The activity of developers in regional markets remains at a relatively high level, however, the volume of office space in investments under construction decreased by more than 25% compared to the fourth quarter of 2021. At the end of the first quarter of 2022, almost 550,000 sq m was under construction. sq m, of which 20 percent. was secured by pre-lease contracts.
Opportunities to start new office investments are now largely dependent not only on the activity of tenants and reported demand for offices, but also on the availability and prices of building materials and the situation on the labor market (labor shortages and its high cost). In the coming months, we can expect a further decrease in the volume of office space under construction - says Agnieszka Giermakowska, director of the Market Research and Advisory Department at Newmark Polska.
At the end of the first quarter of 2022, the total stock of modern office space in the eight largest regional markets (Kraków, Wrocław, Tricity, Katowice, Poznań, Łódź, Lublin, Szczecin) amounted to over 6.27 million sq m. Developers delivered over 243.5 thousand. sq m offices, which is the highest quarterly volume recorded in the first quarter in the regions.
A total of 16 office buildings were commissioned, including 10 offering over 10 thousand. sq m The largest completed investments in the first quarter of 2022 included: A1 and A2 buildings as part of the Global Office Park complex in Katowice (55,200 sq m in total), Ktw II also in Katowice (39,900 sq m) , Midpoint71 in Wrocław (36,200 sq m), Format in the Tri-City (16,000 sq m) and CZ Office Park D in Lublin (15,000 sq m).
Kraków and Wrocław are the first regional markets in Poland with office space stock exceeding the threshold of 1 million sq m. In 2022, Tricity will probably join their group, where at the end of the first quarter of 2022 there were already over 992,000. sq m offices. At the opposite extreme, there are Lublin and Szczecin, which offer a total of just over 410,000. sq m The remaining cities (Poznań, Katowice and Łódź) account for about 31 percent. total resources of modern office space located in the regions.
The total demand registered on the main regional markets in the first quarter of 2022 amounted to almost 153.5 thousand. sq m, which means an increase by 57% compared to the first quarter of 2021.
The transaction volume in the first quarter of 2022 exceeded the level of 20 thousand. sq m in four regional cities: in Wrocław, Kraków, Katowice and the Tri-City, where it amounted to 38,350 sq m, 31,100 sq m, respectively. sq m, 29.4 thousand sq m and 22.5 thous. sq m In total, these cities accounted for over 79 percent. total demand in the regions. The lowest tenant activity was recorded in Szczecin (8,300 sq m) and Lublin (5,200 sq m).
More than half of the demand was generated by companies from the IT and financial sectors - 30.9 percent, respectively. and 20 percent The manufacturing industry came third, with a share of 15.7% in the total volume of lease transactions.
As in Warsaw, the regions also saw a decline in tenant activity in terms of renegotiating and renewing lease contracts. Transactions of this type on regional markets in the first quarter of 2022 accounted for 22.1 percent. total demand (a decrease by 3.9 pp compared to the first quarter of 2021 and by as much as 21 pp compared to the entire 2021). 59.2 percent of the new contracts accounted for. total demand, while the remaining 18.7 percent. they accounted for pre-let (8.3%), expansions (4.8%) and transactions for own needs (5.6%).
At the end of the first quarter of 2022, the vacancy rate in the main regional office markets was 15.5 percent. and was higher by 1.4 pp compared to the fourth quarter of 2021 and by 2.6 pp y / y. An increase in the vacancy rate was recorded in Katowice, Lublin, Łódź and the Tri-City, while in Kraków, Poznań, Szczecin and Wrocław the vacancy rate decreased. In total, tenants have over 970,000 sq m of space at their disposal in eight regional office markets. sq m of vacant space - most in Kraków and Wrocław.
In all regional office markets in Poland, we observe a pressure to increase rents while limiting the incentive package offered by developers and owners of office buildings. This mainly applies to buildings and locations with limited office space availability.