Advisory firm JLL summarizes the situation on the Polish office market at the end of Q1 2019.
Demand in the first quarter of 2019 was more than 270,000 sq m, with markets outside Warsaw accounting for 130,500 sq m. 67% of this volume was generated by Kraków (43%) and Wrocław (24%). The most notable transactions included a 11,200 sq m renewal by Akamai in the Vinci Office Building in Kraków, a 7,000 sq m new deal by Wirtualna Polska in the Business Garden in Warsaw, a 7,000 sq m pre-let by a company from the public sector in the Vector+ building also in Warsaw, a pre-let by Perform Group (Perform Content & Perform Media) for 6,400 sq m in the Face2Face Business Campus in Katowice, and a renewal & expansion totalling 6,300 sq m by GlobalLogic in the Bonarka for Business, Kraków.
“The main driver for the largest regional office markets in Poland is still the business services sector. Companies from this industry generated nearly 40% of the demand for offices outside of Warsaw during the first quarter of 2019. The biggest share of the BPO/SSC sector in terms of gross take-up volumes was in Katowice - almost 74%, with the Tri-City having in excess of 45%”, says Karol Patynowski, Director of Regional Markets, JLL.
Moreover, the providers of flexible work spaces, and not only in Warsaw, play an increasingly important role on the office markets. Over 60,000 sq m of new flex space is already confirmed to open in 2019 although this volume may be even higher.
"The strength of the Polish office market is underlined by the growth in modern office stock. In Kraków and Wrocław it has exceeded 1 million sq m, in the Tri-City it stands at almost 800,000 sq m, in both Katowice and Poznań it is more than 500,000 sq m, with Łódź set to hit the half-a-million mark this year. In total, the market in Poland, including Warsaw, offers 10.7 million sq m of modern office space”, comments Łukasz Dziedzic, Senior Research Analyst, JLL.
During the first three months of 2019, more than 142,000 sq m was delivered to the Polish market, with the regional markets accounting for more than 120,000 sq m.
“Under-construction stock in Poland totals 1.6 million sq m, with major markets outside Warsaw accounting for 800,000 sq m. This space is mainly concentrated in Kraków, the Tri-City and Wrocław, where Business Garden II, the biggest project on the regional markets, is already a very well-let development”, adds Łukasz Dziedzic.
The biggest office projects completed during the first quarter in Poland included the five buildings of Business Garden in Poznań (46,100 sq m, Vastint), V.Offices in Kraków (21,700 sq m, AFI Europe), and Spark B in Warsaw (15,700 sq m, Skanska Property Poland).
Vacancy rate and rents
The overall vacancy rate in Poland stands at 9.3%. In Warsaw 9.1% of existing office supply is vacant. Outside the capital the lowest (5,4%) vacancy rate was found in the Tri-City, with the highest (15,8%) – in Poznań. The overall vacancy rate for the regional cities now stands at 9.4%.
Additionally, the vacancy rate was analysed for the first time in the Górnośląsko-Zaglębiowska Metropolis, and at the end of the first quarter the rate stood at 9.8%.
Currently the highest prime headline rents can be found in Kraków (13.5 – 15 EUR / sq m / month), and the lowest in Lublin (10.5 – 11.5 EUR / sq m / month). Prime rents in the central areas of Warsaw are currently quoted at 17 to 24 EUR / sq m / month, while prime assets located in the best non-central areas are 11 to 15 EUR / sq m/ month.