Key findings

• In Q1 2020, the Polish office sector turned over €618.1 million, up by 15% on the same period last year.
• The overall vacancy rate stood at 8.3%, down by one percentage point compared to where it was in 2019.
• Gross take-up climbed to 359,000 sqm, representing a 33% increase on the previous year.

Supply

In Q1 2020, Warsaw’s new office supply amounted to 6,700 sqm delivered in one building. The regional cities saw a total of 79,800 sqm completed across five projects; the largest completions included Skanska’s fourth building of the High 5ive complex in Krakow (23,500 sqm), Echo Investment’s first building of the Face2Face complex in Katowice (19,600 sqm), and Giant’s Giant Office in Poznań (15,300 sqm). At the end of March 2020, the development pipeline included 108 projects totalling 1.7 million sqm, most of which was under construction in Warsaw (29 projects), Krakow (22), Tricity (17), Łódź (14) and Katowice (12).

Take-up

Office take-up hit a total of 359,000 sqm in Q1 2020, up by 33% on the same period in 2019. By comparison, net take-up climbed to as much as 220,100 sqm on Poland’s eight regional city markets, representing a 70% increase on Q1 2019.

“The current situation has had a limited impact on the number of leases as the first measures to contain the spread of the Covid-19 pandemic were not introduced until 18 March and a substantial majority of transactions scheduled for the first quarter had been finalized or were in their final stages. The real impact on office demand will not be known until later months as the real estate market takes much more time to respond to all economic developments than equity or bond markets,” says Katarzyna Lipka-Nawrocka, Head of Consulting & Research, Cushman & Wakefield.

Vacancies

In Q1 2020, the all-market vacancy rate averaged 8.3%, down by 0.4 pp quarter-on-quarter and by 1.0 pp year-on-year. Vacancy rates ranged between 4.1% in Tricity and 12.9% in Poznań. In Q1 2020, office absorption amounted to 100,000 sqm on Poland’s nine largest markets, which represented an almost twofold increase on the same period in 2019.

Rents

Office rental rates remained flat at €12-15/sqm/month on most of the surveyed markets. Prime headline rents in Warsaw stood at €24/sqm/month.

Outlook

“As the current situation is very fluid, it is difficult to exactly predict the impact the COVID-19 pandemic will have on the property market in Poland. Although at the moment there is no legislation limiting construction works in Poland, completion of some office projects underway is likely to be delayed in the near term due to protracted administrative procedures, limited labour availability, potential disruptions to supply chains and rising construction costs. The current situation will, however, lead developers to delay their decisions to commence projects planned for 2022-2023, which may result in a supply gap in these years,” says Jan Szulborski, Senior Consultant, Cushman & Wakefield.