by Property Forum | Report

In the first three quarters of 2019, the regional city investment volume reached €1.06 billion, matching the level recorded in the whole of last year. Cushman & Wakefield forecast this year’s total volume to hit €1.3–1.5bn, 25-40% above the equivalent level in 2018. Prime office yields stand at 5.50%–6.00% in Krakow and Wrocław, and at 6.75–7.25% in Gdansk, Poznań, Katowice and Łódź.

“The largest transaction of 2019 was the acquisition of a 70% interest in an office portfolio comprising 105,000 sqm from EPP by Henderson Park UK. Two other major deals were done by Philippine-based ISOC, which acquired the 38,000 sqm Argon office building in Gdansk from Torus and the first phase of Vastint’s Business Garden (38,600 sqm) in Wrocław,” said Marcin Kocerba, Associate, Capital Markets, Cushman & Wakefield.

At the end of Q3 2019, the total office stock of Poland’s eight core regional cities (Krakow, Wrocław, Łódź, Tricity, Katowice, Poznań, Lublin and Szczecin) reached 5.39 million sqm (+12% y/y). Of all the regional cities, Krakow and Wrocław are the only markets with office stock above the one million sqm mark: 1.34 million sqm and 1.11 million sqm, respectively. If all projects in the pipeline come to fruition, the upcoming months are likely to see a ranking reshuffle for Poznań (555,100 sqm), Katowice (531,200 sqm) and Łódź (517,700 sqm).

New regional office supply hit 76,000 sqm in Q3 2019. The largest office completions included Skanska Property Poland’s Nowy Targ with a total of 19,400 sqm in Wrocław, Cavatina’s Carbon Tower (17,600 sqm) in Wrocław and Avestus’ Imagine I & II (14,800 sqm) in Łódź. Regional cities expanded by a total of 313,500 sqm (-26% y/y) in the period from the beginning of the year to the end of September 2019. The largest volumes of new office space were delivered in Krakow (nearly 90,000 sqm) and Poznań (76,000 sqm). The development pipeline across the surveyed regional cities currently stands at approximately 930,000 sqm of office space.

“Given the fourth-quarter outlook, this year’s total office supply is likely to climb to nearly 600,000 sqm, marking the strongest annual regional city performance on record,” said Katarzyna Lipka-Nawrocka, Associate Director, Research and Consulting, Cushman & Wakefield.

The leasing volume topped 517,000 sqm in January-September 2019 (+23% y/y), with 34% (178,000 sqm) and 33% (170,000 sqm) transacted through lease renegotiations and pre-lets, respectively. The largest regional city transactions of Q3 2019 included UBS’s 19,300 sqm pre-let in Fabryczna Office Park B2, the renegotiation of the 17,100 sqm lease by Motorola Solutions Systems in Green Office, Jeppesen Poland’s renegotiation and expansion to 9,500 sqm in Arkońska Business Park A3 & A4, and the renegotiation of IBM’s 8,650 sqm lease in A4 Business Park I.

“Given the robust occupier demand for office space throughout 2019, this year’s total office take-up is likely to surpass the record high of 675,000 sqm posted in 2017,” added Katarzyna Lipka-Nawrocka.

At the end of Q3 2019, the regional city vacancy rate averaged 9.1% (-0.6 pp y/y). The highest vacancy rates were in Łódź (12.1%) and Poznań (11.4%), while the lowest were in Tricity (4.8%) and Szczecin (6%). Rents on regional city office markets remained flat over the last quarter at €12-15/sqm/month.