Colliers: Sun Shining for Emerging Office Markets in Eastern Europe
Evolving markets in Eastern European capitals, including Sofia, are currently around half their potential capacity in terms of the volume of office space per capita, according to a report by realtor Colliers International.
The same holds true for Moscow, Bucharest and Zagreb, but a detailed analysis of vacancy, absorption and availability point towards a positive outlook for the majority of cities according to the research report.
Damian Harrington, Regional Director of Research for Colliers International, Eastern Europe , said: “While headline [overall] office vacancy has been gradually increasing across Eastern Europe in 2013 and questions are being raised in terms of the health of the markets, the operational vacancy rate in each market was more positive than headline vacancy rates would suggest.”
A review of the modern stock in each market highlights a number of older buildings which are highly vacant, distorting the true operational vacancy rate of each market. Increasingly, occupiers are looking to upgrade space to improve working conditions and productivity while reducing overheads.
This leads to pockets of vacant space in buildings and micro locations that are not competitively matched with the occupational demands of the market. By discounting these outliers from the headline vacancy rate, we can derive a more accurate operational vacancy rate for each market.
“In an established office market such as Budapest, headline vacancy is almost 20 per cent, while operational vacancy is close to 16 per cent.”
“Vacancy rates in the other established markets of Warsaw, Prague and Bratislava are also reduced, reaching close to 9.3 per cent, 11 per cent and 12 per cent; this is down from a headline rate of 9.8 per cent, 13 per cent and 14.3 per cent respectively.”
The report found that the major markets in Eastern Europe can be categorised into one of three broad categories according to the provision of modern office space per capita: established, evolving and emerging.
This, alongside the impact of active future supply, is an important reference point when interpreting the relevance of vacancy rates upon rental trends.
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