At the end of 2019, the combined office stock of Poland’s regional city office markets climbed to 5.61 million sq m, surpassing Warsaw’s 5.59 million sq m for the first time in history. The total office stock of the nation’s nine largest markets (Warsaw, Krakow, Wrocław, Tricity, the Upper Silesian and Zagłębie Metropolis, Poznań, Łódź, Lublin, and Szczecin) came close to 11.2 million sq m at the end of last year, representing an almost 8% increase on 2018’s level.
The largest regional city office markets are Krakow (1.42 million sq m), Wrocław (1.18 million sq m) and Tricity (0.84 million sq m), followed by Poznań (0.56 million sq m), Katowice (0.53 million sq m) and Łódź (0.53 million sq m), the latter three competing for the title of Poland’s fifth-biggest office market. The smallest regional city office markets include Lublin (0.19 million sq m) and Szczecin (0.18 million sq m). At the end of 2019, Warsaw’s new supply hit 162,200 sq m spread across 17 buildings.
The regional city office markets saw a total of 545,600 sq m of new office space delivered in 57 buildings. The largest completion was Develia’s Wola Retro (24,500 sq m) in Warsaw. Last year’s largest completions in regional cities included Vastint’s two developments: phase two of the Business Garden complex in Wrocław, comprising five buildings with a total area of 76,700 sq m, and phase two of Poznań Business Garden with 46,100 sq m of office space. Next in line were Torus’ 33,700 sq m Neon, phase four of Alchemia, in Gdansk, Cavatina’s Tischnera Office (32,800 sq m) in Krakow, and Skanska’s first phase of Brama Miasta (25,500 sq m).
At the end of 2019, the development pipeline included 89 projects totalling 1.6 million sq m, most of which was under construction in Warsaw (28 developments), Krakow (13), Tricity (15), Łódź (10), and Katowice (10). The average size of these developments was 17,700 sq m, with more than 68% sized above 10,000 sq m.
Office take-up hit 1,570,500 sq in 2019, the highest volume since records began. The strongest leasing activity was reported in Warsaw, Krakow, Wrocław, and Tricity, which accounted for 56%, 17%, 8% and 6% of all deals on the surveyed markets, respectively. “Occupier activity was also relatively robust in Katowice, which saw more than 82,000 sq m transacted. Demand for office space in Warsaw came from the banking, telecom and IT sectors. Meanwhile, the growth of the regional city office markets continued to be driven by the expansion of the business services sector,” says report author Jan Szulborski, Consultant, Research and Consulting, Cushman & Wakefield.
In 2019, absorption hit 604,000 sq m on Poland’s nine largest markets, down by almost 31% on 2018, largely due to the limited office supply in Warsaw, which was at its lowest since 2011 despite a record-breaking occupier activity. Although net absorption was relatively weaker, the overall vacancy rate for the surveyed markets stood at 8.7%, up by 0.2 pp compared to where it was a year ago, as demand for office space remained strong. Vacancy rates on the surveyed markets ranged between 4.9% in Tricity and 12.5% in Wrocław.
Office rental rates remained unchanged at EUR 12–15/sq m/month on most of the surveyed markets in 2019. Prime headline rents in Warsaw stood at EUR 24/sq m/month. The office sector, which turned over EUR 3.84 bn, accounted for 50% of the total transaction volume in Poland. Warsaw was the top-performing city, where EUR 2.42 bn worth of transactions were concluded. Looking ahead, office yields will come under growing downward pressure in the coming quarters. Prime office yields currently stand at 4.5% in Warsaw, at 5.5% in Krakow and Wrocław, and at 6.75% in Tricity.