Between Q1 and Q3 2018, demand for office space in Poland reached nearly 1.1 million sqm, signalling a continued strong market momentum. JLL summarised the situation on the Polish office market at the end of Q3 2018.
“Polish office market continues to record excellent results, and we expect this positive trend to continue into the future. Tholons recently released the 2018 update of its Services Globalisation City Index and four Polish cities made it into the Top 100 Super Cities ranking - Kraków, Warsaw, Wrocław and Gdańsk. Furthermore, as from September, Poland is now officially included among the ranks of developed countries according to the FTSE Russel Index. Recognition from international agencies will certainly work in favour of Poland’s investment image and translate into a continuation of the dynamic development of commercial real estate, which is not exclusive to the largest cities”, comments Karol Patynowski, Director of Regional Markets at JLL.
Demand - smaller towns in the game
“The best proof of such a bullish market sentiment is the total take-up volume across Poland. Between Q1 and Q3 2018, companies leased close to 1.1 million sqm, with markets outside Warsaw accounting for nearly 420,000 sqm. What is unique about Poland is that demand for offices does not only involve major agglomerations. International corporations are increasingly looking at smaller cities, where it is easier for them to position their brand. This is confirmed by lease agreements signed in Gliwice, Rzeszów or Białystok”, explains Hanna Dąbrowska, Research Analyst, JLL.
The largest lease agreements concluded so far this year include: Deloitte (22,100 sqm, Q22, Warsaw), Santander Consumer Bank (three contracts: an owner-occupier for 17,000 sqm in Wrocław, 14,800 sqm in Business Garden Poznań and 10,000 sqm in Business Garden Wrocław), Polish Financial Supervision Authority (14,800 sqm in Piękna 2.0, Warsaw), WeWork (14,200 sqm in Mennica Legacy Tower, Warsaw), CiC (13,500 sqm in Varso II, Warsaw), Capgemini (11,900 sqm in Rondo Business Park, Kraków), PLL LOT (an owner-occupier for 11,800 sqm in Warsaw), Ad Pilot (10,300 sqm in Wolf Marszałkowska, Warsaw), and Sii (10,100 sqm in Olivia Prime, Tri-City).
Supply - still on the rise
All this interest is resulting in the rapid growth of office stock in Poland. Currently, the Polish market offers 10.2 million sqm of modern office space, of which Warsaw accounts for in excess of 5.4 million sqm. Office stock on major regional markets have exceeded 4.8 million sqm, with Kraków and Wrocław accounting for over 1 million sqm each, while Katowice, Poznań and Łódź are on a way to reaching 500,000 sqm of space.
“Developer activity in the major regional markets totals approximately 900,000 sqm. Construction work outside Warsaw is predominantly focused on Kraków, Wrocław and the Tri-City. Together, these three markets account for more than 67% of all of the under-construction space in the eight regional cities; however, all of the markets are seeing increased activity on the supply side of the market”, adds Karol Patynowski.
Nearly 1.7 million sqm of modern office space is currently under construction across Poland.
Vacancy rate and rents
The vacancy rate in Warsaw has continued to fall and by the end of Q3 2018 it dropped to 10%. In central areas of the capital, it stood at 6.6%.
The overall vacancy rate for the eight regional cities remained at a relatively stable 9.7% in Q3. In six of the eight major regional cities, the rate fell year-on-year. The biggest drops were in Poznań (–3.6 pp y-o-y, meaning that the city now has the lowest vacancy rate (6.6%) in Poland.
“Even with the large amount of new supply that entered the market, the vacancy rate still fell. That shows how absorptive the office market in the major metropolitan areas are and that there is still a great deal of interest from tenants”, summarizes Hanna Dąbrowska.
In the centre of Warsaw, prime rents are currently quoted at €17.0 to €23.5 / sqm / month, while prime assets located in the best non-central areas lease for €11 to €15 / sqm / month.
Outside Warsaw, the highest rents are quoted in Kraków (€13.5 to €14.6 / sqm / month) and Wrocław (€13.7 - €14.5 / sqm / month), while the lowest are found in Lublin (€10.5 – €11.5 / sqm / month).
