In 2020, the total office stock of Poland’s nine largest cities grew by 6.2%, according to figures from Cushman & Wakefield. At the end of 2020, the development pipeline comprised 84 projects, most of which were underway in Warsaw, Krakow and Tricity. Due to the economic uncertainty caused by the outbreak of the pandemic, the market has seen a notable increase in office space marketed for subleasing.
Development pipeline: 84 projects totalling 1.4 million sqm
Regional city markets saw a total of 397,000 sqm built across 37 projects, the largest being Echo Investment’s Face2face B in Katowice (26,200 sqm), Olivia Business Center’s Olivia Prime B in Gdansk (25,000 sqm), the first phase of Skanska’s Centrum Południe in Wrocław (23,700 sqm), Skanska’s Wave A in Gdansk (23,600 sqm) and Skanska’s High 5ive IV in Krakow (23,500 sqm). At the end of 2020, the development pipeline comprised 84 projects totalling 1.4 million sqm, most of which was under construction in Warsaw (22 projects), Krakow (14), Tricity (14), Katowice (13) and Łódź (8).
“Most development projects are currently running to schedule. A supply gap is, however, on the cards for 2023-2024 on many markets as plans to commence new projects have been scaled back until the economic situation in Poland and the world stabilizes,” says Jan Szulborski, Senior Consultant, Cushman & Wakefield.
Vacancy rate at 11.1% at the end of 2020
The deteriorating health of the economy pushed the overall vacancy rate up by 0.4 pp quarter-on-quarter and by 2.4 pp year-on-year to 11.1% at the end of 2020. In addition, due to the economic uncertainty caused by the outbreak of the Covid-19 pandemic, sublease availability levels remain high.
Cushman & Wakefield estimates that at the end of 2020 there was close to 108,000 sqm of office space marketed for subleasing in Warsaw and approximately 147,000 sqm in regional cities, which volumes are not included in the statistics for available office space.
Office take-up hit close to 1.2 million sqm in 2020
Total office take-up climbed to 1,189,000 sqm in 2020, down by 24% on the previous year’s level.
“Although the transaction volume was lower, 2019 was a peak year in terms of demand and preliminary forecasts indicated more than a twofold decrease in leasing activity. In addition, due to the current situation, demand structure also changed compared with previous years, with new leases accounting for a smaller share of take-up and an increase in regearing. Buildings under construction continued to attract unwavering occupier demand, with pre-lets accounting for almost half of all deals,” says Katarzyna Lipka, Head of Consulting & Research, Cushman & Wakefield.
The largest lettings of 2020 include PZU’s pre-let of 46,500 sqm in Generation Park Y in Warsaw, and in regional cities – Allegro’s pre-let of 26,000 sqm in NowyRynek D in Poznań and the renegotiation of ABB’s lease of 20,000 sqm in Axis in Krakow.
Office rents hold firm across regions
As leasing activity weakened, prime headline rents in Warsaw edged down to €23.50/sqm/month in the Centre and to €14.75/sqm/month in non-central locations. Prime headline rents in regional cities remained unchanged at €13–15/sqm/month.
“Looking ahead, headline rents are expected to hold stable in the coming quarters as incentive packages are scaled up to include longer rent-free periods or more generous fit-out contributions leading to more pressure on effective rental rates,” adds Katarzyna Lipka.
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