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CEE Marketbeat Office Q2 2020

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CEE Marketbeat Office Q2 2020 M A R K E T B E AT MARKETBEAT CENTRAL EUROPE Office Q2 2020 M A R K E T B E AT CONTENTS Bratislava (SK) Bucharest (RO) Budapest (HU) Prague (CZ) Warsaw (PL) M A R K E T B E AT BRATISLAVA Office Q2 2020 YoY 12-Mo. ECONOMY: Slovakia Among the First Countries to Reopen, Economy in Recovery Phase Chg. Forecast Slovakia’s economy has been hit by the domestic, as well as international restrictive measures which have been implemented to minimize the impact of the coronavirus pandemic on public health. According to Oxford Economics data, Slovakia’s real GDP 9.8% should see a year-over-year drop in all four quarters of 2020. Prices should continue to rise, although by a smaller rate. The Vacancy Rate trough of the economic activity was reached in Q2 and most of the economy should now be in a recovery phase, including domestic demand, private sector revenues, industrial production, exports and retail sales. Due to a relatively mild course of the pandemic, Slovakia enjoyed one of the fastest reopenings of the economy in the world. The sentiment in private sector has €17.00 grown less tense as evidenced by the month-over-month increase in industrial turnovers, construction output and real estate Prime Rent, Sq m/month activities (based on the Statistical Office of the Slovak Republic data). 5.75% SUPPLY & DEMAND: Expected Drop in Leasing Confirmed, Developers React by Postponing Supply Prime Yield The office property stock saw the first completions since Q4 2019, delivering around 48,000 sq m of class A offices. This includes the competitive projects of Nivy Tower by HB Reavis and Einpark Offices by Corwin. As part of the new supply is (Figures based on class A+B only.) speculative, we see an increase in overall vacancy rate in the Bratislava office market, reaching 9.82%. On the other hand, the Source: Bratislava Research Forum Bratislava IV district has seen a decrease in vacancy rate as a new tenant from public sector moves into Westend Plazza by JTRE. There are currently 11 buildings under construction, totaling 174,000 sq m. Most of this stock (126,000 sq m) is in central ECONOMIC business district (CBD). Additional 63,400 sq m of office stock should be added in 2020 and only 26,400 sq m should be INDICATORS Q2 2020 delivered in 2021 as developers respond to coronavirus crisis by postponing planned supply. Total occupied office stock YoY 12-Mo. increased by 21,000 sq m quarter-over-quarter. This represents a third consecutive quarterly increase in net absorption. Gross Chg. Forecast take-up decreased annually, totaling 31,000 sq m. However, the net take-up share continued to rise and exceeded 64% in Q2. 242K Bratislava PRICING: Prime Rent Holds Steady while Prime Yield Sees a Small Uptick Employment Prime rent remained at 17.00 EUR/sq m/month and is achievable in city centre and CBD. Prime yield saw a minor increase of 0.15% to 5.75%. Competitive leasing market translated to an increase in standard rent free period from 5-6 months to now 6-7 months on a 5 year lease contract or even longer based on the level of competitiveness of a project. Tenants are increasingly 2.7% considering the level of their operating expenses and some show interest in reducing the leased area, although most Bratislava companies in Slovakia don’t intend to move to a home-based model of working. Stronger negotiating power on the side of Unemployment Rate tenants contributes to higher incentives and contributions. 7.4% SPACE DEMAND / DELIVERIES OVERALL VACANCY & ASKING RENT Slovakia Unemployment Rate 150 17 € 10% 9% Source: ÚPSVaR 100 16 € 8% 50 15 € 7% 6% 0 14 € Thousands 5% 13 € 4% -50 2016 2017 2018 2019 2020 2016 2017 2018 2019 YTD 2020 Net Absorption, SM Construction Completions, SM Prime Rent, € PSM Vacancy Rate M A R K E T B E AT BRATISLAVA Office Q2 2020 MARKET STATISTICS INVENTORY AVAILABILITY OVERALL VACANCY CURRENT QTR YTD OVERALL UNDER CNSTR PRIME RENT SUBMARKET (SQ M) (SQM) RATE TAKE-UP (SQ M) TAKE-UP(SQ M) (SQ M) (€/SQ M/MTH) CC 485,700 36,000 7.4% 500 2,300 3,600 17.00 IC 259,100 12,800 4.9% 2,800 6,800 28,800 14.00 OC 414,900 56,500 13.6% 13,700 15,900 15,900 11.50 CBD 564,800 61,200 10.8% 12,700 29,700 125,800 17.00 SB 162,400 18,800 11.6% 1,300 2,100 0 15.00 BRATISLAVA TOTALS 1,886,900 185,300 9.8% 31,000 56,800 174,000 17.00 KEY LEASE TRANSACTIONS Q2 2020 PROPERTY SUBMARKET TENANT SECTOR RSM TYPE Public/Embassy/Trade Westend Plazza OC 9,300 new lease Council/Diplomatic City Business Center II CBD Prof. services 1,971 renegotiation Apollo Business Center II CBD Prof. services 1,717 new lease JURAJ BRONČEK Research Analyst Trade Center II IC IT 1,500 renegotiation +421 (0) 910 162 011 /[email protected] Tower 115 CBD Prof. services 1,396 renegotiation cushmanwakefield.com KEY CONSTRUCTION COMPLETIONS YTD 2020 A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION Cushman & Wakefield (NYSE: CWK) is a leading global real QUARTER OF estate services firm that delivers exceptional value for real PROPERTY SUBMARKET SM COMPLETION estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 53,000 Nivy Tower CBD 31,000 2 employees in 400 offices and 60 countries. In 2019, the firm had revenue of $8.8 billion across core services of property, Proxenta Tower CC 1,000 2 facilities and project management, leasing, capital markets, valuation and other services. Einpark Offices SB 16,000 2 ©2020 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may Source: Bratislava Research Forum contain errors or omissions and is presented without any warranty or representations as to its accuracy. M A R K E T B E AT BUCHAREST Office Q2 2020 YoY 12-Mo. SUPPLY: Developers continue to provide new supply Chg. Forecast In Q2 2020, new deliveries totaling more than 27,000 sq. m have been completed, consisting of the third and last phase of The Bridge project from the Central – West area and Zone 313 in the Floreasca – Barbu Vacarescu hub. The total new supply for the 10.1% first semester reached 108,000 sq. m, reflecting a 16% y-o-y decline. The modern office stock of Bucharest reached 3.2 million Vacancy Rate sq. m, while the vacancy rate increased to the 10.1% level. There is a significant difference between the vacancy rates for A and B class office buildings, with A class properties recording a level of 7.2%, compared to 17% in B-class buildings. €19.00 New projects totaling more than 430,000 sq. m GLA are currently under construction, the remaining pipeline for 2020 being Prime Rent, Sq m/month estimated at app 100,000 sq. m. The most active sub-markets in terms of deliveries during the following period will be West and Central – North, with more than 160,000 sq. m under construction in each of these submarkets and a cumulated market share of 75%. The most important developments currently under construction are One Cotroceni Park, Campus 6.2 and 6.3, J8 Office 7.00% Park, Globalworth Square, U Center and One Tower. Prime Yield (Overall, All Property Classes) DEMAND: Covid-19 pandemic impacts the leasing activity In Q2 2020, the total leasing activity in Bucharest was of 44,500 sq. m, with net take-up having a share of only 42%, since most transactions were renewals. The Central-North submarket attracted almost 50% of the total volume and also the largest ECONOMIC transaction, the contract renewal agreed between UniCredit Bank and Globalworth for the 15,500 sq. m UniCredit HQ building. INDICATORS Q2 2020 During H1 2020, the total leasing activity reached 97,000 sq. m, reflecting a 50% y-o-y decline and a record-low volume for the first semester during the last decade. Since restrictions were gradually lifted after two months of lockdown, activity started to YoY 12-Mo. Chg. Forecast pick-up, but most occupiers are still reluctant to commit for long-term contracts. 1.0M PRICING: The market is still confident, as rents remain stable Bucharest Prime headline rents in Bucharest remained stable in Q2 2020, as asking rents in the CBD area generally fall in the €18.50- Employment 19.00/ sq m/month range, with values of €16.00-17.50/ sq. m/month being recorded in the most representative buildings from the Central-North submarket. 1.3% Bucharest Unemployment Rate 3.4% SPACE DEMAND / DELIVERIES OVERALL VACANCY & ASKING RENT Romania Unemployment Rate (F) €20 16% 350 €19 14% 300 Source: Oxford Economics, National Institute 12% 250 €19 of Statistics 10% 200 €18 8% €18 150 6% €17 Thousands 100 4% 50 €17 2% 0 €16 0% 2015 2016 2017 2018 2019 H1 2020 2015 2016 2017 2018 2019 2020 Net Absorption, Sq m Construction Completions, Sq m Prime rent, €/sq m/month Vacancy Rate M A R K E T B E AT BUCHAREST Office Q2 2020 MARKET STATISTICS STOCK AVAILABILITY CURRENT QTR YTD TAKE-UP YTD COMPLETIONS UNDER CNSTR PRIME RENT SUBMARKET VACANCY RATE (SQ M) (SQ M) TAKE-UP (SQ M) (SQ M) (SQ M) (SQ M) (€/SQ M/MTH) CBD 357,400 22,800 6.4% 3,300 5,143 - 38,900 19.00 Central-North 758,100 54,000 7.1% 21,890 23,661 41,700 163,800 17.50 North 234,700 20,900 8.9% 492 3,242 - - 15.00 Pipera 724,100 110,200 15.2% 6,639 14,651 34,800 - 13.00 West 608,900 57,100 9.4% 6,549 31,645 21,200 166,500 15.00 Central 365,900 40,100 11% 5,043 8,893 10,500 62,100 15.00 South 42,000 1,000 2.4% - 8,991 - - 12.00 East 122,300 19,000 15.6% 600 600 - - 12.00 Bucharest (overall) 3,213,400 325,100 10.1% 44,513 96,826 108,200 431,300 19.00 KEY LEASE TRANSACTIONS Q2 2020 PROPERTY SUBMARKET TENANT RSQM TYPE CRISTI MOGA Head of Research UniCredit HQ Central-North UniCredit
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