 (Q1)

Selected projects completed in Q1 2015


>

>

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SIZE (m² GLA)

CITY

PROJECT

DEVELOPER

Lublin

Tarasy Zamkowe

Immofinanz

38,000

Elbląg

CH Ogrody (extension)

CBRE Global Investors

22,500

Toruń

Atrium Copernicus (extension)

Blackstone

15,000

Wrocław

Magnolia Park (extension)

Keen Property Partners Retail

15,000

Sanok

Galeria Sanok

Galeria Sanok Sp. z o.o.

7,000

Wieluń

Era Park Wieluń

Ikoma

6,000

Głowno

Galeria Głowno

Locrum

6,000

2

At the end of Q1 2015, approx. 677,000 m of retail space was under construction with opening dates planned between Q2 2015 and Q4 2016. The vacancy rate for the fifteen largest Polish cities remains at a low level of approx. 2.7%.


Research&Forecast Report | Q1 2015 | Poland | Colliers International

virtual shopping throughout the country. On March 26, the online store of the well-known Swedish brand H&M premiered in Poland.

Demand >

In the first quarter of this year, several foreign brands debuted in Poland, such as the first Esprit Bodywear lingerie store, which opened in Galeria Krakowska, and the first Swedish fitness club Fitness25Seven, which opened in Galeria Dębiec in Poznań.

>

Spanish chain Décimas, offering footwear and sportswear, will open its first store in Poland soon in Wrocław’s Magnolia Park shopping centre.

>

Other interesting events of the past quarter include the re-opening of the Guess store in Dom Mody Klif in Warsaw, which took place in mid-March. It is the chain’s fifth store in Europe in its new visual arrangement. As a result of the expansion of previously leased space, Reserved has opened its largest store in Poland in Wola Park shopping centre in Warsaw, while in Katowice, in Silesia City Center, the chain opened its first store dedicated to only one clothing line – Young Fashion Lab (YFL).

Available space >

The average vacancy rate noted in the eight major agglomerations stood at 2.5% at the end of December 2014. In the case of cities with a population of 200,000400,000 the average rate was 3.5%.

>

Among the main major retail markets, Warsaw and Tricity have the lowest vacancy rate (1.6% and 1.8% respectively). The largest amount of available space on the other hand is in Upper Silesia (3.5%).

>

Among big cities (200,000-400,000 inhabitants), Bydgoszcz has the largest availability of retail space (5.3%), while the lowest is noted in Lublin (1.9%).

Prognosis >

At the end of Q1 2015, approx. 677,000 m2 of new retail space was under construction, 74% of which is planned to be delivered by the end of this year.

>

The largest projects currently under construction include Posnania (100,000 m2), Zielone Arkady in Bydgoszcz (51,000 m2) and Sukcesja in Łódź (46,300 m2).

>

We are observing a strong revival in the largest agglomerations, where more than half the space currently under construction is located. However, developers’ interest in small cities (fewer than 100,000 inhabitants) is not weakening, accounting for 30% of retail space under construction.

>

We are seeing an increase in investors’ interest in schemes located on the main high streets of cities. At the beginning of the year, the demolition of the Sezam department store in Warsaw began, to be replaced with an office building with retail and services on the ground floor. In addition, also in Warsaw, the ground floor of the Ethos investment (formerly Holland Park) was completely emptied of tenants. After the modernisation, the building located by Plac Trzech Krzyży will accommodate luxury brands. Meanwhile, in Poznań, work on the Półwiejska_2 project is coming to an end. In January, McDonald’s and LPP took over their units in order to carry out the arrangement process.

Selected lease transactions announced in Q1 2015 TENANT

AREA (m²)

Reserved

2,230

Wola Park, Warsaw

CityFit

2,200

Zielony Targówek, Warsaw

LOCATION

Michael Kors

300

Fashion House Outlet Piaseczno

Pako Lorente Outlet Store

190

Galeria Sandecja, Nowy Sącz

Kiko Milano

120

Pasaż Grunwaldzki, Wrocław

Jacadi

98

Dom Mody Klif, Warsaw

Esprit Bodywear

65

Galeria Krakowska, Kraków


>

A growing number of retailers are choosing to sell their products at lower prices in outlet stores. This trend also applies to luxury brands. On March 26 in the Fashion House Outlet Centre Piaseczno the first store of this kind by the Michael Kors brand was opened. Two days later, in Galeria Sandecja in Nowy Sącz, the first Pako Lorente outlet store was launched.

>

At the beginning of 2015, the sale of 100% of the shares of Kakadu Sp. z o.o., which owns 41 Kakadu stores in Poland and the Telekarma online store, was announced. The new owner – a Super Zoo s.r.o., which belongs to Placek Holding SE – plans further development and expansion of the chain.

>

Retail chains, by integrating sales channels, are trying to reach customers more effectively. An example of this trend is Rossmann’s online drugstore, which on February 11 launched full-scale operations enabling

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Research&Forecast Report | Q1 2015 | Poland | Colliers International

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