Jones Lang LaSalle, a real estate consulting company, summarized the office market trends in main Polish cities including Katowice. The report provides a comprehensive review of the office market situation in the City in 2011 and shows predictions for the next twelve months.
“Construction activity in the Katowice conurbation has started to increase slightly. However, as occupier confidence is moderate and in our opinion will remain moderate until the end of 2012, developers may have to postpone projects” – Jones Lang LaSalle analysts claim in the publication.
According to the report, Katowice offers more than 250 000 sq. meters of modern office space and is ranked fifth in terms of office stock in Poland (after Warsaw, Kraków, Wrocław and Tri-City). At present, vacancy rate stands at 12,8% and consultants expect it to remain at around 10% during 2012.
Over three years ago, the vacancy rate was ten times lower (1,2% in Q4 2008) and it was the lowest level ever seen in the market’s history. The situation was caused by the spectacular arrival of international companies during 2007 and 2008. Growing demand and the limited availability of office space in existing buildings encouraged investors to undertake several office projects on a speculative basis. This has led to an oversupply on the office market and increasing levels of vacant space in the City – developers delivered about 45 000 sq. meters in Q2 2010. As can be read in the report, construction activity has been almost frozen since Q1 2010 and currently there is only 19 500 sq. meters of active development, of which only 24% is secured by pre-lease agreements. Thereby, analysts anticipate that the developer activity will not increase until the substantial amount of available space has been soaked by the market.
According to Jones Lang LaSalle, existing buildings provide around 32 000 sq. meters of space available for rent. More than 70% is located in three office locations: Chorzowska 50, Atrium and Francuska Office Center. Another 14 000 sq. meters is vacant in developments currently under construction. It means that tenant-favourable market conditions will continue in Katowice during 2012 and even in 2013.
Leasing activity was up slightly during Q1 to Q3 2011, totaling 33 000 sq. meters. Only six deals were larger than 1 000 sq. meters – Tauron (5 700 sq. m), Capgemini (5 700 sq. m), Opal Development (4 400 sq. m), Mentor Graphics (3 100 sq. m), Grupa Żywiec (2 500 sq. m) and Ruch S.A. (2 400 sq. m). Almost 32% of signed leases were renewals, no pre-lease agreements were concluded. Analysts expect that the majority of signed deals in 2012 will not exceed 1 000 sq. meters as new firms will tend to adopt a “wait and see” attitude or lease small units of up to 600 sq. meters.
Due to the market situation, transactional rates in Katowice have declined and reach the current level of EUR 12,00 – 13,50 /sq.m/month. Further decrease of the prices is expected to continue in 2012.
General outlook for this year tells that occupier confidence will continue to be moderate. The immediate availability of office space of 1 000 sq. meters and more makes Katowice an attractive alternative for corporations from the business services sector. Tenants typically choose this location having analyzed the costs, such as rental levels for office space, and the easy access to the more than 2,2 million people who live in the wider Katowice metropolitan area.
source: Jones Lang LaSalle