In terms of new supply, Katowice was followed by Tricity, Krakow, Łódź and Wrocław, which reported around 40,000-50,000 sq m of office deliveries each. The total volume of new development completions in regional cities in the first half of 2022 was double the average for the last two years as many projects scheduled for delivery in 2020-2021 had been delayed, reveals the latest report from Cushman & Wakefield.
Largest office completions in Poland
The largest completions in Warsaw included Forest Tower (51,500 sq m), Skysawa II (22,800 sq m) and Lixa C (19,400 sq m) while the key projects delivered in regional cities comprised .KTW II (39,000 sq m) and Global Office Park A1 and A2 (27,300 sq m and 29,900 sq m, respectively) in Katowice, Midpoint7 (36,200 sq m) in Wrocław and Format (16,000 sq m) in Gdansk.
“Poland’s office development pipeline has recently shrunk considerably, especially in Warsaw, where there is only around 235,000 sq m under construction compared to close to 750,000 sq m in early 2020. Office stock under construction in regional cities amounts to 485,000 sq m, down from the pre-pandemic 850,000 sq m. These lower volumes are a reflection of both fewer projects breaking ground due to the pandemic and rising office construction and fit-out costs, as well as uncertainty caused by the war in Ukraine,”
- says Katarzyna Lipka, Head of Consulting & Research, Cushman & Wakefield.
An undersupply is on the cards
105,000 sq m is scheduled for completion in Warsaw by the end of 2022, which will bring this year’s total to just under 230,000 sq m, down by 12% compared to the five-year average, says Cushman & Wakefield.
“With development activity being more muted, a significant undersupply of office space is expected in 2023-2025. Regional city office markets are likely to see a total of 460,000 sq m come on stream throughout 2022, up by 8% on the average for the last five years, but from 2023 onwards they will also experience lower supply levels,”
-says Jan Szulborski, Senior Consultant, Consulting & Research, Cushman & Wakefield.
Leasing activity picks up both in Warsaw and in regional cities
In the first six months of 2022, total leasing activity in Warsaw amounted to 479,400 sq m, up by 94% on the same period in 2021 and up by 19% on 2019. This robust office take-up in the Polish capital was largely due to pent-up demand in previous quarters which led to about a dozen large leases such as PKO BP’s pre-let for 34,500 sq m in Skysawa I & II, and ING Bank’s expansion combined with the renegotiation of its deal for 23,500 sq m in Plac Unii.
Occupier activity also picked up in regional cities, pushing total regional take-up up by 26% on the first half of last year and by 13% on the first six months of 2019. Similarly as with Warsaw, regional cities also witnessed a build-up of leases previously delayed due to pandemic-related uncertainty. The largest transactions in regional cities included a deal for 13,800 sq m in Fabryczna Office Park 5 in Krakow and a 12,900 sq m lease in .KTW II in Katowice.
Vacancy rate falls for the first time since the pandemic
Poland’s overall vacancy rate currently stands at 13.6%, down by 0.2 pp on the first quarter of 2022, marking the first fall since 2020. Office availability fell in Warsaw, Katowice, Lublin and Wrocław.
Rents under upward pressure
As in the previous quarter, rents in Warsaw remained under upward pressure due to rising office construction and fit-out costs, as well as strong occupier demand for new offices in the city centre and limited availability of such space.
Prime office rents averaged EUR 22-26/sq m/month in the Centre, reaching a maximum of EUR 28/sq m/month, while in non-central locations they were in the range of EUR 13.50-16.50/sq m/month.
Average prime office rents in central locations in regional cities stood at EUR 12.50-15.50/sq m/month.
