At the end of 2018, modern office stock in Poland’s eight biggest cities (Krakow, Wrocław, Tricity, Katowice, Poznań, Łódź, Szczecin and Lublin) stood at more than 4.9 million sq m (+12% y/y). Krakow, Wrocław and Tricity topped the league table for total office stock. The Wrocław office market was the second regional city after Krakow to see its volume of office space exceed one million sq m.
In 2018, new supply on the regional markets reached 512,600 sq m, up by more than 55,700 sq m on 2017’s level. Last year’s largest office completions included Olivia Star in Gdansk (45,700 sq m), Olivia Prime A in Gdansk (28,000 sq m), Sagittarius Business House in Wrocław (24,900 sq m), Ogrodowa 8 in Łódź (24,700 sq m) and Equal Business Park C in Krakow (23,500 sq m). At the end of 2018, the regional development pipeline comprised 76 office projects totalling more than 878,000 sq m, most of which was under construction in Krakow (17 schemes), Tricity (14) and Wrocław (11), the average project size being 12,400 sq m.
Office take-up amounted to nearly 650,000 sq m in 2018, which represented a 4% y/y decrease. Of all the regional office markets, the strongest leasing activity was in Krakow, Wrocław and Tricity, which accounted respectively for 33%, 25% and 13% of Poland’s total transaction volume (excluding Warsaw).
“Robust office demand was driven on the regional markets, among other things, by expanding BSS companies which consolidated offices in individual cities (Credit Agricole in Wrocław) or gained footholds in new locations (Fujitsu Global Delivery Center in Katowice). The trend towards decentralisation is also benefiting smaller cities such as Rzeszów (Premium Mobile), Bydgoszcz (SII), Toruń (Mimecast), Gliwice (Enginiety) and Częstochowa (SII),” said report author Jan Szulborski, Consultant, Consulting and Research, Cushman & Wakefield.
In 2018, absorption on all the regional office markets hit 534,200 sq m, up by more than 21% on the level recorded in the peak year 2017. A major role in this volume was played by a significant number of pre-lets signed in 2017 for space at office buildings completed in 2018. The highest percentage increases in absorption rates were recorded in Lublin (140%), Katowice (118%) and Wrocław (99%).
At the end of 2018, the overall vacancy rate on in the eight regional cities stood at 8.4% (-1.5 pp y/y), ranging from 5.1% in Szczecin to 15.4% in Lublin. Limited availability of prime office schemes pushed effective rents up in some locations in Wrocław, Katowice and Poznań. Rents remained at EUR 12.00–14.50/sq m/month on most regional markets.