research & forecast sNaPshot
EastErn EuropE | officE MarkEt MEtrics
Introduction
since the end of 2012 office vacancy across the region has started to creep upwards, albeit ever so slightly. When combined with relatively muted economic growth forecasts for the year ahead, questions have been raised as to the overall health of office markets and the sustainability of rents, which have remained robust since their initial post-crisis slump.
recent activity in Warsaw this year, for example, shows a market which has seen a drop in both headline and net effective rents. the combination of a significant short-term spike in new supply, lower economic growth rates and very weak sentiment (in a market which has seen office rents go through several peaks and troughs over the years) has been driving this current change in rents. But is this a short-term knee-jerk reaction with rents set to rebound in future, or is this a trend which will stabilise into a longer term pattern?
this report examines the major eastern european office markets in detail, considering each of the following metrics per city:
office space per capita
• the strategic office market position: i.e. the volume of modern office space per capita, used to determine if a market is established, evolving or emerging.
occupational Growth trends
• occupational growth trends, showing changes in the net absorption rate of each market over time. operational Vacancy
• the composition of vacant space in each city in order to determine whether vacancy is distributed and/or concentrated across a market. this helps us understand the true operational vacancy rate of a market, compared to the often misleading headline vacancy rates which are widely quoted. It also points to any signs of structural vacancy starting to appear in a particular market.
availability
• an analysis of the future ‘availability’ of modern office space within each market, which accounts for both operationally vacant space and the volume of space coming on-stream within the active pipeline which is yet to be pre-let. By relating this volume of availability to previous levels of absorption and current economic growth activity/prospects we can determine how many years’ worth of availability exist in each market today to determine whether a market is likely to be over, under or effectively supplied over the short-medium term.
By analysing of each of the above metrics, we can derive a more informed picture of likely occupational patterns and the path of rents in each market over the short-medium term. EastErn EuropE:
aVEraGE Vacancy & rEnts
2007 2008 2009 2010 2011 2012 2013/Q1 40 35 30 25 20 15 10 5 0 40 35 30 25 20 15 10 5 0 % €/m2 Prime rents secondary rents e europe Vacancy inDEX Introduction 1 office Market Metrics: Key Messages 2 established office Markets 3 evolving office Markets 4 emerging office Markets 5 future Demand/supply equilibrium 6 conclusion: city summary & rental Impact 7 office Weather Map 9 ee capital cities: office Vacancy Distribution 10
EastErn EuropE: stratEGic officE MarkEt position
Office Market Metrics: Key Messages
the major markets across eastern europe can be categorised into one of three broad categories: established, evolving and emerging - according to the provision of modern office space measured in m²/000 capita. considering each market according to its ‘long-term position’ combined with a much clearer picture of actual operational vacancy (as opposed to the headline vacancy rates which are widely quoted) enables us to better understand the likely future path of occupancy and rental behaviour in each market.
the following provides a summary of how demand and supply activity will typically change and interact, according to whether a market is considered established, evolving or emerging.
EstablishED (buDapEst, bratislaVa, praGuE, WarsaW)
In established markets the demand cycle becomes more predictable, with take-up formed predominantly by renegotiations and renewals rather than ‘net increases’ in demand. as the days of significant increases in space absorption are over, the market starts to churn space and occupiers place greater emphasis on the need for higher quality/performance office space. Increased levels of supply-side competition will ultimately lead to structural vacancy in each market as buildings fail to match modern occupational needs. this in turn will drive the redevelopment, refurbishment and replenishment of existing stock into higher quality office space, or for alternative uses such as mixed-use, residential and hotel.
EVolVinG (MoscoW, sofia, bucharEst, ZaGrEb)
expansions and new leases continue to be a feature of the market, driven by economic growth and the relocation of tenants from older, non-competitive stock into modern premises. renewals and renegotiations will gradually become an important component of total take-up. some pockets of opportunity remain for the development of modern office space, but this will become an increasingly competitive gap in the market placing growing emphasis on the need for quality over quantity.
EMErGinG (kyiV, bElGraDE, st. pEtErsburG)
the absorption of modern space continues to expand, albeit from low base levels of take-up, but the majority of demand represents a net increase in absorption where large, one-off deals will often distort take-up trends. Long-term development opportunities exist, but short-term timing is critical to success. Being aware of pockets of high vacancy, competitive pipelines and sticking to locations which work can be critical to the cashflow generation and success of a specific project.
Emerging
Evolving
Established
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 25% 20% 15% 10% 5% 0% oper ational V acancy r ate
office stack + active pipeline / per capita thousands kyiv belgrade bucharest Zagreb sofia budapest Warsaw prague bratislava Moscow st petersburg
Established Office Markets
thE EstablishED MarkEts: WarsaW, praGuE, bratislaVa & buDapEst
the ‘occupational Growth’ chart highlights the extent to which the volume of occupied office stock has continued to grow post-crisis. In the last year or so, it is noticeable that occupational growth has started to flatten out in all of the established markets. this is primarily a result of markets reaching close to maturity from a capacity perspective, although the slowdown is also underpinned by weakening short-term economic conditions - despite the economic differences impacting each market.
In response to relatively strong economic conditions in Poland, the volume of occupied office space in Warsaw has continued to grow marginally in size, reaching 3.6 million m² as of end h1 2013. Bratislava on the other hand, which has also benefitted from positive economic growth recently, has seen a 2% contraction in net absorption to date in 2013 – evidence that the market has reached a strategic supply position.
a review of take-up trends in these four markets over the past 2-3 years corroborates this trend, demonstrated by the increase in ‘occupational churn’ i.e. renewals, renegotiations and relocations versus ‘net growth’ in demand from expansions and new leases. In Prague, for example, occupational churn now accounts for 75% of total take-up, increasing from 60% in 2011. concurrently occupiers are increasingly looking to upgrade and rationalise space in order to improve working conditions and productivity whilst reducing overheads. this is leading to increasing pockets of vacant space concentrated in buildings and/or areas which do not meet modern occupational needs.
Vacancy: Distribution Vs. concEntration
the ‘Vacancy Distribution’ chart highlights the extent to which the volume of vacant space within each market is either distributed across the entire market, or concentrated in specific buildings. for example, in Warsaw 50% of all vacant space is concentrated in buildings which have up to 30% vacancy. an additional 30% of overall vacancy is situated in buildings where vacancy is between 30-70%, and the final 20% of vacant space within the market is situated in buildings which have over 70% vacancy.
the main observation is that markets with a higher proportion of space in the 0-30% category show a stronger degree of vacancy distribution, which is a good thing from an owner/investors perspective. Up to 10-15% vacancy in a building is perfectly healthy – you need circulation/ expansion space for existing occupiers and to help manage refurbishment. Vacancy of between 20-30% leaves room for improvement in terms of the need to increase occupation but anything above this level highlights a need to actively manage these assets. any office building which suffers from over 70% vacancy suggests there is something unacceptable with either the building quality, where it is located, and/or how it is being managed/marketed.
In summary, even though each market has a sizeable concentration of buildings which are over 70% vacant, making up 20%+ of total vacancy in each respective market. Warsaw and Prague look healthy whilst Bratislava and Budapest are more challenged, given the spread of vacancy in the middle 30-70% band and likelihood of limited net absorption growth to plug the vacancy gaps.
Vacancy ratE iMpact: hEaDlinE Vs. opErational Vacancy ratEs
a review of the underlying buildings in the 70% vacant category in each city shows that, after discounting new completions from the list (2012+), there remains a number of buildings which are ‘practical outliers’, failing to attract occupiers and losing existing occupiers primarily due to their build quality and unattractive location. If we discount these ‘outliers’ from the headline vacancy rate (because they are no longer a real feature in the competitive office set) we arrive at what we would regard as a more accurate operational vacancy rate for each market.
the outcome is much healthier vacancy rates. Budapest vacancy drops to around 16%, which is still relatively high, but not as high as the ca. 20% widely quoted. Vacancy rates in Bratislava, Prague and Warsaw are also reduced, reaching close to 11% in the case of Bratislava and Prague, getting below 10% in Warsaw. In the current property cycle this should support relatively stable rents, depending upon how well new supply is managed into each market.
occupational GroWth: 2007–2013 h1 [inDEX, basE 2007]
Vacancy Distribution
hEaDlinE Vs. opErational Vacancy 2007 2008 2009 2010 2011 2012 2013/ h1 200 180 160 140 120 100 Warsaw Prague Budapest Bratislava 0-30% 30-70% 70%+ W ar saw pr ague br atislava budapest 100% 80% 60% 40% 20% 0% W ar saw pr ague br atislava budapest 25% 20% 15% 10% 5% 0% headline Vacancy Vacancy rate less then 70% operational Vacancy rate
Evolving Office Markets
thE EVolVinG MarkEts: MoscoW, bucharEst, sofia & ZaGrEb
When we move on to the ‘evolving markets’, markets which are around half of their potential capacity in terms of the volume of modern office space per capita, we see a slightly different set of trends.
firstly, Moscow is going through a fairly rapid and significant transformation, highlighted by an occupational base which has grown by around 60% in the last five years. this has been driven by significant 4%+ annual economic growth in russia since 2009, but also from the significant modernisation of office stock in the city facilitating the demand for new, modern space.
as we head down towards south-east europe, we have two cities which show a similar strong growth curve to Moscow in Bucharest and sofia. In addition to the same modernisation trends witnessed in Moscow, Bucharest and sofia have witnessed positive net absorption growth as a result of eU accession and their ability to attract a number of outsourcing companies to their respective markets helping to drive demand for modern space.
Growth in Zagreb, however, has been far more muted. a comparatively high-cost local employment base combined with muted economic growth has restricted growth in office demand in the city to date. even though the positive structural changes undertaken pre-eU accession in 2013 should help to drive demand growth for modern office space, the high cost base of the city needs to be addressed if this growth potential is to be realised.
Vacancy: Distribution Vs. concEntration
When we look at the distribution of vacant space across these four markets, it shows a very different picture to that of the established markets. the volume of vacant space is far more concentrated, with over 45% of vacant space in each market concentrated in buildings with over 70% vacancy. Whilst this may seem high, it is worth considering that a lot of this space has been completed in recent years in anticipation of continued growth in demand.
In Moscow, given that russian GDP is expected to continue to expand by around 3-4% per annum in the short-medium term, the majority of this space will soon be absorbed keeping vacancy rates low. Unfortunately for Bucharest, sofia and Zagreb, demand growth has been weak for the last two years in response to weak short-term economic conditions leading to a sharp increase in vacancy rates in each of these cities. as economic growth returns, we expect the better quality vacant space to be absorbed quite rapidly.
Not all of the space which is currently vacant would fit into the ‘good quality’ category, however. there is a large proportion of sub-standard space in each of these markets as a result of the pre-crisis rush to develop new supply creating some pockets of practically obsolete space.
Vacancy ratE iMpact: hEaDlinE Vs. opErational Vacancy ratEs
a review of the underlying buildings in the 70% vacant category in each city shows that, after discounting new completions from the list (2012+) there are a number of ‘practical outliers’, especially in sofia and Bucharest.
By discounting these ‘outliers’ from the headline vacancy rate the operational vacancy rates of each city falls markedly to as low as 6% in Moscow, down to around 13-14% in Bucharest and sofia, and only marginally in Zagreb to sub-16%.
these rates in Bucharest, sofia and Zagreb are still quite high so rental growth won’t be happening this year. But with increasing growth in absorption in the next 1-2 years, vacancy rates should continue to drop leading to a more positive rental growth outlook. In the case of Moscow, an operational vacancy rate of 6% should support an increase in rents in the city given the forecast for steady growth in absorption in the short-medium term. all will depend upon the management of future supply.
hEaDlinE Vs. opErational Vacancy Vacancy Distribution 0-30% 30-70% 70%+ Mosc ow sofia Buchar est Zagr eb 100% 80% 60% 40% 20% 0% Mosc ow sofia Buchar est Zagr eb 25% 20% 15% 10% 5% 0% headline Vacancy Vacancy rate less then 70% operational Vacancy rate
occupational GroWth: 2007–2013 h1 [inDEX, basE 2007] 2007 2008 2009 2010 2011 2012 2013/ h1 200 180 160 140 120 100 Moscow Bucharest sofia Zagreb
Emerging Office Markets
thE EMErGinG MarkEts: st pEtErsburG, kyiV & bElGraDE
the emerging office markets of Kyiv and st Petersburg benefit from a sizeable local base population. this combined with an existing low base of modern office space per capita has resulted in significant growth in net absorption of around 100% in st Petersburg and 60% in Kyiv over the last five years.
the large volume of latent office demand within each market able to respond to an increase in competitively priced modern office product, combined with strong economic growth has helped to drive this rapid shift in occupation. this trend will continue but at reduced growth rates in the short-medium term.
although the Belgrade curve looks much flatter, there has be around 40% growth in net absorption over the same time-frame; despite a flattening off in the last 12 months or so as the serbian economy contracted. With positive news surrounding serbia’s accession to the eU, we expect expansive growth in the occupation of modern office stock in Belgrade over the short-medium term provided structural reforms are undertaken to facilitate economic growth.
the supply response is likely to be slightly inconsistent with new and latent demand requirements, creating short-term spikes in vacancy which have been a feature of emerging office markets to date.
Vacancy: Distribution Vs. concEntration
at first sight, the distribution of vacant space in the emerging markets appears to be very similar to that of the evolving markets – with a large proportion (almost 50%+) of vacant space found in buildings which have over 70% vacancy. however, on closer inspection there is a subtle difference. In the emerging markets the low proportion of vacant space in the ‘30-70%’ vacancy cohort accounts for 15-20% compared to 20-40% in the evolving markets. equally, there is a larger proportion of vacant space to be found in buildings with under 30% vacancy.
this is due to the fact that vacancy is driven by very high concentrations of vacant space in only a few buildings, as a result of high proportional increases in new supply.
an analysis of all the buildings in the 70%+ vacancy cohort across the three markets shows that the majority of these high vacancy buildings in st Petersburg and Kyiv are indeed very new completions. In Belgrade, one newly completed building in 2012 significantly adds to the vacancy total as does one building which has been suffering from legal issues. the latter is now close to being marketed as available for leasing, reducing the volume of practically obsolete space in the market.
Vacancy ratE iMpact: hEaDlinE Vs. opErational Vacancy ratEs
If we account for the impact of practically obsolete space in each of these markets, we see that the difference between headline and operational vacancy rates is not so significant. the st. Petersburg rate barely changes staying around the 9% mark, but the Kyiv vacancy rate drops markedly from around 15% to 12% whilst vacancy in Belgrade falls from around 12% to 8.5%.
In terms of the likely impact on rental rates, an operational vacancy rate of 9% in st. Petersburg is likely to support stable rents, or even support some modest growth in the short-term. In Kyiv and Belgrade, rents may seem a little soft given the relatively high vacancy rates but are liable to change quickly. Particularly in Kyiv if the current growth in occupational demand continues at a strong pace.
the real test will be driven by the management of future supply into each market, relative to growth in demand.
occupational GroWth: 2007–2013 h1 [inDEX, basE 2007]
Vacancy Distribution
hEaDlinE Vs. opErational Vacancy 2007 2008 2009 2010 2011 2012 2013/ h1 200 180 160 140 120 100 st Petersburg Kyiv Belgrade 0-30% 30-70% 70%+ st P eter sbur g Kyiv Belgr ade 100% 80% 60% 40% 20% 0% st P eter sbur g Belgr ade Kyiv 16% 14% 12% 10% 8% 6% 4% 2% 0% headline Vacancy Vacancy rate less then 70% operational Vacancy rate
Future Demand/Supply Equilibrium
Now we have a more accurate depiction of operationally vacant space in each market, we can combine this with the known active (non pre-let) pipeline to determine the volume of availability in each market. By relating this to previous levels of net absorption in each market combined with current economic growth forecasts, we get a better idea of the health of each market in terms of the number of years’ worth of available space in each market.
each chart shows the potential number of years it could take to absorb total availability. the mid-case scenario is the most probable absorption rate for each market based on its strategic position, current economic growth forecasts and implied absorption volumes in the next few years ahead. the lower range of the bar for each market represents the best-case scenario; the upper limit of the bar represents the worst case scenario.
It is worth considering that 2-3 years worth of supply is perfectly normal and healthy in established office markets. this volume of available space provides ample choice to occupiers and helps to stabilise rents. a higher absorption rate of 3-4 years in evolving and emerging markets would also be reasonable, given that net absorption is likely to continue to increase in the short-medium term, especially in the evolving markets where absorption volumes are moving off a low-base.
EstablishED MarkEts
Warsaw has the tightest range of all the established markets of 2.3 - 4 years. this is the result of consistent levels of net absorption across the market over the last six years, in part driven by constant positive economic growth. as GDP growth normalises to around 2-3% in 2013 and 2014, combined with a very strong pipeline, we get a mid-case absorption rate of around three years. this is a sound level of availability, but will feel different to the 1-1.5 years worth of availability the market was accustomed to over the last few years.
a similar picture emerges in Prague, but given the lower economic growth forecasts in the czech republic, net absorption growth is likely to be lower for the next 12-18 months, pushing the absorption rate out to four years. Bratislava mirrors Prague in terms of the mid-case scenario, but the range is significantly different. a small market, where economic growth rates can range quite significantly has led to varying annual absorption rates and a potentially wider spread in absorption. With an increasing middle-band of highly vacant buildings, the mid-case scenario could worsen from 4 to 5 years. the weakest market is Budapest, which continues to suffer from low economic growth and high levels of increasing structural vacancy. the mid-case scenario for Budapest is six years, which translates into ‘a tenants market’ for a number of years to come.
EVolVinG MarkEts
all markets have a very similar mid-case absorption scenario of 2-3.5 years, although the potential range in Bucharest is by far the largest. this does not necessarily mean it is the riskiest market as net absorption is unlikely to reach the near zero levels of the recent past as a result of economic contraction. forecast economic improvements and a well managed active pipeline is more likely to lead to a rapid absorption of space, although some pockets of obsolete vacant stock will remain. Moscow has by far the tightest range as the supply of new modern space remains constrained whilst demand continues to grow and absorb availability. the sofia office pipeline has been cut significantly in recent years, which combined with very positive growth in net absorption on the back of an economic recovery should see space being much more readily absorbed in future. economic challenges in croatia, however, will mean continued weak growth in absorption in Zagreb, so despite only a small volume of availability, the absorption rate will be at least two years.
EMErGinG MarkEts
In the emerging markets, the likely absorption rate is typically between 2-3 years. With increasing levels of net absorption likely to occur on the back of economic growth in the years ahead, albeit slightly more muted in Belgrade, the absorption of availability could well be at a much quicker rate than depicted here; especially in st. Petersburg and Kyiv.
EstablishED MarkEts
aVailability [no. of yEars]
EVolVinG MarkEts EMErGinG MarkEts W ar saw Pr ague Br atislava Budapest 12 10 8 6 4 2 0
Mid case scenario
Mosc ow Zagr eb Buchar est sofia 12 10 8 6 4 2 0
Mid case scenario
st P eter sbur g Belgr ade Kyiv 12 10 8 6 4 2 0
Conclusion:
City Summary & Rental Impact
the following provides a city by city summary of the outcome of these office market metrics on rental trends:
EstablishED MarkEts
Warsaw: Despite high levels of new supply putting upward pressure on vacancy, continued
occupational growth should absorb the majority of space in the next 3-4 years. however, the problem is that Warsaw is a very cyclical and emotive market, and current weak economic/ business sentiment driven is forcing rents down. headline rents for prime space at €24 m²/month have not changed too much, but in some instances net effective rents have been forced to sub €20 m²/month. headline rents in Mokotov are around €14-15 m²/month, but net effective rents trade at a 15% discount. It is unlikely that rents will fall below these rates, and should start growing again in 12-18 months as the market stabilises.
Prague: Many new speculative projects have started to enter the market in 2013, adding 70,000 m²
of speculative space to a total pipeline of 270,000 m² which will continue to put pressure on the market, especially as the economy remains weak. these are not prime buildings, however, so most pressure will be felt in the secondary market where there is increasing competition for tenants; pushing average rents down further. Prime rents should remain relatively stable, but prime net effective rents may soften a little from €19/month as owners compete to attract and maintain occupancy.
Bratislava: With no major leasing transactions in the market so far in 2013, and only ca. 40,000 m²
estimated take-up in h1 (only 25% represents net absorption), the market remains a tenants market. Limited new supply will not alter the overall conditions markedly and rents have already bottomed-out, so should remain stable at €13 m² /month for prime net effective for the foreseeable future.
Budapest: the market remains very quiet from a leasing perspective with limited new take-up
in 2013 following on from almost zero absorption in 2012. With a number of new projects coming on-line, almost all of which are being marketed with green credentials (such as the New Vaci Greens building completed in Q2) the market is set to get increasingly competitive as occupiers move up the quality curve. although rents have improved since 2012, prime net effective rents may soften again from €15.9 m2/month especially given the muted economic growth and absorption forecasts for the next 1-2 years ahead.
EVolVinG MarkEts
Moscow: Despite a slow-down in economic growth, absorption will continue to grow positively
against a supply-side which suffers capacity constraints keeping vacancy at or below 8%. Both prime and average rents are likely to be sustained. Prime net effective rents of Us$ 68.7 m²/month to increase slightly in key, central locations.
Bucharest: Despite take-up of 112,000 m² in h1, only around 1/3rd of this activity represented a
net increase in demand. as new completions brought an extra 80,000 m² to the market in h1 2013 this resulted in a slight increase in the overall headline vacancy rate. New prime product such as floreasca Park will add an additional 37,000 m² by year-end, but 60% is pre-let and should continue to lease up on the back of improving business sentiment and an expanding economy. Prime net effective rents of €17 m²/month to remain stable.
Sofia: With 75,000 m² of net absorption recorded in h1 2013 the sofia office market is improving,
driven in large part by requirements from Business Process outsourcing (BPo) tenants and research and Development (r&D) occupiers. Vacancy dropped by 41,000 m² to around 350,000 m² so operational vacancy is lower than 15%, but it remains a tenants market for now. Prime net effective rents remain close to bottom at €11.4 m²/month, but no change likely this year. a slow, stable progression probable next year on the back of steady economic growth and positive absorption in 2014.
aVEraGE rEnts 2007–2013 h1
[inDEX, basE 2007]
EstablishED MarkEts EVolVinG MarkEts EMErGinG MarkEts 2007 2008 2009 2010 2011 2012 2013/ h1 2007 2008 2009 2010 2011 2012 2013/ h1 2007 2008 2009 2010 2011 2012 2013/ h1 180 160 140 120 100 80 60 40 20 0 180 160 140 120 100 80 60 40 20 0 180 160 140 120 100 80 60 40 20 0 Warsaw Prague Budapest Bratislava Moscow Bucharest sofia Zagreb st Petersburg Kyiv BelgradeZagreb: Very limited take-up of approximately 20,000 m² in h1 2013 reflects a market somewhat
in the doldrums. the 32,000 m² of new space added to the market in h1 2013 has pushed vacancy above 15%, although this remains concentrated in a few challenged properties or new completions. operational vacancy remains lower and the market is fundamentally okay. Very limited net absorption growth and a weak economic growth outlook suggests both prime and average rents may fall, even though prime net effective rents are low at €13 m²/month.
EMErGinG MarkEts
St Petersburg: take-up continues to grow positively but is focussed primarily on grade a buildings.
Growth in completions by year-end 2013 will bring an additional 200,000 m² of new space to the market, split 50/50 between class a and B grade space. Yet all this space should be absorbed meaning limited change in both prime or average rents as vacancy remains stable, with prime net effective rents to stay around Us$53 m²/month.
Kyiv: take-up for h1 2013 is estimated to be at least 70,000 m2 pushing the headline vacancy
rate for h1 to below 15%. this trend is likely to continue for remainder of the year, pushing both headline and operational vacancy rates lower still by year-end. Prime headline and prime net effective rents of Us$ 35 m./month to stabilise over the remainder of 2013 into 2014. there is no expectation that rents will rise next year, but they will probably not face any further downward pressure.
Belgrade: there has been very little activity in the market over the last 18 months or so, but
take-up of around 30,000 m² in h1 will push the operational vacancy rate down to below 10% in 2013. only two new buildings will complete by the end of 2013 - one of which is owner occupied and the other bringing a meagre 3,000 m² to the market. Prime headline and prime net effective rents of €15 m²/month to remain stable, as should average rents.
a generally positive outlook, with the strong likelihood of positive growth in net absorption driving stable or growing rents over the short-medium term. Despite a slight vacancy overhang dampening rental prospects in the short-term, the positive absorption outlook is likely to drive rental growth over the medium term.
an increase in vacancy levels will continue to dampen rental growth prospects over short-medium term, especially given the limited possibility of significant net absorption growth over this period.
the current vacancy overhang is significant enough to put downward pressure on rents over the short-medium term, given the weak economic and net absorption growth outlook at present. rents are likely to fall in the short-term given the overall weak market conditions, but an improved economic outlook over the medium-term should lead to a strong increase in net absorption, supporting more positive rental growth.
Paris Rotterdam IRELAND UNITED KINGDOM SPAIN PORTUGAL BELGIUM LUXEMBOURG FRANCE NETHERLANDS GERMANY DENMARK SWEDEN NORWAY FINLAND RUSSIA ESTONIA LATVIA LITHUANIA BELARUS POLAND UKRAINE SWITZERLAND AUSTRIA CZECH REPUBLIC SLOVAKIA HUNGARY CROATIA ROMANIA BULGARIA TURKEY GREECE ITALY
Office Weather Map
In order to conclude our report, the following weather map depicts our view of the outlook for each city in terms of the short-medium term view concerning vacancy and rents. as with all forecasts, conditions can change and we’ll be keeping an eye on the outlook for each market in the year-ahead.
482 offices in
62 countries on
6 continents
United states: 140 canada: 42 Latin america: 20 asia Pacific: 195 eMea: 85• ¤1.5 billion in annual revenue • 104 million square meters under
management
• 13,500 professionals
accelerating success.
EastErn EuropE:
Damian harrington, MrIcs; Msc
regional Director – research & consulting eastern europe regional team
cee Investment services
MobilE +358 400 907 972
Main +358 985 677 600
EMail [email protected]
Juliane priesemeister, Msc
regional research analyst – research & consulting eastern europe regional team
MobilE +420 739 009 345
Main +420 226 537 618
Mail [email protected] www.colliers.com
the information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. this publication is the copyrighted property of colliers International and/or its licensor(s).
Market boundary
Local Markets submarkets city centre city centre Inner city Inner city outer cIty outer city
Market boundary
Local Markets submarkets
c city centre cc city centre Us Inner city N Inner city W Inner city sW Inner city Ls Inner city se Inner city e Inner city Market boundary
Local Markets submarkets cBD city centre Inner city Inner city outer city outer city
Appendix: Office Vacancy Distribution
the following appendix provides a detailed analysis of the distribution of vacancy in each of the major cities covered in the office Market Metrics report, as supporting information.
the chart illustrates the distribution of vacant office space in each capital city market, by sub-market and by vacancy cohorts. the bar for ‘cohort <10%’ represents the volume of vacant space m2 situated in buildings which have less than 10% vacancy. cohort ‘20- 29.9%’, for example, represents the volume of vacant space which is situated in buildings which have vacancy of between 20-29%. the cohort >90% shows the volume of vacant space in buildings with over 90% vacancy.
In summary, the cities which have a greater proportion of vacant space in cohorts on the left hand side of each chart i.e. up to 30% vacancy, represent markets where vacancy is more widely distributed across the entire office stock. Provided the overall vacancy rate is not too high, this represents a healthy office market. those cities with a higher proportion of vacancy on the right hand side of each chart i.e. over 70% vacancy, represent markets where vacancy is more concentrated in specific buildings or areas within the entire office stock. In such markets, the headline vacancy rate can often be very misleading as it is skewed by vacancy in a small number of challenged, often obsolete buildings.
each city chart highlights where vacant space is located by sub-market, categorised as cc (city centre locations) Ic (inner centre locations) and oc (outer city locations), determined by each city map and legend provided. for example, the Warsaw market show a strong level of vacancy distribution. combined with a low headline vacancy rate of around 10%, this points to a healthy office market. In terms of location, most vacant space clearly occurs in office buildings within the inner city sub-markets of the city.
WarsaW – polanD
praGuE – cZEch rEpublic
bratislaVa – sloVakia < 10% 10%-19 .9% 20%-29% 30%-39% 40%-49% 50%-59% 60%-69% 70%-79% 80%-89% > 90% < 10% 10%-19 .9% 20%-29% 30%-39% 40%-49% 50%-59% 60%-69% 70%-79% 80%-89% > 90% 90 80 70 60 50 40 30 20 10 0 80 60 40 20 0 thousands thousands cc Ic oc cc Ic oc < 10% 10%-19 .9% 20%-29% 30%-39% 40%-49% 50%-59% 60%-69% 70%-79% 80%-89% > 90% 60 40 20 0 thousands cc Ic oc Inner city outer city city centre e cc se Us Ls sW W N c Inner city outer city cc
Market boundary
Local Markets submarkets cBD city centre floreasca city centre Dimitrie Pompeu Inner city Baneasa Inner city Piata Presei Inner city West Inner city south Inner city east Inner city
Market boundary
Local Markets submarkets cBD city centre central Buda city centre central Pest city centre Non-central Buda North Inner city Non-central Pest Inner city Non-central Buda south Inner city Vaci ut corridor Inner city Periphery outer city
Market boundary
Local Markets submarkets cBD city centre Broad centre Inner city suburban area outer city
Market boundary
Local Markets submarkets cBD and central portion
of New Belgrade area city centre Broad centre District Inner city suburban District outer city
bucharEst – roMania buDapEst – hunGary sofia – bulGaria bElGraDE – sErbia < 10% 10%-19 .9% 20%-29% 30%-39% 40%-49% 50%-59% 60%-69% 70%-79% 80%-89% > 90% 120 100 80 60 40 20 0 thousands < 10% 10%-19 .9% 20%-29% 30%-39% 40%-49% 50%-59% 60%-69% 70%-79% 80%-89% > 90% 120 100 80 60 40 20 0 thousands cc Ic oc cc Ic oc < 10% 10%-19 .9% 20%-29% 30%-39% 40%-49% 50%-59% 60%-69% 70%-79% 80%-89% > 90% 140 120 100 80 60 40 20 0 thousands cc Ic oc < 10% 10%-19 .9% 20%-29% 30%-39% 40%-49% 50%-59% 60%-69% 70%-79% 80%-89% > 90% 35 30 25 50 15 10 5 0 thousands cc Ic oc West cBD east floreasca Piata Presei Baneasca Dimitrie Pompeiu south cBD central Pest central Buda Non-central Buda North Non-central
Buda south Non-central Pest
Vaci ut corridor suburban area Broad centre cBD cBD Broad centre District suburban District
Market boundary
Local Markets submarkets 1. cBD city centre 2. centre city centre 3. Business District east city centre 4. District West Inner city 5. Novi Zagreb Inner city 6. Buzin outer city 7. Jankomir outer city 8. Lucko outer city
Market boundary
Local Markets submarkets central Business
District (cBD) city centre Non-cBD Left Bank Inner city Non-cBD right Bank Inner city
Market boundary
Local Markets submarkets centre 1 city centre centre 2 city centre Petrogradskaya city centre admiralteiskaya city centre Vasileostrovskaya city centre Bolshaya Nevka Inner city okhta Inner city North-West Inner city North-east Inner city elizarovskaya Inner city Moskovsky Inner city south Inner city Port Inner city
Market boundary
Local Markets submarkets
1 city centre 5 city centre 9 city centre 2-4 Inner city 6-8 Inner city 10-20 Inner city ZaGrEb – croatia kyiV – ukrainE st. pEtErsburG – russia MoscoW – russia < 10% 10%-19 .9% 20%-29% 30%-39% 40%-49% 50%-59% 60%-69% 70%-79% 80%-89% > 90% 180 160 140 120 100 80 60 40 20 0 thousands cc Ic oc < 10% 10%-19 .9% 20%-29% 30%-39% 40%-49% 50%-59% 60%-69% 70%-79% 80%-89% > 90% 70 60 50 40 30 20 10 0 thousands cc Ic oc < 10% 10%-19 .9% 20%-29% 30%-39% 40%-49% 50%-59% 60%-69% 70%-79% 80%-89% > 90% 30 25 20 15 10 5 0 thousands cc Ic oc < 10% 10%-19 .9% 20%-29% 30%-39% 40%-49% 50%-59% 60%-69% 70%-79% 80%-89% > 90% 70 60 50 40 30 20 10 0 thousands cc Ic oc cBD centre Buzin Jankomir Lucko Business District east District West Novi Zagreb Non-cBD Left Bank Non-cBD right Bank cBD Ne south NW Petrogradskaya Vasileostrovskaya admiralteiskaya Port Moskovsky elizarovskaya center 1center 2 Bolshaya Nevka okhta city centre Inner city