Mokotów rules office development

According to the latest report from Collier's International, Warsaw saw office vacancy rates drop in 2006, which drove lease rates sky-high and sent businesses scrambling for space. New offers in the immediate vicinity of the central business district (CBD) have dwindled, bringing absorption to record levels.

The shortage in the city center pushed development in the "upper south" area (principally Mokotów). Upper south deals comprised 26 percent of total activity, in great part as a result of a greater proportion of leasable stock as opposed to owner-occupied properties. Out of nearly 190,000 sqm of new space delivered over 2006, 58,000 sqm were in the Mokotów area.

Rondo 1, Hotchief's 39-storey, 55,000 sqm glass tower, comprised a mammoth one quarter of CBD offerings, while companies like Nestle, Canal + and Schneider Electric all moved into Mokotów-area office spaces at 5,300, 7,600 and 10,000 sqm, respectively.

The stock of total modern office space was at 2.55 million sqm, split at a 60:40 ratio between the suburbs and the city center, leased at headline rates ranging from E16-20 (zł.62-78), considerably higher than in previous years.

"At the end of the year, some offers were taken off the market and are slowly being re-introduced at higher rates," Marcin Kania, CEE associate director for Colliers International Poland, explains. "Later this year, a few more big players will be active in the so-called upper south - bringing available modern office space up to about 450,000 sqm by 2009.

In 2007, market activity is expected to remain strong at around 110,000 sqm leased per quarter, a great part of which consists of pre-lease deals for 2008-2009. Pre-leasing is fast becoming the norm for a market that is tightening under the weight of unstoppable demand.