There are still fewer leased and built offices than two years ago, but there is an upward trend in the office sector. Last year, some regional markets saw a sizable increase in demand, even compared to 2019, Walter Herz reports.
In 2021, 325 thousand sqm of office space was delivered to the Warsaw market. Such a high result was last seen in 2016. Several spectacular buildings, the implementation of which began before the pandemic, have been commissioned. Skyliner, Warsaw Unit, Generation Park Y and Fabryka Norblina have been completed in the vicinity of Daszyńskiego roundabout. The construction of the X20 building and Moje Miejsce II in the district of Mokotów have been completed. Warsaw office resources, which already exceed 6.15 million sqm have also gained two office buildings in Centrum Praskie Koneser complex, as well as the EQ2 building and Baletowa Business Park.
Warsaw with a negligible amount of new projects
On the other hand, there are over a half less offices under construction in Warsaw than in recent years, when about 700-800 thousand sqm of space was commissioned annually. According to Walter Herz, almost 330 thousand sqm of offices is currently under construction. The last time there has been so little of them built in the city was a decade ago. Most of the projects will be completed this and next year. The office buildings under construction include, among others, Varso Tower, SkySawa, The Bridge, P180 and Bohema.
The high level of new supply in 2021 and lower demand caused the vacancy rate to increase in the Warsaw market by 2.8 pp. to 12.7 per cent and become the highest in six years.
“The activity of tenants in the office market is still lower than before the pandemic, but its gradual increase is noticeable. The total volume of leases in the office sector in Poland in 2021 was several percents higher than in the previous year. In Warsaw, the volume of lease transactions increased by over 7% year on year. Over 646 thousand sqm of space has been leased. This result is significantly lower than in 2015-2019, when tenants leased an average of about 830 thousand sqm of offices”, says Bartłomiej Zagrodnik, Managing Partner/CEO of Walter Herz. “However, offices still remain an important element of companies' business activities and interesting assets for investors. So far, rental rates are at the same level as before, but a significant increase in construction costs is putting pressure to increase them”, adds Bartłomiej Zagrodnik.
The Tri-City with the largest number of new offices
In the regions, the highest increase in resources was recorded in the Tri-City. The offer of the Tri-City office market, which is the fourth in the country, will soon reach 1 million sqm of space, due to the completion of the construction of 73 thousand sqm of offices in 3T Office Park, Palio, LPP Fashion Lab and Gato projects.
Kraków, the second-largest office market in Poland, increased its offer last year to over 1.6 million sqm of space. The supply increased by over 60 thousand sqm of space, due to the completion of Equal Business Park D, Ocean Office Park A, Tertium Business Park B and Aleja Pokoju 81.
Over 37 thousand sqm of offices has been delivered to the office market in Poznan in Nowy Rynek D building. As a result, the resources exceeded 620 thousand sqm of space.
In Wrocław, Krakowska 35 and Nowa Strzegomska projects were commissioned, offering a total of 22 thousand sqm of space. As a result, the offer increased to 1.25 million sqm In Katowice (600 thousand sqm), over 13 thousand sqm of space entered the market last year, and in Łódź (583 thousand sqm) - 3.6 thousand sqm.
Katowice market with the largest development
Katowice clearly stands out in the regions with the number of offices under construction. There are as many as 200 thousand sqm of space under construction on the Katowice market, which accounts for nearly a third of the city's current resources. Most of the projects are to be completed this year.
The Kraków market is also growing, with 165 thousand sqm of office space under construction. “If the macroeconomic conditions and the economic situation are favourable, this value may increase in the upcoming quarters with projects that are being prepared for implementation in Kraków”, says Mateusz Strzelecki, Head of Tenant Representation/Partner at Walter Herz. “Another office market that is also expanding is Wrocław with 150 thousand sqm of space under construction, among others in the Brama Oławska project, Quorum Office Park and another building in the Centrum Południe and Tri-City complex with 120 thousand sqm of offices that are implemented mainly in Gdańsk”, informs Mateusz Strzelecki.
Nearly 80 thousand sqm of office space is under construction in Poznań and almost 90 thousand sqm of offices in Łódź. The largest investment on the Poznań market is Andersia Silver, which upon completion will deliver the tallest building in the city. In the near future, Łodź will offer modern space in Manufaktura Widzewska, Fuzja and React projects.
Demand in the regions is at a fair level
According to Walter Herz, the lease level in regional markets was over a dozen per cent lower last year than in 2019. "While the office sector has seen a significant recovery in the second half of 2021, the annual transaction value is still below the pre-pandemic average. However, the high demand for offices registered last year in Wrocław, the Tri-City and Poznań, where more space was contracted than in 2019 is noteworthy", says Mateusz Strzelecki.
Last year, we could observe the greatest demand for offices in Kraków, where approximately 156 thousand sqm of space was leased and in Wrocław, which showed absorption at the level of 153 thousand sqm. While the demand on the Kraków market was slightly lower than in the previous years, in Wrocław the result was several per cent higher, both in comparison to 2020 and 2019.
The Tri-City and Poznań markets also showed an increase in demand last year. The rental volume in the Tri-City amounted to 108 thousand sqm of office space and was 23 per cent higher than the year before, and nearly 7 per cent higher than in 2019. Poznań, on the other hand, where lease agreements for 73 thousand sq m of offices were signed, recorded over 80 per cent increase in demand for offices, compared to 2019.
The demand on the Katowice market dropped to 53 thousand sqm of space, that’s 16 per cent lower than a year earlier. In Łodź, 51 thousand sqm of offices were contracted, which is also less than in previous years.
Over the last year, the vacancy rate in regional markets increased slightly. Only in Poznań, due to the jump in demand, it slightly decreased. It is currently at the level of 10.5 per cent in Katowice to 16.7 per cent in Wrocław.
Experts point out that the model of arranging office space is changing. More rooms for meetings and videoconferences are now being designed. A larger number of desks also function as workstations, which, depending on the needs, can be used by various people in the hybrid system.
