"In the first half of the year, Cracow market, apart from Warsaw, was the most popular location among tenants, with contracts for 74 thousand sqm of offices. The Tri-City also had a good 6 months, where 72 thousand sqm of space was contracted. It is almost twice as much as in the same period in the last four years. Overall, the regional markets closed the first half of the year with a result of 20 per cent lower than last year, but the demand in Poznan, apart from the Tri-City also deserves attention. The transactions concluded in the capital of Greater Poland have resulted in a higher volume of lease than recorded at the same time in the last two years" informs Krzysztof Foks, Senior Analyst at Walter Herz.

In the first half of this year, 510 thousand sqm of office space was delivered to tenants. 250 thousand sqm of offices was leased in Warsaw, one third less than the average for the last 5 years. According to Walter Herz report, there were over 260 thousand sqm of contracted office space on the main regional markets.

"The slowdown in decision-making processes caused by the pandemic affects both the lease of space and the construction of new projects. However, in the second quarter of this year, we dealt with much greater tenant activity than in the first months of this year, especially in the regional markets. Companies are already discussing their ultimate demand for space much more extensively. Building owners, on the other hand, expect a temporary decline in demand, but in the long run they presume its growth due to the expected relocation of business to Poland from other locations", says Bartłomiej Zagrodnik, Managing Partner/CEO of Walter Herz

Warsaw with a large, new supply

In the first half of 2021 in Warsaw, we saw a significant increase in supply. According to Walter Herz data, the construction of 10 buildings has been completed, offering a total of 226 thousand sqm of office space. As a result, the capital's office stock increased to 6.1 million sqm.

Implementation of three tower projects has been completed - Warsaw Unit, Skyliner and Generation Park Y, located in the vicinity of Daszyńskiego roundabout. High-rise buildings blend in with the more and more impressive skyline of the central part of Warsaw. Among the completed office buildings there are also Moje Miejsce II, Forest podium, X20, Centrum Praskie Koneser M i N, EQ2 and Baletowa Business Park.

360 thousand sqm of office space are under construction in Warsaw, of which nearly a third is to enter the market this year. According to investors, the construction of another 6 buildings will also be completed. Thanks to them, the new annual supply, according to Walter Herz, may achieve the highest result in Warsaw since 2016. On the other hand, the number of new office developments dropped drastically. Currently, the capital market has the lowest number of offices under construction in years. This year, The Bridge project is the only construction that has started.

Construction is in progress in the regions

Regions are in the lead in terms of resource expansion. More than twice as much office space is being built in regional markets as in Warsaw, which proves that the positive mood is rebuilding. According to Walter Herz, the largest number of new offices is being developed in Katowice (180 thousand sqm), Wroclaw (140 thousand sqm) and Cracow (115 thousand sqm) and the Tri-City (115 thousand sqm). For the Tri-City market, the completion of projects will coincide with exceeding the threshold of 1 million sqm of office supply.

Among the investments carried out in the regions there are High5ive, Podium Park, Wadowicka 3 and The Park in Cracow, Nowy Rynek building E and Andersia Silver in Poznan, Global Office Park, .KTW II and Craft in Katowice, as well as Quorum, Wielka 27 and Centrum Południe in Wroclaw.

In the first half of this year, 11 office buildings have been completed in the regions. The office offer in the largest regional cities increased by a total of approximately 126 thousand sqm The highest level of new supply was recorded in Cracow (42,4 thousand sqm), Poznan (35,9 thousand sqm) and the Tri-City (35 thousand sqm).

The regional markets have a total base of approximately 5.95 million sqm of modern office space. Among the buildings commissioned in the first six months of this year, are Rynek D in Poznan, Palio Office Park A in Gdansk, Krakowska 35 office building in Wroclaw and Tertium Business Park B, Equal Business Park D, Ocean Office Park A, and Aleja Pokoju 81 in Cracow.

The new offer increased the vacancy rate in all regional markets to an average of 13.4 per cent. The highest vacancy rate remains in Lodz - 18.3 per cent, and the lowest vacancy rates in the country are recorded in the Tri-City and Katowice - 9.2 per cent. In Warsaw, commissioning large facilities increased the vacancy rate by 2.6 pp. up to 12.5 per cent.

Asking rents in top-class buildings located in the center of Warsaw are in the range of €18-25/sqm/month. In other parts of the agglomeration, they range from €10 to 15/sqm/ month. The highest rates among the main regional markets are recorded in Wroclaw €12.50 - 16.00/sqm/month, and the lowest in Lodz €9.50 - 14.00/sqm/month.