C&W: Weak rental outlook for Warsaw office market

Generally, the outlook is positive in the Central European office markets of the Czech Republic, Hungary, Romania, Poland and Slovakia, however Warsaw is anticipating the weakest rental growth, a report by Cushman & Wakefield indicated. The best performing CEE markets are expected to be Prague and Budapest, with 0.8 percent per annum rental growth each. The weakest rental growth outlook is for Warsaw at -4.1 percent per annum over 2015-17, where supply-driven concerns are the most apparent. "We expect disparity across the CEE markets to continue, due to occupier demand and supply imbalances. Budapest is experiencing a positive upswing that should deliver future rental growth. In Poland there is a significant contrast between the positive prospects of the regional cities where demand is generally robust, and Warsaw, where the strong development pipeline is limiting short term rental growth prospects," said Charles Taylor, Managing Partner at Cushman & Wakefield in Poland. C&W evaluated that occupier activity over the first half of 2015 in Warsaw was healthy and while some of this was due to new market entrants successfully completing their outstanding requirements, a large proportion is attributed to lease renegotiations and existing occupiers moving within the market. The city's vacancy rate stood at 14.1 percent in the Q2. Take-up volume in the main regional markets (Kraków, Wrocław, Tri-City, Poznań, Katowice and Łódź) rose in the first two quarters of 2015 to more than 217,200 sqm, accounting for close to 59 percent of 2014 total take-up. More than 400,000 sqm is expected to be transacted in regional cities in 2015.