In Q3 2018, Poland’s eight largest regional cities (Krakow, Wrocław, Tricity, Katowice, Poznań, Łódź, Szczecin and Lublin) saw more than 176,000 sqm of office space delivered across 21 new projects, taking the total space available on those markets to 4.81 million sqm. Cushman & Wakefield presented a summary of Polish regional office markets.
Key findings:
- There is a notable trend towards decentralisation in the business services sector, leading to increased leasing activity in smaller cities such as Rzeszów, Bydgoszcz, Toruń, Gliwice and Częstochowa, which saw new lease transactions in Q3 2018.
- Of all the regional markets, Krakow and Poznań saw the biggest movements in vacancy rates quarter-on-quarter: up by 1.33 pp and down by 1.15 pp, respectively.
- Net absorption in the first three quarters of 2018 hit 400,000 sqm, up by more than 22% on the same period in 2017. The relatively high absorption rate is largely due to the delivery of office space pre-let in 2017.
- Skanska broke ground on its first project in Gdansk. Wave will offer nearly 48,000 sqm of modern office space and is scheduled for delivery in 2020.
“In the first three quarters of 2018 the investment volume on the regional office markets reached €670 million, which represented a 210% increase on the same period in 2017. Krakow saw the strongest investor activity with three transactions closed for a total of €225 million. The runner-up was Wrocław, where five office buildings changed hands for €220 million in total,” said Michał Wachowicz, Consultant, Capital Markets at Cushman & Wakefield.
In Q3 2018, Poland’s eight largest regional cities (Krakow, Wrocław, Tricity, Katowice, Poznań, Łódź, Szczecin and Lublin) saw more than 176,000 sqm of office space delivered across 21 new projects, taking the total space available on those markets to 4.81 million sqm. The biggest completions included Olivia Prime A in Gdansk (28,000 sqm), Ogrodowa Office in Łódź (24,700 sqm) and the first phase of Podium Park in Krakow (15,700 sqm). According to Cushman & Wakefield’s analysts, with nearly 140,000 sqm in the pipeline the regional cities’ total office stock is likely to hit the 5 million sqm mark by year-end 2018.
Despite the healthy supply volumes, the overall vacancy rate is rather stable. At the end of Q3 2018, the average for the eight largest regional cities stood at 9.7%, up by 0.4 pp on the previous quarter. The lowest vacancy rate was in Poznań (6.6%) while the highest was in Lublin (18.9%).
In January-September 2018, total leasing activity amounted to 421,000 sqm in the eight largest regional cities, down by 9% compared to the same period in the peak year 2017 and up by 4% on the three-year average. The highest take-up volumes were posted in Krakow (46,000 sqm), Tricity (40,400 sqm) and Wrocław (38,100 sqm). These cities also reported the largest transactions: Capgemini’s 11,850 sqm renegotiation at Rondo Business Park in Krakow, Sii’s 10,100 sqm pre-let at Olivia Prime A in Tricity and Credit Agricole’s 9,850 sqm expansion at Business Garden I in Wrocław.
“In the first three quarters of 2018, occupier activity focused on Krakow, Wrocław and Tricity - Poland’s three biggest regional markets. However, the notable trend towards decentralisation in the business services sector is leading to increased leasing activity both in mid-sized cities including Łódź, Poznań and Katowice, and in smaller cities such as Rzeszów, Bydgoszcz, Toruń, Gliwice and Częstochowa, which recorded new lease transactions in Q3 2018,” said Jan Szulborski, Consultant, Consulting and Research, Cushman & Wakefield.
In Q3 2018, prime headline rents remained flat at €12-14.5 per sqm per month on Poland’s regional office markets.
