The largest office completions
Regional cities have seen 14 office completions with a total area of 143,800 sq m. The largest were Nowy Rynek D in Poznań (35,800 sq m, Skanska) and Palio Office Park A in Gdansk (16,500 sq m, Cavatina). The development pipeline on Poland’s largest office markets currently stands at 1.08 million sq m which is due for delivery in 2021-2024. Cushman & Wakefield estimates that 315,000 sq m will be built by the end of 2021, followed by approximately 540,000 sq m in 2022. Given the current pandemic situation and subdued occupier activity, we expect a limited number of new projects coming onto the market in 2023-2024.
Supply and demand
High supply levels and muted occupier activity since the onset of the pandemic pushed the overall vacancy rate up to 13.0% at the end of Q3 2021, representing an increase of 2.3 pp year-on-year and an uptick of 0.1 pp over the quarter.
In the year to date, regearing accounted for a substantial proportion of the leasing volume at 41%, while new leases/relocations and expansions made up 53% and 6%, respectively, well below their pre-pandemic levels.
“Due to the economic uncertainty caused by the outbreak of the pandemic, sublease availability remains high but is trending downwards. Cushman & Wakefield estimates that at the end of Q3 2021 there was close to 95,000 sq m of office space marketed for subleasing in Warsaw, which represents shrinking availability, and approximately 140,000 sq m in regional cities - a slight decrease over the quarter,” says Katarzyna Lipka, Head of Consulting & Research, Cushman & Wakefield.
Although sublease stock is not included in the statistics for available office space, it contributes to higher office space availability.
“Leasing activity in the first three quarters of 2021 totalled 777,600 sq m, down by 13% on the same period last year. Weaker demand is largely due to the continued cautious approach adopted by tenants toward relocation and leasing additional space on account of the uncertainty over the pandemic and economic outlook,” says Jan Szulborski, Senior Consultant, Consulting & Research, Cushman & Wakefield.
The largest leasing deals of the first three quarters of 2021 were the renegotiation and expansion for 19,500 sq m by Rockwell Automation in A4 Business Park III in Katowice and the pre-lease of 12,300 sq m in Midpoint71 in Wrocław signed by 3M Service Center.
Following a downward rental correction in the early months of the pandemic, prime headline office rents in Warsaw currently stand at EUR 23.00–25.00/sq m/month in the Centre and at EUR 13.50–16.50/sq m/month in non-central locations. Prime headline rents in regional cities also remain unchanged at EUR 12.00–15.00/sq m/month. Looking ahead, headline rents are expected to hold firm in the coming quarters, supported by a gradually improving pandemic situation and a recovery in leasing activity.