At the end of Q2 2020, total modern office stock in the eight regional Polish cities amounted to 5.6 million sqm. The largest regional office markets are Kraków (1,483,300 sqm), Wrocław (1,186,100 sqm) and the Tri-City (868,400 sqm).
In H1 2020, over 175,600 sqm of office space was completed, mostly in Kraków (69,100 sqm), Katowice (31,100 sqm) and the Tri-City (29,900 sqm). This figure is 27% lower compared to the volume of H1 2019.
“Contrary to appearances, the decrease in the number of sqm completed in the first half of this year is not a result of the suspension of construction works after the outbreak of the Covid-19 pandemic. After short interruptions at some construction sites, construction works have resumed, most developers do not expect significant delays in commissioning," says Olga Drela, senior analyst in the Research and Consultancy Services at Colliers International.
Demand higher than last year
The total volume of leasing activity in H1 2020 amounted to 333,000 sqm, which is 9% more than in the same period last year. However, in Q2 2020 alone, almost twice less office space was leased than in Q1 2020. Since January 2020 the largest volume of space was leased in Kraków (114,700 sqm).
Between January and June 2020 the highest share in total take-up volume was attributed to new deals: 54% (including pre-lets transactions and owner-occupier deals). Renewals of current lease agreements attributed to 32% while expansions to 14%. In Q2 2020 alone, renewal transactions accounted for the largest share - 59%, whereas new contracts and expansions accounted for 28% and 13%, respectively. The demand structure was clearly dominated by companies from the IT sector.
“The Covid-19 pandemic has resulted in increased uncertainty and caution among many companies, which has translated into longer decision-making processes in many fields, also in the context of office space leasing. Tenants who are just finishing their lease agreements are forced to take certain steps, so many transactions are still ongoing. As we expected, the number of renegotiations increased significantly in the second quarter and this trend will certainly continue. There are also more and more sub-leasing offers on the market - currently there are approx. 70,000 sqm of sublease space is currently available on the largest regional markets and this number is constantly growing”, says Paweł Skałba, senior partner, director of Office Agency at Colliers International.
The largest transactions executed in H1 2020 include a renewal of the ABB’s contract in the Axis office building in Kraków (20,000 sqm), a pre-lease transaction of Fujitsu Technology Solutions in the Fuzja project in Łódź (16,300 sqm) and a confidential client transaction in Tertium Business Park II in Kraków (14,500 sqm).
Available area
At the end of Q2 2020 in the eight major regional markets, almost 571,600 sqm remained vacant, resulting in a vacancy rate of 10.2% (0.7 pp q./q. increase). The highest vacancy rate was recorded in Poznań - 14.5%, when the lowest in the Tri-City and Katowice - 6.1%.
