JLL summarizes the situation on the Polish office market in H1 2018.

The boom continues. At the end of H1 2018, supply on the office market in Poland exceeded 10 million sq m. Furthermore, 1.8 million sq m remains under construction, with 1.1 million sq m being developed outside Warsaw.

“Cities across Poland are developing at a rapid pace and the commercial real estate sector is most definitely a catalyst of this reshaping process. The intangible benefits of place-making are becoming more and more important to office developers who wish to make their contribution in the processes of the expansion and evolution of cities. Some of the new developments, particularly mixed-use projects, create entire new city quarters and contribute to the reviving of an area. Some examples of these include Monopolis in Łódź, Nowy Rynek in Poznań and Unity Centre in Kraków. The joint investment efforts by both commercial developers and local authorities enhance these areas; and that will encourage firms to lease space which spells good news for local communities. This shift in thinking is spurred on by increasing occupier requirements and competition between developers”, comments Karol Patynowski, Director of Regional Markets at JLL.

Demand – Kraków is the leader on markets outside the capital

By the end of H1 2018, total demand on the Polish office market was 686,500 sq m with the main markets outside Warsaw accounting for nearly 40%[1].

Kraków remains the most sought-after office market, especially amongst the business services and banking sectors. Wrocław and Poznań are also noteworthy, with the latter currently responsible for 14% of demand in the regions. Approximately 261,800 sq m was transacted on major office markets outside the capital city in H1 2018. There are signs that this pace will continue into the second half of the year”, adds Karol Patynowski.

The largest deals concluded in H1 2018 include: BZ WBK in its own office buildings (17,000 sq m in Wrocław), Financial Supervision Authority (14,800 sq m at Piękna 2.0 in Warsaw), BZ WBK (14,800 sq m in Business Garden Poznań), Cambridge Innovation Center (13,500 msq m at Varso II in Warsaw) and PLL LOT, which renewed its current lease agreement (11,800 sq m in Warsaw).

Higher supply

430,000 sq m of new office space was completed in H1 2018, with 256,100 sq m being delivered to market outside the capital. There is 1.8 million sq m under construction across Poland.

“The Polish office market exceeded the volume of 10 million sq m of office space. Regions have been particularly active. H1 2018 saw a surge in new completions delivered in major business centres which comprised a 36% increase y-o-y. In Wrocław, stock has now exceeded the 1 million sq m mark. This activity is focused mainly on Kraków, Wrocław and the Tri-City. The trio together accounts for 70% of all of the under-construction space; however, all of the regional markets are characterized by increased activity on the supply side of the market”, says Łukasz Dziedzic, Research Analyst at JLL.

The three largest office projects delivered to market in H1 2018 were in major markets outside Warsaw namely Olivia Star in the Tri-City, an office tower and the tallest building in northern Poland (45,700 sq m), Sagittarius Business House in Wrocław (24,900 sq m) and High 5ive in Kraków - buildings 1 and 2 (20,600 sq m). Other major projects that have been delivered to tenants include Proximo II in Warsaw (20,000 sq m) and O3 Business Campus III in Kraków (19,200 sq m).

Vacancy rate and rents

The overall vacancy rate for the Polish office market stands at 10.2%. The vacancy rate in Warsaw is 11.1%, while outside the capital it is 9.3%. The highest vacancy rate was recorded in Lublin (19.7%), while the lowest was in the Tri-City (6.7%).

In central Warsaw rents are currently quoted at 17 EUR to 23 EUR / sq m / month, while prime assets located in the best non-central areas lease for 11 EUR to 15 EUR/ sq m / month. Currently the highest rents outside Warsaw are quoted in Kraków (13.5 EUR to 14.6 EUR / sq m / month), Wrocław (13.7 EUR - 14.5 EUR / sq m / month) and Poznań (13.6 – 14.5 EUR / sq m / month), while the lowest are found in Lublin (10.5 - 11.5 EUR / sq m / month).

More reports and office market analyses can be found at www.officefinder.pl.

[1]Krakow, Wrocław, Tri-City, Katowice, Poznań, Łódź, Lublin, Szczecin