POLAND RESEARCH & FORECAST REPORT Q Accelerating success.

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1 POLAND RESEARCH & FORECAST REPORT Q3 213 Accelerating success.

2 RESEARCH & FORECAST REPORT Q3 213 POLAND ECONOMIC OVERVIEW Economic overview KEY ECONOMIC FIGURES GDP 1.4% Unemployment 13% Inflation 1.1% Source: Central Statistical Office, BZ WBK, NBP, Ministry of Finance GDP (%) 6% 4% 2% Source: Central Statistical Office, BZ WBK, Ministry of Finance UNEMPLOYMENT (%) 2 15% 1 SUMMARY A further rebound in the gross domestic product growth was observed in Poland in Q Preliminary estimates show that the economy grew by ca. 1.4% (compared with.8% in Q2 213). It is expected that the coming months will bring a further acceleration of the Polish economy. The unemployment rate in Q3 213 remained at a similar level. According to the Ministry of Labour and Social Policy, unemployment reached a level of 13%, which was.5 percentage points lower compared to the previous quarter. The average salary in Q3 213 increased by approximately 2.9% year-on-year, while in Q2 213 this figure was 2.2%. After a reduction in interest rates by.25 percentage points in July 213, the Monetary Policy Council have kept base rates unchanged. As a result, throughout Q3 213, the reference rate remained at the historical low level of 2.5%. The inflation rate in Q3 213 was rather stable and amounted to 1.1%, which constitutes an increase of.6 percentage points compared to the previous quarter. The gradual improvement among Poland s main trading partners has had an impact on the recovery in the industrial sector. Polish manufacturing PMI grew by 4.2 points in Q3 213 compared to Q2 213 and reached 52.3 points. FORECAST According to analysts from the major financial institutions in Poland, the economic growth rate will continue an upward trend. It is expected that Polish GDP will rise to around 2% in Q4 213 and throughout the year 213 may exceed 1.5%. According to members of the Monetary Policy Council, interest rates will remain unchanged until the end of the year. The coming months are forecast to bring a gradual increase in inflation at a level of 1.5% in Q4 213 and approximately 2% at the beginning of 214. The inflation target may be achieved in the middle of next year. We can observe positive projections regarding the labour market, but the pace of improvement is rather slow. No significant change in Q4 213 is expected and wage growth is expected to be moderate. As a result of proposed changes in Open Pension Funds, the government predicts that public debt will fall by over 8% of GDP in % Source: Central Statistical Office, Ministry of Labour and Social Policy INFLATION (%) 5% 4% 3% 2% 1% Source: Central Statistical Office, NBP, Ministry of Finance 2 COLLIERS INTERNATIONAL

3 RESEARCH & FORECAST REPORT Q3 213 POLAND OFFICE MARKET Office market TRENDS Q4 213 SUPPLY OF OFFICE SPACE Q3 213 CITY TOTAL STOCK (m 2 ) (%) 4,71,5 1.9 Kraków 51, 3.3 Wrocław 442, 13.8 Tricity 333, Poznań 263, Łódź 232, Katowice 218,3 9.3 Szczecin 92, TAKE-UP STRUCTURE IN WARSAW Q3 213 SUPPLY DEMAND RENTS TAKE-UP IN WARSAW (in thous. m 2 ) 25 2 New deals Expansions 6% 26% 14% 54% Renegotiations and Renewals Owner-occupied space OVERVIEW At the end of September 213 the total supply of modern office space in nine major markets in Poland amounted to 6.24 million m 2. New supply delivered to the market reached 161,5 m 2, which was an increase of 31% in comparison to the corresponding period of 212. Tenants' activity in Q3 amounted to ca. 25, m 2. Pre-let agreements constituted a significant share in the total transaction volume (37%). Rental rates remained unchanged in Q At the end of Q3 213 the overall vacancy rate for major office markets stood at 11.4%. SUPPLY at the end of Q3 213 the total supply of modern office space amounted to 4.7 million m 2, 7 (2.81 mln m 2 ) of which was located outside the city center. From July to September, six projects totalling 94,3 m 2 were delivered to the market. The largest investments completed during the period included: Miasteczko Orange (43,7 m 2, South West), Wola Center (27,5 m 2, West ) and Żoliborz One (8,7 m 2, North). Regional cities the total supply of modern office space in eight major regional markets amounted to 2.1 million m 2. In Q3 213, developers completed projects of a total area of 7, m 2. The highest growth in stock was noted in Poznań (14,7 m 2 ), Kraków (13,6 m 2 ), and Wrocław (13,3 m 2 ). Office buildings completed in Q3 included: Malta House (14,7 m 2, Poznań), Quattro Business Park C (12,2 m 2, Kraków), Lastadia (11,5 m 2, Szczecin) and the first phase of West House 1B (6, m 2, Wrocław). DEMAND demand for office space recorded in Q3 213 amounted to 184,6 m 2, which was the best result since the beginning of 213. New lease agreements constituted 54% (99,2m 2 ) of the registered activity. The share of pre-let transactions in the total volume reached the level of 37.3%. The highest level of tenants activity was recorded in the following zones: Upper South (74, m 2 ), West (26,9 m 2 ) and South West (23,7 m 2 ). The average deal size in the city centre was 74 m 2, while outside the city center it accounted for 1,37 m 2. The biggest agreements signed during the discussed period included: Polkomtel (pre-let, 22,6 m 2, Konstruktorska 4), BZ WBK (pre-let, 11,8 m 2, Atrium 1), Sygma (renegotiation / extension, 6,4 m 2, Trinity Park) and Sanofi-Aventis (renegotiation / renewal, 5,5 m 2, North Gate). Regional cities the total leasing activity registered in Q3 213 is estimated at a level of ca. 65, m 2. The share of new agreements amounted to 74%, while renegotiations / renewals reached 15%. Expansions of the current tenants constituted 11% of the recorded demand. Similar to office market, pre-let agreements constituted an important share (37%). The strongest tenants activity was recorded in Katowice, Kraków and Poznań. The largest lease transactions concluded in Q3 included: IBM in A4 Business Park (pre-let, 9, m 2, Katowice), Eurobank in Wratislavia Center (renegotiation / renewal, 6,1 m 2, Wrocław), ING Services Polska in GPP Business Park (pre-let, 5,6 m 2, Katowice) and BPH in the Avia office building (pre-let, 3,1 m 2, Kraków) COLLIERS INTERNATIONAL

4 RESEARCH & FORECAST REPORT Q3 213 POLAND OFFICE MARKET MAJOR REGIONAL CITIES BY TAKE-UP SHARE Q % % 15.1% 6.9% 24.9% 21.4% Katowice Kraków Łódź Poznań Szczecin Tricity Wrocław SELCTED LEASE TRANSACTIONS Q3 213 at the end of Q3 213, the vacancy rate for all office zones stood at 1.9% (against 8.1% at the end of September 212). The vacancy in the central zones amounted to 1.5%. In case of non-central locations the vacancy rate accounted for 11%. The highest rates were recorded in the South-West (13.6%), West (13.1%) and North (12.5%) zones. Regional cities similar to previous quarter, the lowest vacancy rate was registered in Kraków (3.3%). The highest rates were recorded in Szczecin (23.1%) and Łódź (19.5%). RENTS in Q3 213, the rents for office space remained stable. The asking rents in the city centre varied from EUR 17 to 25/m 2 per month. Rental rates in non-central zones stood between EUR 12 and 16 EUR/m 2 per month. Regional cities rental rates in regional markets recorded no significant changes. The average rents ranged from EUR 11 to EUR 16/m 2 per month. The highest rents were recorded in Poznań (EUR 13-16/m 2 per month) and Wrocław (EUR 11-16/m 2 per month). With the average rents at a level of EUR /m 2 per month, Łódź remained the most competitive market in terms of rental costs. FORECAST TENANT AREA (m 2 ) BZ WBK 11,8 Sanofi-Aventis 5,49 TBWA Group 2,23 Newell Rubbermaid 1,9 CHRobinson 1,16 Inoffice 1, Medicover 1, BUILDING Atrium 1 North Gate R34 Andersia BC Poznań Aquarius BH Wrocław Horizon Plaza Olivia BC Tricity At present, over 1 million m 2 of office space is under construction. Ca. 55, m 2 is being constructed in. Among regional cities, the strongest construction activity is observed in Kraków (129,2 m 2 ), Wrocław (88,5 m 2 ), Katowice (73, m 2 ) and Tricity (7,3 m 2 ). In Q4 213, the office stock will grow by 15, m 2. Ca. 43% of new supply will be delivered to the office market. The biggest investments that are going to be completed in the capital are Plac Unii (41,3 m 2 ) and Oxygen Park II (8,9 m 2 ). In case of regional cities, the largest increase in stock will be recorded in Wrocław, Kraków and Tricity. The overall vacancy rate will continue an upward trend. Due to relocations of the current tenants to newly completed schemes, a rise in vacancy in older office buildings is expected. Rental rates are forecasted to demonstrate a slight downward tendency in the upcoming months. AVERAGE RENTAL RATES CITY MIN. (EUR/m 2 ) MAX. (EUR/m 2 ) : City Centre : outside City Centre Kraków Wrocław Tricity Poznań Katowice Łódź Szczecin COLLIERS INTERNATIONAL

5 RESEARCH & FORECAST REPORT Q3 213 POLAND INDUSTRIAL MARKET Industrial market KEY INDUSTRIAL FIGURES (Q3 213) Supply 7,696,6 m 2 Demand 446,173 m 2 Vacancy 1.2 % TOTAL SUPPLY BY REGIONS m DEMAND BY REGIONS m GENERAL OVERVIEW At the end of Q3 213, the total supply of modern industrial space reached nearly 7.7 million m 2, which represents an increase of over 144, m 2 compared to the end of June. This figure is two times bigger than the increase in supply observed in Q2, when approximately 7, m 2 were delivered to the market. Projects under construction at the end of September 213 totalled 358,444 m 2, of which 83% has been leased already. Transaction volume in past three months was slightly lower than in Q2 and totalled approximately 446, m 2. The majority of demand was made up of new deals (63%), while renegotiations represented 37% of tenants activity. The vacancy rate decreased slightly in the period July - September 213 and reached 1.2% (compared to 1.5% at the end of June). Rents in both and regional industrial markets remained unchanged from the previous quarter. SUPPLY in the Q3, 35, m 2 were delivered to the industrial market, the majority of which (27, m 2 ) was supplied to zone II, while the rest went to zone I. As a result, the total supply of modern industrial space reached approximately 2.69 million m 2 at the beginning of October 213. Currently, there are 35, m 2 under construction, of which 44% has been leased already. Central Poland the past three months have not brought about any substantial changes in the supply of industrial space, which remained at a level of 1 million m 2. An increase in supply is expected in 214 when the completion of two projects by Panattoni with an area totalling 61, m 2 is expected. Poznań the supply of industrial space has remained at the unchanged level of 91, m 2. At the end of September 213, the space under construction totalled 69,5 m 2. Upper Silesia at the end of Q3 this second biggest industrial market in Poland totalled 1.48 million m 2, which represents an increase of 28,8 m 2 compared to the previous quarter. Kraków the total supply of modern industrial space totalled 158,6 m 2, which represents an increase of 9,134 m 2 in comparison to the previous quarter. Currently, there are no industrial projects under construction in Kraków market. Wrocław in the past three months as many as 42,6 m² were delivered to the market and presently Wrocław offers 819,2 m² of the modern industrial space. Additionally, there are 41,96 m 2 under construction. Gdańsk 6,6 m² of modern industrial space were delivered to the market in the past quarter. Space under construction totals 24,6 m 2 (within SEGRO Logistic Park), which has been completely leased already by one tenant. Toruń / Bydgoszcz the supply of the modern industrial space remained unchanged in the first half of 213, while the last quarter saw an increase of 14, m² as a result of the modernisation of an existing building in Bydgoszcz. Currently, there are no projects under construction in this market. Szczecin the supply of modern industrial space has remained stable in this smallest of the markets analysed compared to the previous quarter and totalled 48,7 m². The stock will probably increase by 13, m 2 next year, when the completion of the next stage of North-West Logistic Park is forecast. 5 COLLIERS INTERNATIONAL

6 RESEARCH & FORECAST REPORT Q3 213 POLAND INDUSTRIAL MARKET SELECTED LEASE TRANSACTIONS Tenant Area (m 2 ) Building Retail 26,17 Retail 24,6 Retail 23,325 Segro Logistics Park Poznań SEGRO Logistics Park Gdańsk Logistic City Piotrków DC New Deal/ Renewal 3PL 2, AB Logistyka N Automotive 15,396 Automotive 15, Panattoni Park Czeladź Millennium Park Bieruń FMCG 13,84 BTS Kutno N TERG-Media Expert 11,3 NG2 (CCC) 1,88 InPost (InTeger.pl) 1,618 RATE 3 25% 2 15% 1 5% Panattoni Park Łódź East Prologis Park Wrocław IV Europolis Park Poland Central H1 213 Q3 213 EFFECTIVE RENTAL LEVEL (EUR/m²) REGION MIN. (EUR/m²) MAX. (EUR/m²) zone I zone II zone III Central Poland Poznań Upper Silesia Kraków Wrocław Gdańsk Toruń / Bydgoszcz Szczecin R N N R N N R R DEMAND in Q3 213, the three zones remained the most active market in terms of demand. 51 leasing deals were signed concerning 112,8 m² in total. The greatest transaction volume was observed in zone II (3 transactions for 91, m²), while the least: in zone III (slightly less than 3, m²). 63% of the signed contracts were new deals, whereas renewals represented 37% of demand. Central Poland since the beginning of July 213, approximately 79, m² have been leased, which represents nearly 18% of the transaction volume in Poland. The majority of the leasing agreements were new deals (77%), whereas renegotiations represented 23%. Poznań 48,5 m² of modern industrial space was leased in this market in the past quarter. Renegotiations were definitely the prevalent type of deal in the analysed period, as they constituted 73% of demand. Upper Silesia this market was characterised by the second greatest transaction volume (right after ) among Polish industrial markets in the period July - September ,9 m² were leased within 21 signed deals, which represents 23% of the transaction volume registered in Poland. In comparison, the demand in the first half of the year equalled 145, m². In Q3, 59% of take-up was represented by new deals, while the remaining 41%: by renegotiations. Kraków in the analysed period, two leasing agreements were signed for 5, m², which represented 1% of demand observed in Poland. Wrocław in Q3, the demand for modern industrial space reached 41,3 m², which were leased within 9 transactions. 55% of this area was leased within new deals, while renewals represented 45% of demand. Gdańsk the demand in this market totalled 32,3 m 2. 76% of this take-up is represented by a deal for 24,6 m 2 built in the BTS formula. Toruń / Bydgoszcz in Q3, there was no tenant activity registered in this market. Szczecin similarly to the Toruń and Bydgoszcz market, in past three months there were no transactions regarding industrial space concluded in Szczecin. In Q3, the vacancy rate for industrial space decreased slightly compared to the end of June 213, and stood at 1.2%. the past quarter has brought about a slight decrease in the vacancy rate compared to Q2 (14.2% in comparison to 15.7% at the end of June). As for the zones, the index stood at: 18.8% (zone I), 14.6% (zone II) and 6.8% (zone III). The most significant change in the vacancy rate was registered in zone II, where the rate decreased by nearly 3 p.p.. Regional markets the markets with the lowest vacancy rate were Poznań (3.6%), Wrocław (3.7%) and Gdańsk (4.4%). At the same time, the highest vacancy rate was observed in Central Poland (15.4%) and Toruń and Bydgoszcz market (25.7%). RENTS The rental rates in both and regional industrial markets remained similar to those registered in the previous quarter. FORECAST Presently, there are over 358, m² under construction in the Polish industrial market, of which 83% have been leased already. As a result, we can expect a gradual decrease in the vacancy rate, that can bring about a slight upward trend in terms of rents in selected markets. It is forecast that tenants from the e-commerce sector will increase their activity and have an influence on the modern industrial space market in Poland. Some developers consider launching speculative projects in selected markets characterised by low vacancy rate, such as Wrocław and Poznań. 6 COLLIERS INTERNATIONAL

7 RESEARCH & FORECAST REPORT Q3 213 POLAND RETAIL MARKET Retail Market EVOLUTION OF RETAIL SPACE IN POLAND m² mln m² 9, 8, 7, 6, 5, 4, 3, 2, 1, RETAIL SCHEMES COMPLETED IN Q3 213 CITY PROJECT DEVELOPER Katowice Poznań SELECTED LEASE TRANSACTIONS/ OPENINGS IN Q3 213 TENANT Peek & Cloppenburg Galeria Katowicka PH Franowo - extension Galeria Mokotów - extension LEVELS IN MAJOR POLISH AGGLOMERATIONS SIZE (m² GLA) Neinver 53, Inter IKEA 1,8 Unibail Rodamco AREA (m²) LOCATION 3,4 Smyk Megastore 3,1 TK Maxx 3,5 6% 5% 4% 3% 2% 1% Annual supply Total supply Katowice, Galeria Katowicka Poznań, PH Franowo, PH Targówek ,5 GENERAL OVERVIEW At the end of Q3 213, the total stock of modern retail space in Poland amounted to approximately 9.49 million m 2. 9 of the total supply was represented by traditional shopping centres, while retail parks and outlet centres accounted for 8% and 2% respectively. During the third quarter of the year, developers delivered to the market 65,3 m 2 of modern retail space, 1 of which was located in major Polish agglomerations. The biggest retail scheme completed in Q3 213 was Galeria Katowicka, which enriched the market by 53, m 2 of leasable area. SUPPLY At the end of Q3 213, the total supply of modern retail space in Poland reached approximately 9.49 million m 2. The biggest retail markets among the eight major agglomerations are still (about 1.41 million m 2 ) and Upper Silesia (about 1.7 million m 2 ). During the past quarter, about 65,3 m 2 of new retail space were delivered to the market (within one new scheme and two extensions of existing projects). The new project, completed in the last quarter, is Galeria Katowicka, which offers 53, m 2 of leasable area. Also during this period work was completed on the extension of PH Franowo in Poznań (1,8 m 2 ) and approximately 1,5 m 2 GLA within the rebuilding of the restaurant floor of Galeria Mokotów in (Aleja Smaków) was completed. DEMAND From July to September 213, some new international brands appeared on the Polish market. Some of them opened their stores in, e.g. Karl Lagerfeld Woman, which entered Atrium Promenada, French men's clothes shop Celio, which opened in three centres in (Sadyba Best Mall, Arkadia, Warszawa Wileńska) and two children s clothes stores Italian brand Original Marines (Blue City) and Greek SAM -13 (Galeria Rembielińska). The Spanish brand Mango has introduced its two new fashion concepts to Poland Mango Kids (Kraków, Bonarka City Center) and H.E. by Mango (Poznań, Stary Browar), which offers modern men's fashion. The vacancy rate in major Polish agglomerations stood at the level of less than 5%. The lowest value of the ratio was noted in Szczecin and (less than 3%), while the highest in Poznań and Wrocław (between 4% and 5%). In regional cities (between 2, 4, inhabitants), the vacancy rate ranged between 3% and 6.2%. The least available space is located in Lublin, while the most in Toruń and Radom. FORECAST It is estimated that the new supply delivered in the course of 213 will exceed the level reached in previous year, when about 485,6 m 2 of modern retail space were completed. Currently, there is almost 85, m 2 of modern retail space under construction, part of which (nearly 4) is planned to be completed by the end of 213. Among the most significant openings planned to take place in Q4 213, we can mention Galeria Bronowice in Kraków (6, m 2 GLA), Poznań City Center (58, m 2 GLA) and Centrum Riviera in Gdynia (45,5 m 2 GLA within extension of CH Wzgórze). Also, the delivery of Trzy Korony in Nowy Sącz and Brama Pomorza in Chojnice is expected. 7 COLLIERS INTERNATIONAL

8 Accelerating success.