Cushman & Wakefield has published a summary of the first quarter of 2018 on Poland’s regional office markets. Following the record-breaking performance in 2017, the total office stock of regional cities rose by 3% q/q by the end of Q1 2018 to 4.5 million sqm. The average vacancy rate for the regional markets was down 0.6 p.p. at 9.3%. The largest concentration of development activity is in Wrocław and Krakow.
Key findings:
- Development activity continues unabated on Poland’s core regional office markets. In the first quarter of 2018, new supply amounted to 129,050 sqm, representing a 92% increase year-on-year.
- In 2018, new office supply is expected to be only 20% and 30% lower in Krakow and Wrocław, respectively, than in Warsaw.
- Most regional office markets are seeing a trend towards consolidation of BPO/SSC tenants at a single address, exemplified by Clariant’s deal in Łódź.
- Despite the relatively robust activity of office developers, Tricity’s vacancy rate is at its lowest since 2012.
Nearly 130,000 sqm of office space was completed in seven new projects delivered onto the regional office markets in Poland in the first quarter of 2018. The total office stock of the largest regional cities now stands at more than 4.5 million sqm and is expected to surpass the 5 million sqm mark by year-end 2018. The largest office completions include Olivia Star (45,600 sqm) in Gdańsk, developed by Olivia Business Center, followed by O3 Business Campus III (19,200 sqm) in Krakow and .KTW (18,250 sqm) in Katowice.
Of all the regional markets, Krakow and Wrocław lead the way in terms of office development pipeline with more than 180,000 sqm and nearly 166,000 sqm to be delivered in Krakow and Wrocław, respectively, by the end of this year. Wrocław and Krakow also saw the biggest lease transactions of the quarter: Santander Consumer Bank’s 10,000 sqm lease at Business Garden Wrocław I in Wrocław and State Street’s 8,960 sqm pre-let at .BIG in Krakow. Tricity comes third with nearly 105,000 sqm of new office space to be added to its office stock by year-end 2018. Other regional cities will see lower supply volumes: 53,000 sqm in Łódź and 40,000 sqm in Lublin and Katowice.
Following the intense leasing activity in late 2017, regional markets cooled down in the first quarter of 2018 with signs of reaching stability. Leasing transactions totalled 127,100 sqm, down by nearly 30% on the first quarter of 2017, amid falling volumes of vacant space. The overall vacancy rate fell by 0.6 p.p. to 9.3%: the lowest is in Tricity at 7.7% while the highest is in Lublin at 17.1%. “The overall vacancy rate was pushed down by the relatively high absorption which hit 101,200 sqm in the first quarter of 2018 following the delivery of new projects, most of which had been secured with pre-lets,” said report author Jan Szulborski, Consultant, Consulting and Research, Cushman & Wakefield.
In the first quarter of 2018, rents remained largely unchanged at €12–14.50/sqm/month, but edged up by €0.50/sqm/month in Poznań and Wrocław due to limited prime office space availability in the two cities.
