While overall office vacancy has been gradually increasing across Eastern Europe in 2013, the operational vacancy rate in each market was more positive than overall vacancy rates would suggest, according to Colliers’ “Office Market Metrics, Research & Forecast Snapshot” for Eastern Europe report.
The report finds that a number of older buildings which are highly vacant distort the true operational vacancy rate of the office markets. Increasingly, occupiers are looking to upgrade space to improve working conditions and productivity. This leads to pockets of vacant space in buildings and very small locations that are not competitively matched with the occupational demands of the market. By discounting these outliers from the headline vacancy rate, one can derive a more accurate operational vacancy rate for each market.
“In an established office market such as Budapest, headline vacancy is almost 20 percent, while operational vacancy is close to 16 percent,” said Damian Harrington, regional director of research for Colliers International, Eastern Europe, in the report. “Vacancy rates in the other established markets of Warsaw, Prague and Bratislava are also reduced, reaching close to 9.3 percent, 11 percent and 12 percent; this is down from a headline rate of 9.8 percent, 13 percent and 14.3 percent respectively,” Mr Harrington added.
According to Jones Lang LaSalle’s “European Property Clock” report, although the recovery of the European office market is continuing, Warsaw recorded a 2 percent decline due to high development activity. In the whole of Europe, office completions decreased further over the quarter (-11 percent) to reach a 10-year low. On the demand side, Q2 office take-up in Europe improved slightly over the quarter (+5 percent), but is down on Q2 2012 (-3 percent).
Occupier activity remains impacted by ongoing uncertainty over the short-term economic outlook, as well as weak labor markets, the report said. Occupiers remain cost-sensitive and continue to examine their lease options very carefully.
“There is some evidence of occupiers taking the opportunity to upgrade if clear gains in floor plate efficiency and workplace productivity and/or location can be realized,” said Dr Lee Elliott, head of EMEA research at Jones Lang LaSalle. “There are some initial signs of improving sentiment in select markets, but this will need to be sustained and extended if expansionary demand is to materialize,” Mr Elliott added.
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