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Research Market Forecast Mid-Year 2011 - Poland

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Mid-Year 2011 Real Estate Research Market Forecast for Poland. Includes an economic overview and forecast for the industrial, retail, office, investment and land markets.

Mid-Year 2011 Real Estate Research Market Forecast for Poland. Includes an economic overview and forecast for the industrial, retail, office, investment and land markets.


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  • 1. POLANDRESEARCH & FORECAST REPORTMID-YEAR 2011Accelerating success.
  • 2. 2011 | RESEARCH & FORECAST MID-YEAR REVIEW | POLANDTABLE OF CONTENTS Executive summary 3 Economic overview 4 Investment market 5 Land market 6 Industrial market 8 Office market 10 Retail market 12 Key metric definitions 14
  • 3. RESEARCH & FORECAST REPORT | MID-YEAR 2011 | POLAND | EXECUTIVE SUMMARY Executive summary RECENT TRENDS • Economy: In H1 2011 the Polish economy expanded steadily, despite a slightly weaker performance recorded in Q2. The GDP is estimated to have grown at a pace exceeding 4.0%. • Investment: Poland is still perceived by the international investment community as the main marketplace in the region. H1 2011 a stabilisation of core yields across all asset classes was observed in H1 2011. Over 50% of total transaction volume recorded in the discussed period refered to office investments. • Land: A continuing trend of buyer‟s domination in the transaction process can be observed. H1 2011 brought several significant transactions. Investors and developers have bought land worth EUR 150 million. • Industrial: H1 2011 resulted in an apparent increase in the number of new warehouse investments. The transaction volume was about 800,000m². Compared to the first three months of the year, the transaction volume increased by nearly 7%. Vacancy rate showed a slight downward trend and at the end of H1 was at 13.3%. Rents inMARKET INDICATORS general remained stable with a slight upward trend. 2010* 2011* • Offices: The year so far has been marked by pre-lets. The share of pre-lease GDP GROWTH agreements in the total volume of leased space is increasing, which is a sign of a real revival in the market and its healthy condition. UNEMPLOYMENT • Retail: The retail market in Poland saw revival as both developers as well as retailers presented their expansion plans. In H1 2011 over 250,000m² of retail space was WAGES delivered to the market. Another 400,000m² is planned to be completed by the end of 2011. Increasing supply of modern retail space in secondary cities is facilitating the INFLATION expansion of retail chains in regional locations. INVESTMENT VOLUMES MARKET PROGNOSIS OFFICE RENTS • Economy: The second half of the year will witness a slowdown in the pace of INDUSTRIAL RENTS economic growth. The upcoming months will bring a gradual decrease in both inflation and unemployment. However, a considerable rise in the number of FDI is expected. RETAIL RENTS • Investment: It is anticipated that overall activity in 2011 will approach 2010 levels. The pricing gap between core and non-core assets is expected to increase further in H2 YIELDS 2011.* COMPARED TO THE PREVIOUS YEAR • Land: As a result of the crisis break in investments, the lack of available dwellings has influenced a significant recovery in residential developers‟ activity. Developers are now aiming at large and medium-sized cities. Investment plots intended for shopping malls and retail parks are of interest to many Polish and foreign companies. • Industrial: An increase in planned investments can be observed in most markets. Further growth in demand is predicted, both in Warsaw and in other regions. It is expected that rents will remain stable with a slight upward trend. • Offices: Due to a relatively low amount of vacant space in Warsaw‟s non-central locations tenants may be forced to search for space in buildings within the CBD. Effective rents in non-central locations may move upwards, whereas they should remain stable or even slightly decrease in the city centre. • Retail: Developers are targeting mainly small and medium-sized cities, which still are not saturated in terms of modern retail space. Top international retail chains will follow this direction and enter regional markets. Anticipating higher activity from retailers, rents in prime locations will begin to increase. The trend of tenants switching to the best retail destinations and newly opened high quality shopping centres will continue.3 | COLLIERS INTERNATIONAL
  • 4. RESEARCH & FORECAST REPORT | MID-YEAR 2011 | POLAND | ECONOMIC OVERVIEW Key Economic Figures Economic overview GDP Growth 4.2% Unemployment 12.2% SUMMARY Inflation 4.6% • The Polish economy expanded steadily in H1 2011 as the GDP grew at a pace exceeding 4%. Preliminary estimates show that the economic performance recorded in Q2 was slightly weaker than in comparison to the previous period, yet the Central Statistical Office predicts that the GDP will maintain dynamics similar to Q1.GDP (bln) GDP Annual Change • The GDP growth in Q2 was mainly driven by strong consumer demand and high 560 7,0 dynamics in the construction sector. In comparison to the previous quarter a decrease 480 6,0 in industrial output was reported. An upswing in investment demand recorded in Q1 (6% in a yoy analysis) is expected to be continued in the following quarter. 400 5,0 320 4,0 • As it was expected during H1 2011 an upward trend in the consumer price index was observed. The inflation rate in Q1 amounted to 3.8% and reached 4.6% in Q2. To 240 3,0 tame the increasing inflation the Monetary Policy Council decided to raise the interest 160 2,0 rates four times throughout the six past months. 80 1,0 • Despite a drop in Q2 (12.2% against 13.1% in Q1 2011), the unemployment rate remained relatively high during H1 2011. The unemployment rate in June stood at 0 0,0 11.8% and was the lowest value reported during the last six months. • The average monthly nominal salary in the enterprise sector in June 2011 reached PLN 3600.47 (EUR 900.11), which was a 5.8% increase in comparison to the sameSource: Central Statistical Office, Ministry of Finance period of 2010. The average monthly wages in H1 2011 grew by 4.6% in a yoy analysis.UNEMPLOYMENT (%) • The Ministry of Economy estimates that the inflow of foreign direct investments in the first five months of 2011 amounted to EUR 4.2 bln. Poland remained an attractive 25 location for investors, thanks to its steady economic and political situation, skilled work force and competitive labour costs. It is also worth mentioning that during the first six 20 months of 2011, rising investment activity within the special economic zones was recorded. 15 10 PROGNOSIS 5 • H2 2011 will witness a slowdown in the pace of economic growth. The National Bank of Poland estimates that the GDP in 2011 will amount to 4%. 0 • Analysts predict that the inflation rate will drop during H2 2011. • The upcoming months will bring a slow decrease in the unemployment rate – mainly because of increasing seasonal work. Experts predict that unemployment will fall toSource: Central Statistical Office, Ministry of Finance 11.5% by the end of the year. • According to the Ministry of Economy the total inflow of foreign direct investment in 2011 might exceed EUR 10 bln. The peak of investors‟ activity is anticipated in theINFLATION (%) second half of the year. 5 4 3 2 1 0Source: Central Statistical Office, Ministry of Finance4 | COLLIERS INTERNATIONAL
  • 5. RESEARCH & FORECAST REPORT | MID-YEAR 2011 | POLAND | INVESTMENT MARKET Investment market Key Investment Figures SUMMARY H1 Investment Turnover EUR 960 mln • Stabilisation of core yields across all asset classes can be witnessed in H1 2011. Any Prime Office Yields 6.7% further movement in pricing is expected to depend largely on the impact of the sovereign debt crisis. Prime Retail Yields 6.7% Prime Industrial Yields 8.0% • Poland is still perceived by the international investment community as the main marketplace in the region and the liquidity has remained high in H1 2011. It‟s recognition as a largely „core market‟ in the CEE region has been upheld. • Approximately EUR 960 million of investment transacted in H1 2011 across all asset classes. The market has been driven by office investment transactions (53.5% of total volume), followed by retail (38.5%) and logistics (8%). There have been no hotel PRIME YIELDS transactions this year to date.14% • Austrian (due to the sale of the stake in the Europolis portfolio by CA Immo) and12% German investors dominated the market in terms of volume of closed transactions,10% followed by UK investors. 8% 6% • Warsaw has dominated the market in terms of volume, accounting for approx. 83% of all transactions closed in H1 2011, which translates into EUR 795 mln. Ca. EUR 165 4% mln of investment product was traded in regional cities, which indicates sustained 2% liquidity which stretches beyond Warsaw. 0% PROGNOSIS Industrial Retail Office • Poland is still on-track to drive the investment volumes in the region, primarily due to healthy macro-economic dynamics and the availability of product.Source: Colliers International • We expect the pricing gap between core and non-core assets to continue to grow through the second half of this year. INVESTMENT VOLUME (EUR mln) • Investors perceive favourable leasing dynamics and their anticipation of a „supply gap‟ in major cities as one of the main drivers of the market.50004000 • Core funds are expected to continue to dominate the investment landscape for the medium term, given their ability to conduct “all equity” transactions, or at low leverage3000 levels.2000 • Notwithstanding the above, we note that certain funds are approaching their investments more selectively and may be inclined to sell if the pricing can match their1000 expectations. 0 • Stabilisation of core yields in the mid-term continues to be dependent on the macroeconomic fundamentals of the Euro Zone and the CEE region in the wake of the sovereign debt crisis.Source: Colliers International • As several transactions are currently either in due diligence or are approaching that stage, we expect that overall transaction activity in 2011 will approach 2010 levels.5 | COLLIERS INTERNATIONAL
  • 6. RESEARCH & FORECAST REPORT | MID-YEAR 2011 | POLAND | LAND MARKET Land marketTRENDS 2011 GENERAL OVERVIEWOffice investment sites • The land market has started to revive after the crisis. The first signs of this were transactions concluded in the last few weeks of 2010. A further market upswing was SUPPLY recorded in the first half of 2011, during which the value of land transactions exceeded EUR 125 mln. DEMAND • Contrary to H2 2010, an increased number of companies with their own or confirmed PRICES debt funds, interested in buying investment land was observed.Source: Colliers International • For investment sites with valid Development Conditions or covered by a Local Plan, the sales process – from offer to the transfer of ownership – extended considerably over time and can take up to twelve months. In the case of land without Conditions or a Plan or with documents requiring changes, the process can take up to two years. • Despite the concluded and pending transactions, today‟s market cannot be comparedTRENDS 2011 to the market before the crisis. The only similarity which can be observed is the uniqueRetail investment sites investment opportunity to acquire land in a very good location at a reasonable price. Good investment sites attract several or even a dozen potential investors, whose SUPPLY financial capabilities and investment potential should be verified. DEMAND • Areas well-prepared for the investment process, in terms of technical, legal and planning are attracting the highest prices. As always, location is a major factor PRICES determining the value.Source: Colliers International TRENDS • The trend of buyers‟ domination continues. • In terms of transactions, their number is still low due to the continuing difficulty inTRENDS 2011 financing commercial projects. However, the volume of those concluded is still impressive. Residential investment sites SUPPLY • Fluctuations in the global economy and turmoil in the European Union are impacting on the market. This is influencing transactions, leading to reconsideration of offers, DEMAND price, and even to postponement of the closure process. • Sluggishness among some local authorities, particularly in Kraków and Warsaw, in PRICES issuing building permits continues to have a negative impact on the market, and is prolonging the investment process.Source: Colliers International PRICES AND TRANSACTION • The first half of the year has brought several significant transactions. Investors and developers have bought land worth EUR 150 million. This volume is impressive, despite the small number of transactions. • Prices of investment sites in all sectors have stabilised. This applies both to areas where the price declines were the greatest, and to those, where prices have reached their upper level. • Investment plots intended for shopping malls and retail parks are seeing interest from Polish and foreign companies. The prices for land suitable for shopping malls in Warsaw range between EUR 300-600 per m². Outside of Warsaw prices are lower at around EUR 120-450 per m². Land for retail parks is priced in the range between EUR 150-190 per m². The price depends on location; local market saturation and the plot‟s investment potential.6 | COLLIERS INTERNATIONAL
  • 7. RESEARCH & FORECAST REPORT | MID-YEAR 2011 | POLAND | LAND MARKET PROGNOSISPRICES AND TRANSACTIONS PLOT TRANSACTION • Ongoing negotiations and concluded preliminary agreements may allow the land INVESTOR LOCATION SIZE VALUE market in 2011 to reach a value of EUR 0.3-0.375 billion. (ha) (mln PLN) J.W. Kasprzaka, 8.1 174 Construction Warsaw • Land intended for offices in Warsaw, Wrocław and Kraków attract the highest interest. Dom Powązkowska, 9.9 168 As for TriCity and Poznań, projects started during the crisis have been Development Warsaw re-established and new transactions may well be on the horizon, although these Echo Konstruktorska, 7.4 63 Investment Warsaw markets remain less buoyant than in Warsaw or Wrocław. Echo Hotel Mercure, n/a 125 Investment Warsaw • As a result of the hiatus in investments caused by the crisis, the lack of availableSource: Colliers International dwellings has influenced a significant recovery in residential developers‟ activity. These developers are focusing on large and medium-sized cities. • The growth of the tourist market and the upcoming Euro 2012 in Poland, will continue to contribute significantly to the development of both hotel chains and individual hotelPRICES FOR THE OFFICE DEVELOPMENTSITES (EUR/m² of GLA) units. However, the finalised and upcoming transactions are of a lower value compared to the rest of the real estate market. TOWN/ REGION MIN MAX AVERAGE Warsaw CBD 300 850 575 Kraków 150 350 250 Łódź 100 150 125 Poznań 165 300 233 Upper Silesia 75 150 113 TriCity 100 350 225 Wrocław 100 450 275 LAND DEPARTMENT – ONGOING PROJECTS IN 2011Source: Colliers International – SELLER’S REPRESENTATION PORTFOLIO ASKING PLOT SIZE INVESTMENT CLIENT PROJECT FUNCTION PRICES (ha) POTENTIAL (m²) (mln PLN)PRICES FOR THE RESIDENTIALDEVELOPMENT SITES (EUR/m² of PUM) FSO SA Toruńska, Warsaw Commercial 6.00 50,000 38 TOWN/ REGION MIN MAX AVERAGE Żerański Chanel, FSO SA Mixed-use 8.26 50,000 47 Warsaw Warsaw: 300 700 500 CBD FSO SA Falenica, Warsaw Residential 2.80 25,000 12 Warsaw: 140 350 245 outside CBD KCI SA Poznańska, Kraków Residential 2.50 33,000 n/a Kraków 120 450 285 KCI SA Rybitwy, Kraków Commercial 14.80 n/a n/a Łódź 80 200 140 Sita Suez Group Brzezińska, Łódź Residential 11.00 n/a 12 Poznań 80 300 190 Sita Suez Group Darwina, Kraków Residential 1.80 n/a 5 IGD Silesia Sp. z o.o. Bukowińska, Warsaw Residential 0.60 21,500 45 Upper Silesia 60 200 130 Emerald Tower, IGD Mokotów Sp. z o.o. Office 0.40 20,000 45 TriCity 100 300 200 Warsaw Beethovena II, Wrocław 130 350 240 BRJ Investment Office 0.91 16,000 34 WarsawSource: Colliers International BP Investment Beethovena I, Warsaw Office 4.41 n/a 70 Hala Koszyki Savleigh Hala Koszyki, Warsaw Mixed-use 0.94 20,000 48 Metsa Tissue/Konstans Konstancin-Jeziorna Mixed-use n/a 120,000 n/a Mor Eden Towers Grzybowska, Warsaw Residential 0.60 26,850 72 Shipyard City Gdańsk, Drewnica Development Mixed-use 20.20 230,000 136 Gdańsk Promenady Vantage Development Mixed-use 15.10 n/a n/a Wrocławskie, Wrocław Nowe Ogrody 4 Sp. z Droga Męczenników Residential 6.90 75,600 65 o.o. Majdanka, Lublin Source: Colliers International7 | COLLIERS INTERNATIONAL
  • 8. RESEARCH & FORECAST REPORT | MID-YEAR 2011 | POLAND | INDUSTRIAL MARKET Industrial market GENERAL OVERVIEWTRENDS 2011 • The first half of 2011 saw an apparent increase in the number of new warehouse SUPPLY investments. In the first two quarters, almost 140,000 m² was delivered through ten projects, of which over 75% was supplied to the market in Q2. The total supply of DEMAND warehouse space in Poland at the end of H1 2011 was approximately 6.5 million m². Currently, around 347,000 m² of modern warehouse space is under construction. RENTS • In the first half of 2011 the transaction volume was about 800,000 m², of which over VACANCY 51% was signed in Q2. Compared to the first three months of the year, transaction volume increased nearly by 7%. More than 64% of the total transactions were new contracts, with the remaining 36% being renegotiations and expansions. • Vacancy rate showed a slight downward trend and, at the end of Q2 2011, was at 13.3%.DEVELOPERS MARKET SHAREBY EXISTING SUPPLY • Rents for warehouse space in general remained stable. An increase in rental rates was observed in the regions with a low level of available space such as in Kraków, 1% Poznań and Upper Silesia. 24% 39% SUPPLY 2% 4% • Warsaw – the total supply of warehouse space in Warsaw‟s three zones at the end of Q2 2011 amounted to nearly 2.5 million m² (compared to Q1, the supply has increased 4% by over 48,000m²). More than 65.8% of warehouse space is located in Zone II. At the end of Q2, over 26,000 m² of modern warehouse space (Zone I and II) was under 18% 8% construction, with 1.2 million m² in the planning stage of which 61% is in Zone II. ProLogis SEGRO • Central Poland – the total supply of warehouse space at the end of Q2 amounted to Panattoni MLP more than 930,000m². Just one project has been delivered to the market – Tulipan Europolis PointPark Properties Park Łódź, comprising the so-called ”small business units”, offering small warehouse modules. Currently, about 22,000m² of industrial area is under construction. Other Goodman • Poznań – warehouse space in H1 2011 increased by nearly 21,500m². Two buildingsSource: Colliers International in Panattoni Park Poznań I were completed. The existing supply has now increased to almost 824,000m², while projects under construction constitute about 54,500m². • Upper Silesia – current supply is more than 1.23 million m² and this remains theTOTAL SUPPLY BY REGIONS second largest warehouse market in Poland. Currently, over 80,000m² of warehouse space is under construction.1,800,0001,600,000 • Kraków – in terms of existing supply Kraków is one of the smallest warehouse markets1,400,000 in Poland. The existing supply as of the end of H1 of 2011 amounted to slightly more1,200,000 than 81,000m². In the first half of the year over 13,000m² of modern warehouse space1,000,000 was delivered to the market. 800,000 • Wrocław – the total supply of modern warehouse space exceeded 617,000m². At the 600,000 end of Q2 around 67,000m² was under construction 400,000 200,000 • Gdańsk – the total stock of warehouse space at the end of H1 2011 was approximately 0 134,000m². • Toruń – currently, the total supply of warehouse space is 95,600 m². Only one project with an area of ​1,100m² is under construction, while at the planning stage, there is around 100,000m².Source: Colliers International • Szczecin – Szczecin remains Poland‟s smallest warehousing market. Overall supply at the end of H1 amounted to less than 42,000m².8 | COLLIERS INTERNATIONAL
  • 9. RESEARCH & FORECAST REPORT | MID-YEAR 2011 | POLAND | INDUSTRIAL MARKET DEMAND SELECTED LEASE TRANSACTIONS IN H1 2011 • Warsaw – the demand for warehouse space in H1 2011 was relatively high. Nearly TENANT AREA BUILDING 371,000m² of warehouse space was leased, which represented 43% of the total (m²) transaction volume in Poland. Most of the lease agreements were signed in Zone I – TK Maxx 25,500 Goodman Wrocław over 184,000m².Hellmann Worldwide Logistics 20,000 Tulipan Park Stryków • Central Poland – total leased space in amounted to 78,800m², of which approximately 77% was leased in Q2. Panattoni Park Faurecia 17,600 Gorzów • Poznań – rented space in H1 reached the level of over 70,000m², of which more than Rhenus Contract Logistics 16,900 ProLogis Park Błonie 56% was leased in Q1. Valeo 16,700 Cracow Airport Logistics Center • Upper Silesia – in the first six months of 2011, 32 leases for a total area of ​over Panattoni Park 159,000m² were signed. In terms of transaction volume, Upper Silesia ranks second Tech Data 15,900 after Warsaw. Święcice Manhattan Business & Willson & Brown 12,000 Distribution Center • Kraków – five leases for 28,000m² were signed. The majority of them in Q2. RUCH S.A. 12,000 Annopol Logistic Park • Wrocław – in H1 2011, 14 lease agreements were signed for a total area of ​over ProLogis Park 84,000m² Geodis 10,000 Wrocław • Gdańsk – in the period from January to June 2011 nearly 25,000m² was leased.Source: Colliers International • Szczecin – the market here observed limited tenant activity. There were just two contracts signed during the first half of the year for a total area of ​9,000m². VACANCY RATE • Toruń – in H1 2011, there were no lease transactions due to the lack of availability of 70% 63,1% warehouse space in this market. 60% 50% VACANCY 40% • Vacancy in Poland at the end of Q2 was lower by 1.36%, compared to Q1 and amounted to 13.02%. 30% 19,3% 20% • Warsaw – the vacancy rate at the end of Q2 was 19.3%. For the particular Zones the 13,0% 5,7% 7,6% 9,7% 5,5% vacancy rate was 12.3% (Zone I), 21.3% (Zone II) and 19.4% (Zone III). 10% 0,6% • Regional Cities - the lowest vacancy rate was recorded in Toruń (0%), Kraków (0.6%) 0% and Gdańsk (5.5%). The highest vacancy was seen in Szczecin (63.1%), Central Poland (13%) and Wrocław (9.65%). The largest decrease was recorded in Szczecin, Wrocław and Kraków. RENTS Source: Colliers International • The downward trend in rents that began in 2009, although continuing in 2010, clearly decelerated. Since the end of 2010 stabilisation of rents has been observed in mostEFFECTIVE RENTAL LEVEL (EUR/m²) markets. The first half of 2011 has generally seen a continuation of this trend across the whole warehouse market, while a slightly upward trend is observed only in markets REGION MIN. MAX. where the vacancy level is low.Warsaw I 4.00 5.50Warsaw II 2.20 2.80Warsaw III 2.10 2.50 PROGNOSISCentral Poland 2.10 2.85 • An increase in planned investments can be observed, of which most are speculativePoznań 2.45 2.85 projects. The interest of developers will be in markets such as Kraków and GdańskUpper Silesia 2.50 2.95 where vacancy rate and supply of warehouse space is low.Kraków 3.50 4.50 • Tenants will still be interested in BTS projects.Wrocław 2.50 3.00 • Further growth in demand is predicted, both in the Warsaw region (especially in ZoneGdańsk 2.90 3.30 II where the vacancy rate is still high, giving tenants favourable lease terms), as wellSzczecin 2.40 2.85 as in other regions. • It is expected that rents will remain stable in the short term. However, in markets,Source: Colliers International which are characterized by a lack of space, we will continue to see an upward trend.9 | COLLIERS INTERNATIONAL
  • 10. RESEARCH & FORECAST REPORT | MID-YEAR 2011 | POLAND | OFFICE MARKET Office market TRENDS 2011 OVERVIEW SUPPLY • The first half of 2011 saw modest supply of new office space coming to the Polish market. Slightly over 95,000 m2 of office space was completed both in Warsaw and in DEMAND the 8 main regional markets. This amount of space constitutes only 37% of new supply delivered in H1 2010. RENTS • Leasing activity remains at a high level. Increasing demand for office space combined with the modest supply is pushing vacancy rates downwards in Warsaw and in all VACANCY regional markets.KEY OFFICE FIGURES • Tenants act with greater confidence with respect to the future of their businessH1 2011 activities and they are attempting to secure large space units at favourable lease conditions. CITY TOTAL STOCK (m2) VACANCY (%)Warsaw 3,505,035 6.2 • 2011 so far is marked by pre-lets. The share of pre-lease agreements in the totalKraków 414,420 11.7 volume of leased space is increasing, which is a sign of a real revival in the market and its healthy condition.Wrocław 311,330 4.3Poznań 195,580 11.3 SUPPLYTriCity 225,180 14.6Katowice 184,730 19.3 • Warsaw – the total stock of office space grew insignificantly in H1 2011. Thanks toŁódź 181,590 22.3 completion of 28,353m2 within four office schemes it amounted to 3,505,035m2. Two office projects were completed in the Upper South Zone (Mokotów) – Platinium IVLublin 61,980 10.5 (13,000m2) and Racławicka Point (1,918m2) and two other projects were completed inSzczecin 43,060 4.4 the City Centre – Pałac Młodziejowskiego (4,964m2) and Mokotowska Square (8,471m2). Currently ca 115,000m2 of office space is under construction for deliverySource: Colliers International before the year end. The largest amount of space will be completed in the CBD and in the Upper South Zone. TAKE-UP COMPOSITION • Regional cities – the total stock of regional markets grew by almost 68,000 m2 during the first half of the year. The largest increase in total stock was recorded in Kraków, 6% where almost 26,400m2 was delivered onto the market with, among others, two 25% buildings of Bonarka4Business (15,694m2) and the first phase of the Green Office scheme (8,000m2). Lublin saw the second largest new supply among regional 30% markets, as 13,500m2 of office space was completed within the Gray Office Park A. The TriCity was third thanks to delivery of the Allcon Park 3 (9,116m2). At the end of June 2011 almost 90,000m2 of office space was under construction, and planned for delivery in 2011. 39% DEMAND Expansions Renewals & Renegotiations • Warsaw – mid-year take-up in the Warsaw market surpassed 320,000m2, which in New agreements excluding pre-lets comparison with the results recorded in H1 2010 constitutes a 46% increase. Pre-let agreements 35% of leasing activity in H1 took place in the central locations. Among non-central locations the Upper South Zone enjoyed the most popularity and its share in the totalSource: Colliers International volume of leased space amounted to 32%. The majority of lease transactions were concluded for lease of small units below 1,000 m2. The average deal size for the TAKE-UP (in thous. m2) period was 1,063m2. Nine lease agreements surpassed 5,000m2. In comparison with H1 2010 the share of renegotiations and renewals in the total volume of leased space 350 decreased by 6 pp and was at the level of 30%, whereas the share of pre-lets 300 significantly increased (25% against 5% in the same period of 2010). The largest 250 agreements include 43,500m2 pre-leased by TP SA and 11,000m2 renewed by Ernst 200 & Young in Rondo 1. 150 100 • Regional cities – slowly but steadily regional markets are regaining their importance. In 50 H1 2011 transactions surpassing 155,000m2 took place, with the largest leasing 0 activity recorded in Kraków (almost 50,000m2) and Poznań (over 30,000m2). The 2008 2008 2009 2009 2010 2010 2011 H1 H2 H1 H2 H1 H2 H1 majority of transactions were new agreements. Renegotiations and renewals constituted 27% of the total recorded take-up and pre-lets had a 26% share in the totalSource: Colliers International volume of leased space. H1 2011 was characterised by a high leasing activity performed by tenants from the BPO sector.10 | COLLIERS INTERNATIONAL
  • 11. RESEARCH & FORECAST REPORT | MID-YEAR 2011 | POLAND | OFFICE MARKET The largest agreements include 16,000m2 renewed by Shell in KBP 400 in Kraków, SELECTED LEASE TRANSACTIONS 14,600m2 pre-leased by Grupa Allegro in Pixel in Poznań and 11,500m2 preleased by IN H1 2011 Infosys BPO Poland in Green Horizon in Łódź. TENANT SIZE (m2) BUILDING Pre-lease: VACANCY Miasteczko TP SA 43,700 TP / Warsaw • Warsaw – the average vacancy rate for the city as a whole has been decreasing for Renegotiation/ renewal: KBP 400 / the last twelve months and at the end of H1 2011 stood at 6.17%. The vacancy rate in Shell Kraków the CBD, which was growing since the end of 2008, has stabilized above 8%. In non- 16,000 central locations, due to the small amount of new supply, the vacancy rate continues to Pre-lease: Grupa Allegro Pixel / Poznań drop. At the end of H1 2011 it stood at 5.2%. 14,600 Pre-lease: Green • Regional cities – vacancy rates range from 4.3% in Wrocław to 22.3% in Łódź. In Infosys BPO Poland Horizon / comparison with rates recorded at the end of 2010 and in Q1 2011 almost all cities 11,500 Łódź recorded a decrease in the amount of vacant offices. This can be attributed to the high Renegotiation/ renewal: Rondo 1 / leasing activity recorded in H1 2011 and very limited supply of new office space. Ernst & Young Warsaw 11,000 Renewal + expansion: Buma Square RENTS SABRE 8,900 / Kraków Renewal + expansion: Rondo 1 / • Warsaw – asking rents remain stable with the average at the level of ca. EUR 21.5 Frontex 8,800 Warsaw /m2 per month in the CBD and EUR 15.5 /m2 per month in non-central locations. Due Pre-lease: to the relatively high amount of unleased space in the central area some office Rabobank Senator / Group Warsaw buildings in the CBD offer space in the range of EUR 16-19 /m2 per month. A-class 2,840 buildings in prime locations leased to a high degree offer space at even EUR 25-28 /m2 per month.Source: Colliers International • Regional cities – rental rates generally continue to range between EUR 12 and VACANCY RATE IN CENTRAL AND 15 /m2 per month. Lowest asking rates remain in Katowice and Łódź, and the highest NON-CENTRAL LOCATIONS in Poznań and Wrocław. 9% 8% PROGNOSIS 7% 6% • Due to a relatively low amount of vacant space in Warsaw‟s non-central locations 5% tenants may be forced to search for space in buildings within the CBD. 4% 3% • Delivery of further schemes in the central area which remain vacant to a high degree, 2% may result in a further increase in vacancy rates for CBD. 1% 0% • Effective rents in non-central locations may move upwards, whereas they should 2008 2008 2009 2009 2010 2010 2011 H1 H2 H1 H2 H1 H2 H1 remain stable or even slightly decrease in the city centre. Central Non-central • Pre-lease agreements will continue to be popular among tenants as a means of securing space in desired locations at favourable conditions.Source: Colliers International • As regards regional markets, new supply scheduled for delivery in H2 2011 will be higher than the amount of space which entered the market in H1 2011. If demand for AVERAGE ASKING RENTS space remains at the current level, this new supply will allow for further stabilisation in most markets. MIN. MAX. CITY (EUR/m2) (EUR/m2) • TriCity will experience the largest increase among regional markets and mayWarsaw experience a significant growth in vacancy rates. In order to attract tenants landlords 19.0 24.0CBD may offer more favourable leasing terms.Warsaw 13.0 16.0outside CBDKraków 12.0 15.0Wrocław 13.5 15.5Poznań 14.5 16.5TriCity 13.5 15.0Katowice 12.0 13.5Łódź 11.0 12.5Source: Colliers International11 | COLLIERS INTERNATIONAL
  • 12. RESEARCH & FORECAST REPORT | MID-YEAR 2011 | POLAND | RETAIL MARKET Retail market GENERAL OVERVIEWTRENDS 2011 • The retail market in Poland revived in the first half of 2011, both on the supply and SUPPLY demand side. DEMAND • Developers are returning to the market by presenting their expansion plans for the coming years. In the first half of 2011 over 250,000 m² of retail space was delivered to the market, which is a 13% increase yoy. RENTS • The first half of 2011 can be described as moderately optimistic in terms of retailers‟ VACANCY activity on the Polish market. One of the reasons is quite good economic conditions, and in June 2011 retail sales in Poland increased by 10.9% yoy. Moreover, there are still many potential locations which are seeing interest from retail chains. There were also some new entries by brands which were yet not present on the Polish retail market. EVOLUTION OF RETAIL STOCK IN POLAND m² mln m² SUPPLY 900,000 9 800,000 8 • The total supply of modern retail stock in Poland amounted to almost 8.22 million m² at 700,000 7 the end of H1 2011. 600,000 6 500,000 5 • More than 60% of the stock is located in the eight main Polish agglomerations, which 400,000 4 translates into approximately 5 million m². 300,000 3 200,000 2 • Warsaw, the biggest Polish retail market, at the end of H1 2011 offered over 1.42 100,000 1 million m² of modern retail space, of which 78% is constituted by shopping centres. 0 0 • In the first half of 2011 more than 250,000m² of retail space was delivered on the Polish market. The major projects completed in this time are: Galeria Słoneczna in Annual Supply Total Supply Radom (42,000m²), Turawa Park in Opole (41,000m²), Galeria Twierdza in Zamość (27,500m²) and Galeria Leszno (32,000m²).Source: Colliers International • Over 700,000m² of retail space is currently under construction in Poland. The majority of this is located in small and medium-sized cities. DEMAND MAIN RETAIL SCHEMES PLANNED TO BE DELIVERED IN H2 2011 • Retailers are more eager to develop their chains, especially by entering regional SIZE markets. There is still a big gap in terms of the brands present in medium-sized cities. CITY PROJECT DEVELOPER (m²) CH Echo Echo • Increasing supply of modern retail space in secondary cities is facilitating the Kielce 41,500 development of regional markets on the demand-side. Many top international brands, (extension) Investment Develop present only in major Polish cities up to now, are opening their stores in smaller cities. Rzeszów Millenium Hall 52,000 Investment This is possible due to completion of modern retail schemes, suitable for their Galeria expectations. Szczecin ECE 43,000 Kaskada • In terms of new entries in the first half of 2011 the Polish market saw the arrival of Toruń Toruń Plaza Plaza Centers 33,000 international fashion brands. Dorothy Perkins, Redgreen, Lindex, and a lingerie brand Saller Group from Serbia – Extreme Intimo in Manufaktura, Łódź. In addition, two international Ostrów Galeria Wlk. Ostrovia West 37,000 childrens brands opened their first Polish store: Catimini in Stary Browar, Poznań and Investment the Australian Groovy Kids brand in Reduta Shopping Centre, Warsaw. EF Rank Kalisz Galeria Tęcza 17,500 Progress • A new national brand – Harpers Shoes – offering well-known international shoeSource: Colliers International brands was established in Poland in H1 2011 and is planning to open as many as 10 new stores by the end of 2011.12 | COLLIERS INTERNATIONAL
  • 13. RESEARCH & FORECAST REPORT | MID-YEAR 2011 | POLAND | RETAIL MARKET VACANCY SELECTED LEASE TRANSACTION IN H1 2011 • Vacancy levels in 8 major Polish agglomerations range between 0.5-3%. TENANT AREA LOCATION (m²) • The lowest rates are recorded in Szczecin (0.52%) and Warsaw Agglomeration (0.78%), while the highest vacancy level is noted in TriCity Agglomeration (almost 3%). Rossmann 1,350 Manufaktura, Łódź Intermarché 2,800 Galeria Leszno RENTS VIP Collection 130 Złote Tarasy, Warsaw • In the last few months a slight increase in rents has been observed in selected locations, especially in the best shopping centres in major Polish cities. TK Maxx 2,870 RP Matarnia, Gdańsk • The highest rental levels are invariably recorded in Warsaw and Kraków. Prime rents Catimini 56 Stary Browar, Poznań for units up to 100m², leased by fashion retailers can reach EUR 80 /m2 per month in the best shopping centres in Kraków and EUR 90 /m2 per month in Warsaw. Parfois 105 Krupówki, Zakopane • Rental levels in shopping centres in Warsaw range between EUR 70-90 /m2 per month Massimo Dutti 420 Wzgórze, Gdynia for units of 100m², in regional cities rents these are approximately 40% lower. Groovy Kids 110 Reduta, Warsaw • In terms of the best high street locations Warsaw and Kraków are still the leaders. The United Colors of 123 Janki, Warsaw rents have remain unchanged and range between EUR 75-95 /m2 per month. Far Benetton lower levels are recorded in Łódź (Piotrkowska Street) or Katowice (3 Maja Street), where shopping centres attract the majority of retailers at the expense of high streetSource: Colliers International development. PROGNOSIS VACANCY LEVELS IN MAJOR • In Poland developers‟ activity is significant, and over 700,000m² of retail space is POLISH AGGLOMERATIONS currently under construction. Developers are aim mainly at small and medium-sized 3% cities, which still are not saturated in terms of modern retail space. • By the end of 2011 it is expected that total retail stock will reach 8.6 mln m², as few big 2% retail schemes are planned to be delivered on the Polish market, e.g. Millenium Hall in Rzeszów, Galeria Kaskada in Szczecin or Toruń Plaza. 1% • Retailers‟ activity is likely to increase. The macro situation in Poland is favourable and 0% retail chains will try to find possible gaps, especially on the markets in medium-sized cities. • The trend of retailers switching to the best newly opened retail schemes and high quality existing shopping centres will continue.Source: Colliers International • The vacancy rate should remain mostly unchanged. It will most likely fall in the best shopping centres, which are targeted by retail chains, but increasing supply will offer new retail space and stabilise the situation. • Regarding retailers‟ activity, rental levels are expected to rise slightly, but this is expected to be focused on the best retail destinations in major Polish cities.13 | COLLIERS INTERNATIONAL
  • 14. RESEARCH & FORECAST REPORT | MID-YEAR 2011 | POLAND | KEY METRIC DEFINITIONS 512 offices in Key metric definitions 61 countries on • Prime Headline Capital Value (derived): This is a calculation of market value derived from the annual prime headline rent divided by the prime (net initial) yield. 6 continents • Prime Net Initial Yield: The yield an investor is prepared to pay to buy a Grade A United States: 125 building, fully-let to high quality tenants at an open market rental value in a prime Canada: 38 location. Lease terms should be commensurate with the market. As a calculation Net Latin America: 18 Initial Yield = first years‟ net income/purchase price (prior to deducting fees and taxes) Asia Pacific: 214 EMEA: 117 • Prime Headline Rent: Represents the top open-market tier of rent that could be expected for a unit of standard size commensurate with demand, of the highest quality and specification in the best location in the market at the survey date. This should • $1.5 billion in annual revenue reflect the level at which relevant transactions are being completed at the time but • 978.6 million square feet under need not be exactly identical to any of them, particularly if deal flow is very limited or management made up of unusual one-off deals. If there are no relevant transactions during the • Over 12,500 professionals survey period, the quoted figure will be more hypothetical, based on expert opinion of market conditions, but the same criteria on building size and specification will apply. CONTACT: • Prime Net Effective Rent: Prime Net Effective Rent is the lowest rent payable, based on a calculation of the Prime Headline Rent, less the monetary equivalent of the Research & Consultancy highest of either the rent-free period or fit-out contribution available at the time of the Dominika Jędrak survey date. Director Mobile: + 48 666 819 242 • Average Headline Rent: Average Headline Rent represents the average open-market Email: dominika.jedrak@colliers.com tier of rent that could be expected for a unit of standard size commensurate with demand, based on a blend of Grade A & B space across a range of locations in the COLLIERS INTERNATIONAL POLAND market at the survey date. Pl. Piłsudskiego 3 00-078 Warsaw • Total Competitive Stock: Includes the gross leasable floor space in all A and B class Tel. + 48 22 331 78 00 buildings. www.colliers.com • Space Under Active Construction: Represents the total amount of gross leasable floor space of properties where construction has commenced on a new development This publication does not necessarily deal with every or in existing properties where a major refurbishment/renovation is ongoing at the important topic nor cover every aspect of the topics with which it deals. It is not designed to provide legal or other survey date. advice. • Space Under Construction – Inactive: Represents the total amount of gross leasable floor space of properties where construction had started/where a major refurbishment/renovation was ongoing, but activity has since stopped for a period of 3 months or longer. • Vacant Space: The total gross leasable floor space in existing properties that meet the Competitive Stock definition, which is physically vacant and being actively marketed at the survey date. Space should be available for immediate occupation. COLLIERS RESEARCH Colliers Research Services Group is recognized as a knowledge leader in the commercial real estate industry, providing clients with valuable market intelligence to support business decisions. Colliers research analysts provide multi-level support across all property types, ranging from data collection to comprehensive market analysis. Across the CEE-SEE-Russia region of EMEA, Colliers researchers regularly collect and update data on key real estate metrics, set to consistent definitions. This information is constantly managed using databases, enabling staff to readily produce analysis on key regional markets including supply, demand, absorption, pricing and transaction data on capital markets and the office, industrial and retail sector. In most CEE-SEE-Russian markets, the office definitions used are consistent with those set out by the CEE Research Forum – an umbrella group, of which Colliers is a founding member - established to ensure consistent research methodologies are used, bringing greater transparency and reliability to the analysis of real estate markets in the region.www.colliers.com
  • 15. www.colliers.com Accelerating success.