Regional cities in Poland are attracting an increasing number of tenants and more development activity. Cresa analysed the office markets of Wrocław, Łódź and Tricity.
Wrocław office market sets new highs
According to Cresa, Wrocław’s new office supply hit 36,633 sqm in Q1 2018, up by 104.2% on the same period last year. The real estate advisory firm’s latest report “Occupier Economics: Wrocław Office Market in Q1 2018” also reveals that office take-up amounted to 24,100 sqm while the vacancy rate stood at 8.3%, down 1.1 p.p. on the average observed over the last five years.
Office buildings delivered to the Wrocław market in Q1 2018 included: West Link (13,900 sqm, Echo Investment), BZ WBK Office Building (17,000 sqm, BZ WBK) and M5 (5,700 sqm, Kernov Properties).
“Wrocław keeps setting new records in terms of office supply and is strengthening its position among regional office markets. Its total office stock is expected to surpass the 1 million sqm mark this year. Wrocław’s vacancy rate and availability of new space are shrinking at a rapid pace, which is a confirmation of the city’s unwavering appeal to occupiers and bodes well for further growth of its office market,” said Michał Grabikowski, Head of Office Tenant Representation in Wrocław Office at Cresa Poland.
In Q1 2018, the volume of leasing activity amounted to more than 24,000 sqm, most of which or 90.3% was transacted under new leases. The biggest transactions were: the 10,000 sqm lease by Santander Consumer Bank S.A. at Business Garden 1, a 4,700 sqm lease at Skanska - Nowy Targ, OVH’s 2,350 sqm lease at Aquarius Business House I and Nokia’s 1,700 sqm renewal at Bema Plaza.
Absorption hit a record high of 44,100 sqm in the first three months of the year, up by 5.3% on the same period last year. Asking rents stood at €13-16/sqm/month in Class A office buildings in Wrocław’s city centre with the median at approximately €14.5, while rents in non-central locations were €12-14.5/sqm/month.
Tenants wait for new projects in Łódź
According to Cresa, the city’s total office stock rose by 17% over the past year to 437,800 sqm. Approximately 42,000 sqm of new office is expected to be delivered to this market by the end of December 2018. The development pipeline includes the long-awaited Ogrodowa Office (28,600 sqm, Warimpex).
More than 100,000 sqm of modern office space is currently under construction, including 38,000 sqm at Skanska’s Brama Miasta. Most of new volume will be completed in 2020.
“Łódź saw record-breaking volumes of office space delivered in the last three years and the new supply was quickly absorbed by the market. Will this momentum be carried forward into coming years? Developers are monitoring market sentiments closely. Only if the occupier demand remains robust, will the planned office projects be completed on time. Therefore, I’d advise tenants requiring modern office space in prime locations to start looking around now,” said Marta Pyziak, Head of the Łódź Office at Cresa Poland.
In Q1 2018, the leasing volume amounted to 9,500 sqm, down by 16.2% on the very strong first quarter of 2017. New leases accounted for 92.4% of total take-up. The key lease transactions included Clariant’s 3,700 sqm lease at Monopolis M1, Bosch Siemens Hausgeräte’s 1,600 sqm lease at Nowa Fabryczna A and Regus’ 1,050 sqm lease at Fabryka Józefa Balle. The city’s vacancy rate held firm at 9.6%, down by 0.8 p.p. on the average observed over the last five years.
Asking rents stand at €9-14/sqm/month in the city centre and at €8-12/sqm/month in non-central locations.
Tricity sees the highest office supply of all regions
In the first quarter of 2018, Tricity’s new office supply hit 45,690 sqm following the completion of the 35-floor Olivia Star office building (45,690 sqm, Olivia Business Centre), says Cresa. Office take-up amounted to 13,400 sqm.
Tricity’s office stock rose by nearly 17% over the year to 743,500 sqm. In the first quarter of the year, the region’s vacancy rate fell to 7.7%, the lowest since 2012, when it stood at 6.7%. Absorption amounted to 45,700 sqm, which represented more than a threefold increase on the same period last year.
“Following a very successful 2017, the Tricity office market maintained its strong momentum in the first quarter of 2018. Tricity is not only ahead of Poznań, Łódź and Katowice in terms of total stock, but it is also seeing the largest volumes of new office space coming on stream and the lowest vacancy rate of all regional markets,” said Michał Rafałowicz, Head of the Tricity Office at Cresa Poland.
The leasing volume amounted to 13,400 sqm, most of which or 69.8% was transacted under new leases while renegotiations and expansions accounted for 15.9% and 14.3% of that total, respectively. The key lease transactions included Arrow’s 4,000 sqm lease at the Olivia Business Center, a 2,000 sqm lease renewal signed by Gdańskie Wydawnictwo Oświatowe at Alchemia I and a 1,500 sqm office expansion by a confidential tenant at Alchemia III Argon.
Asking rents stand at €11-16.5/sqm/month in Tricity’s office buildings, depending on scheme location, standard and lease term.