Office market outlook – autumn 2010

Poland has been and is expected to be one of Europe’s best performing economies. Katowice and its investment market is predicted to develop more rapidly in the future than other regional cities. All ingredients of Katowice assets, like a high population density, well educated workforce, good infrastructure and planned public projects, predestine the City to become successful when the market turns into grow again.

Instead of the economic downturn, there are signs that interest of investors about Katowice is already improving and leasing as well as investment activity should increase during the next years. Here is a general autumn’s outlook of the office market in the City – one of the key factors for investors while deciding about investment localization.

Office market in Katowice is still immature in comparison to Kraków and Wrocław. Though, it is developing by new office projects and tenants point of view about A-class office building is changing systematically. It is forecast the office market in the City will become mature enough within 2-3 years which will cause a significant increase of interest in high quality office spaces.

A new supply in 2010 consists three new office schemes (Katowice Business Point, Francuska Office Center, Reinhold Center) which delivered 45 600 sq. meters of A-class space. At present, a total modern office space in Katowice is estimated at about 260 000 sq. meters*. The total stock has doubled since 2002.

There are a number of developers, such as Skanska, Neinver, Polimex Development and Holdimex, who plan to commence new office schemes in Katowice, however construction works’ start depends on the market situation and level of signed pre-lease agreements.

The high new supply led to an increase in the vacancy rate which reached 17,7 % at the end of the first half of 2010. It is expected the amount will decrease during 2010 and 2011 due to improving demand and no new significant office schemes planned to be completed in 2011.

Rental rates in A-class office buildings stood at approx. EUR 14 – 15 /sq.m/month and EUR 11 – 13 /sq.m/month for B/B+ class spaces in the H1 2010. Instead of increase in demand, developers are still offering competitive rents and other incentives such as free rent periods. It causes the effective rents’ level is between EUR 10,5 – 12,5 /sq.m/month in top quality projects. Though, increasing volume of transactions will result a lower number of incentives in the next months.

* Depending on an agency – King Sturge of Cushman & Wakefield – the total office stock in Katowice stands respectively at level of 256 300 or 262 700 sq. meters.

based on market researches of Deloitte, King Sturge and Cushman & Wakefield