ABC. Poznań. Office Market Report. Real value in a changing world

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1 ABC Real value in a changing world Poznań Office Market Report 2013

2 We encourage you to visit our website to download more office sector related reports On Point Poznań Office Market Report June

3 Major roads and international airports in Poland On Point Poznań Office Market Report June

4 On Point Poznań Office Market Report June Why Poznań? Large Labour Pool 900,000 inhabitants of the Poznań agglomeration. 550,000 inhabitants of the city of Poznań. 28 higher education institutions including 5 universities. 131,000 students and almost 40,000 graduates per year. Above-average fluency in foreign languages 34 philology faculties. The greatest proportion of people aged between 25 and 34 in Poland: 19.6%. Excellent Location and Connectivity A2 motorway - connection to Berlin and to Warsaw in 2.5 hours. A modern airport which handled 1.5 million passengers (2012). A developed and well thought out city transport infrastructure with a new fleet of modern trams and buses. Real Estate Sixth largest office market in Poland in terms of office stock. High quality office space available for both large and small tenants as well as space tailored for BPO/SSC sector needs. Office buildings with green certificates. Experienced local and international developers. Good Place to Invest in A Moody s rating of A3, with a stable outlook. A report from The Hacket Group places Poznań among the cities that offer the best conditions for the establishment of modern services centres and support investors in an active manner. The number of BPO/SSC centres already operating in the city provide complex services. Kostrzyńsko-Słubicka Special Economic Zone (includes Poznań). Support for investors including: content-related assistance for investments; support regarding the most important contacts; information delivery; promotion; post-investment assistance; scholarships for trainees; and assistance in incorporating investments in a special economic zone.. Quality of Life More than 440,000 tourists per year. Cultural facilities featuring nine theatres and music institutions, including the Poznań Philharmonic, 22 museums, a good number of cinemas and galleries, and others sites. City hosts a number of important business and cultural events. Poznań International Fair is the leader among Poland s facilities, with more than 110,000 m 2 of exhibition halls and a total number of more than 400,000 attendees visiting the events there each year.

5 On Point Poznań Office Market Report June Poznań A city based on business and knowledge, offering the perfect environment for investments Economy Poznań is both the administrative and economic capital city of the Wielkopolska region, the third most populous voivodship in Poland (3.4 million inhabitants). It also has the youngest population of the ten largest Polish cities, with more than 19.6% of people between the age of In terms of economy, Poznań is one of the strongest cities in Poland. The Gross Domestic Product (GDP) generated in Poznań in 2010 was approximately PLN 40.2 billion (more than PLN 70,600 per capita), which was double the Polish average. The economic fabric of Poznań is diversified and well developed. Particularly strong sectors include the electromechanical, automotive, chemical and food production sectors. Notwithstanding this, the economy of the city is still mainly service sector orientated, with more than 70% of salaried employees working in that sector. Poznań is also one of the most significant areas in Poland regarding job creation opportunities, with the lowest unemployment rate in Poland, just 4.7% (March 2013). Poznań is not only the location for the Polish operations headquarters for many large national and international manufacturing firms (such as Bridgestone, GlaxoSmithKline, Nivea, Kompania Piwowarska (SAB Miller), Unilever, Volkswagen and Wrigley), but also the place where a number of companies from the business service sector have decided to open their BPO/SSC/ITO and R&D centres (such as Samsung, Carlsberg, Ikea, Franklin Templeton, Roche and MAN). Connectivity Located in one of the main transit corridors connecting western and eastern Europe next to the A2 motorway, Poznań benefits from excellent road transport routes giving the city direct access to the European motorway network (both Warsaw and Berlin being a 2.5-hour drive away). The transport accessibility of Poznań is further facilitated by numerous rail connections and also the Ławica International airport, which is a key hub for both passengers and freight traffic. The airport handles 1.5 million passengers a year with direct connections to key European cities including: London, Paris, Madrid, Munich and Rome. An ideal location for investments Poznań has a lot to offer to investors and is therefore one of the major destinations for foreign investments in Poland. Since 1990, almost USD 7 billion has been invested in the city. Another significant contribution to the development of the city economy has been provided through EU funds (PLN 2.1 billion over the period of ). In March 2013, the international ranking agency Moody s, confirmed Poznańs A3 rating, seeing a stable outlook for the city. It is also worth mentioning a Hacket Group report titled: Global Business Services Executive Insight, where Poznań is ranked among the cities that offer the best conditions for the establishment of modern services centres and support investors in an active manner. City support The Investor Relations Department, which is dedicated to cooperating with investors, carries out a number of functions with regard to complex services for potential investors. As well as information, the office provides investors with contentrelated assistance from an investment guide who is responsible for the organisation of meetings with city authorities, institutions of higher education, recruitment offices or other investors present in Poznań. When a decision to establish a company has been made, the guide assists the investor in the process of obtaining all administrative decisions that are necessary to start business activity. The guide stays in contact with the investor and responds to new initiatives and suggestions. In 2010, Poznań city council adopted the Development Strategy for the City of Poznań until That document is a response to goals which have been set by the city officials for Poznań s future development; those goals are built on the vision Poznań as a metropolitan city with a strong economy and a high quality of life that bases its development on knowledge. Leisure Poznań is one of the Poland s most popular business and tourist destinations attracting approximately over 440,000 visitors per year. The hotel supply for Poznań include over 50 hotels, which can accommodate more than 8,000 guests. The city s impressive cultural package features nine theatres and music institutions, including the Poznań Philharmonic, over twenty museums, a number of cinemas, galleries and many other attractions. Poznań also plays host to a number of important business and cultural events. For example, Poznań International Fair is unquestionably the leader among Polish facilities, with more than 110,000 m 2 of exhibition halls and a total number of more than 400,000 attendees visiting the fair events each year.

6 On Point Poznań Office Market Report June Labour market Poznań is one of the main university cities in Poland. In 2011, it had a total of 131,000 students, with 29% of those attending Adam Mickiewicz University. AMU is not only the biggest, but also the best higher education institution in the whole region: in 2012, it came third in a ranking of the best Polish universities published by Perspektywy magazine. In Poznań, many people choose key courses of study from the SSC/BPO sector perspective (in brackets the number of students for each faculty for 2011): business (29,000), engineering (9,500 ) and IT (4,000). Students and graduates In 2011, almost 37,000 students graduated from universities in Poznań. It is worth mentioning that number has been growing for several years now. The number of graduates in Poznań between Source: Central Statistical Office, Business and administration (9,500), engineering (2,200) and Information Technology (almost 1,000) were among the most popular faculties by numbers of enrolled students Knowledge of foreign languages Students in Poznań have the opportunity to study at 34 philology faculties teaching English, German, Spanish, Russian, French, Italian, as well as Scandinavian languages, Japanese and others. Almost 90% of those who took part in the 2010 Bilans Kapitału Ludzkiego survey speak English while almost half (47%) could converse in German. The latter score ranks third in the whole country and is at least in part explained by the geographical proximity to Germany. Other popular languages spoken by students in Poznań are Russian (11%), French (10.2%) and Spanish (10.1%), followed by Italian (3.1%). Foreign language knowledge of students in Poznań 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% English German Russian French Spanish Italian Source: Bilans Kapitału Ludzkiego, 2010 There are also people in Poznań who speak less popular languages. This is partly because of the uniquely wide range of philology courses of study that are offered by Adam Mickiewicz University. Students have the opportunity to choose rare European languages, such as Lithuanian, Romanian and Dutch, as well as some of the more exotic languages, such as Arabic, Japanese and Hindi. In 2011/2012, Arabic (75), Hungarian (67) and Norwegian (65) registered a significant number of students. Experienced workforce The table below presents salaries for General Ledger positions in SSC/ BPO sector in Poznań. However, one must remember that specific rates depend not only on work experience in a particular process, but also on candidates additional qualifications, such as IT knowledge or command of foreign languages. 89.5% 47.4% Average monthly salaries for General Ledger positions in SSC / BPO sector in gross sums in PLN) Salary Position Min Average Max Junior GL Accountant 3,000 4,000 4,500 GL Accountant 4,000 5,000 5,500 Senior GL Accountant 5,500 6,000 6,500 GL Team Leader 7,000 8,500 10,000 GL Process Manager 12,000 15,000 18,000 Source: Hays Poland, May % 10.2% 10.1% 3.1% Content provider:

7 On Point Poznań Office Market Report June Office Market Wide choice of office locations Modern office supply in Poznań at the end of Q totalled nearly 293,000 m 2, which makes it sixth largest of the major office markets in Poland. The robust development of office space in the city started in 2007 bringing 170,000 m 2 of new supply to the market (57% of total existing modern office space in the city). The city can be divided into a few office subzones. The City Centre is the main office hub in Poznań. This area is bordered by the Warta river from the east, Głogowska (the Main Railway Station and Poznań International Fairs location) Pułaskiego and Roosevelta streets from the west, Armii Poznań avenue from the north and Królowej Jadwigi and Matyi streets from the south. This area includes more than 47% of the total modern office space in the city (almost 140,000 m 2 in 19 existing office buildings). Major office development include: Andersia Tower and Andersia Business Center, Szyperska Office Center, Poznań Financial Center, Globis and Delta. Future projects planned within this subzone are Wilson Park A&B and Bałtyk Tower among others. The second hub, with almost 60,000 m 2 in 11 modern existing office buildings (20% of the entire existing supply), is located in the Western part of the city, mainly along Grunwaldzka and Bułgarska streets (PGK Centrum I&II and Klaster Grunwaldzka Pixel, among others). Currently the largest office complex in the subzone, Business Garden Poznań phase I (two buildings with more than 41,000 m 2 of office space to let) - is under construction. A second phase of 36,000 m 2 is at the planning stage. Business Garden Poznań has obtained LEED precertification. Another emerging office area is the Eastern part of Poznań (15% of the entire existing supply). This is the area where Echo Investment has delivered the Malta Office complex (28,500 m 2 located in six buildings). By the end of 2013, existing stock in the zone will increase by an additional 14,700 m 2 delivered in Malta House by Skanska. Malta House will be another office project in Poznań which will have LEED certification. The Northern and Southern parts of the city are experiencing moderate interest from developers. Currently, they represent 11% (33,000 m 2 ) and 7% (20,000 m 2 ) respectively of the existing office stock in Poznań. Major buildings located in the north are Winogrady Business Center and Murawa Office Park; while in the south there is Skalar Business Center. Summary Statistics Q Y-o-Y change 12 Month Outlook Gross Take-up* (m 2 ) 5,600 0 Net Take-up (m 2 ) 5, Vacancy (m 2 ) 49, ,900 Vacancy Rate (%) p.p Completions (m 2 ) 2,400 +2,400 Prime Rental Band ( / m 2 / month) % Under Construction (m 2 ) 67,000 +2,500 * Gross Take-up = Net Take-up (incl. pre-lets) + registered renewals Source: Jones Lang LaSalle, Q More space available for potential occupiers Construction activity in the city remains at quite a high level: by the end of Q almost 67,000 m 2 of modern office space was at the development stage (a 20% increase in office supply), including the largest office complex, Business Garden Poznań phase I (41,000 m 2, 2014). However, it is worth noting that currently 5% of the space under construction has been secured with pre-let agreements, which allows us to presume that some of the projects could be temporally put on hold. In the short-term perspective we do not expect developers to start any significant office project (over 10,000-15,000 m 2 ). In the first three months of the 2013 new office space was delivered within the Galeria MM scheme (2,400 m 2 ). An additional 23,000 m 2 is planned to be delivered in Q2 to Q4 2013, inter alia in Malta House (14,700 m 2 ), Nobel Tower (4,000 m 2 ) or Temida Offices (2,500 m 2 ). Office Supply (m 2 ) and Vacancy Rate (%) in Major Polish Cities (excl. Warsaw) ,2% Supply (LHS) 9,7% 13,7% Source: Jones Lang LaSalle, Q Vacancy Rate (RHS) 10,0% 16,7% 11,7% 19,7% 2,6% Kraków Wrocław Trójmiasto Katowice Poznań Łódź Szczecin Lublin 20% 15% 10% 5% 0%

8 8 On Point Poznań Office Market Report June 2013 Sound office demand Take-up volume, registered in 2012, reached almost 24,000 m 2, which was in line with the average annual occupiers activity level in Poznań was an exception, when the take-up was boosted by the 14,600 m 2 pre-let to Allegro in Pixel, the first office building from the Klaster Grunwaldzka complex. The first quarter of 2013 saw 5,600 m 2 of transacted office space, predominantly as new and pre-let deals (almost 90%). We expect that in the whole of 2013, the overall level of demand will remain at the comparable level to the 2012 figure. The major transactions concluded in 2012 were: Roche Polska (a renewal of 3,200 m 2 in Malta Office Park), Jeronimo Martins (a renewal and expansion of 2,200 m 2 in Kupiec Poznański), Samsung Electronics Polska (a new deal for 2,000 m 2 in Malta Office Park) and Regionalny Ośrodek Polityki Społecznej (a new deal for 1,700 m 2 in office building at 11 Nowowiejskiego street). In Q1 2013, Ciber took 1,000 m 2 in Malta House (which was a pre-let). The city often appears on the short-lists of companies which are considering the opening of a BPO/SSC centre in Poland. So far, the companies which have chosen Poznań for such purpose include: Roche Polska, MAN, Carlsberg, Franklin Templeton, GlaxoSmithKline, IKEA, Arvato Services and Ciber. Samsung Electronics Polska and Carl Zeis are the most recent newcomers to the city from that sector. Office Space Take-Up (m 2 ) and Vacancy Rate (%) Source: Jones Lang LaSalle, Q Vacancy Net Take-up Renewals Vacancy Rate (RHS) Q % 15% 12% The vacancy rate reached 16.7% at the end of the first quarter 2013, which corresponds to a total vacant area of almost 49,000 m 2. Interestingly, despite the fact that the majority of available office space is scattered across 34 existing buildings, 46% of the vacancy is within just four buildings. 9% 6% 3% 0% At the end of Q1 2013, city offered more than ten office units of at least 1,000 m 2 in existing buildings and two in projects under construction. Larger units of over 3,000 m 2 are available in four existing developments and in two projects under construction. Due to the completion of 67,000 m 2 in the near future (of which almost 64,000 m 2 remains currently vacant), we expect that in 2013 the Poznań office market will remain relatively balanced and a slight upward pressure on the vacancy rate may be seen. Rents to become more attractive? Prime headline rents in Poznań remain at a comparable level to those of other Polish cities, standing by the end of Q at 14.0 to 16.0/ m 2 / month. The high vacancy rate may put rents under a downward pressure, especially in buildings that are currently under construction or offering substantial amount of vacant office space. Prime Headline Rents ( / m 2 / month) Comparison Poznań Wrocław Kraków Trójmiasto Katowice Szczecin Łódź Lublin Source Jones Lang LaSalle, Q MAN Accounting Center as a Shared Service Center for MAN entities provides finance, accounting, payroll and procurement services for its clients in 15 countries (including Turkey, Spain, Portugal, Italy and India) using 11 languages. The center was established in September 2006 with a team of less than 50 employees. By now this number has grown up to more than 300 employees. The decisive factors that played an important role in the decision process of choosing Poznan as the place for MAN s SSC were among others availability of highly skilled employees with the knowledge of foreign languages, MAN s existence (the bus factory close to Poznan), easy connectivity to our headquarters in Munich and last but not least good cooperation with the local authorities. Having said that and assuming we were to choose our location again we would definitely go for Poznan one more time. Wojciech Skrudlik, Head of MAN Accounting Center

9 Map of selected office developments in Poznań On Point Poznań Office Market Report June

10 Contacts Jakub Sylwestrowicz Head of Tenant Representation Poland Jones Lang LaSalle Julita Spychalska Corporate Advisory Poland Jones Lang LaSalle Patricia Lannoije Head of Research and Consultancy Poland Jones Lang LaSalle Investor Relations Department The City of Poznań Jadwiga Naduk Head of Market Research & Consultancy Hays Poland Poznań Office Market Report June Zaawansowane wyszukiwarki Raporty Aktualności Reprezentacja Najemcy Try also magazyny.pl Advanced property search portals Reports News Tenant Representation COPYRIGHT JONES LANG LASALLE IP, INC All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.