August 02, 2016

Poland's office market continues to be buoyant

Poland's office market continues to be buoyant

Demand for office space continues to be strong as companies leased 628,200 sqm in H1 2016. Currently, there is about 1,44 million sqm under development with Krakow claiming a record-breaking share of 303,000 sqm. And there is 545,000 sqm under construction in Warsaw, according to JLL summarizing the situation on the office market at the end of H1 2016 in Warsaw and the eight other major cities in Poland.

“Demand for office space in Poland remains strong as 628,200 sqm was leased in H1 2016 in Warsaw and other major cities. Furthermore, we are expecting the finalization of several significant lease deals in the next few months,” commented Karol Patynowski, Associate Director, Tenant Representation, JLL.

Warsaw accounted for the largest share with 360,100 sqm of leased space followed by Krakow – 110,100 sqm, and Wroclaw – 52,500 sqm.

Mateusz Polkowski, Associate Director, Research and Consulting, JLL, said: “Office demand in major cities outside Warsaw was 268,100 sqm in H1, a sound performance which shows the continued growth of the regional markets. The modern business services sector remains a key occupier in the regional markets with a 60 percent share of total demand outside Warsaw. Agreements signed by companies from the sector covered large amounts of office space. In terms of the modern business services sector share in overall office demand in a city, Kraków leads the way with a 75 percent share in H1.”

“It is worth underlining the fact that demand outside Warsaw was largely driven by pre-letting activity accounting for 40 percent of total take-up. This has prompted developers to increase construction activity, especially in Kraków,” added Karol Patynowski.

A total of 569,600 sqm of modern office space was delivered to market in H1 in Warsaw and Poland's other major markets. Warsaw accounted for 350,100 sqm, while 219,500 sqm was delivered to other major markets. Outside Warsaw, the highest amount of new space was completed in Krakow (nearly 66,500 sqm) and Tri-City (52,700 sqm). The biggest office buildings delivered to market in Warsaw include Warsaw Spire A (59,100 sqm) and Q22 (46,400 sqm). The largest H1 openings on other markets include Tryton Business House (21,300 sqm) in Gdansk, O3 Business Campus (19,200 sqm) in Krakow and University Business Park B (18,700 sqm) in Lodz.

“1,44 million sqm of modern office space is under construction in Poland as of the end of H1 2016. Warsaw accounted for 545,000 sqm. High developer activity was registered in Krakow with up to 303,000 sqm of office space remaining under development, followed by Wroclaw - 181,400 sqm, Tri-City -132,100 sqm and Lodz – 109,600 sqm,” commented Mateusz Polkowski.

As of the end of H1 2016, the vacancy rate in Warsaw was 15.4 percent. Outside Warsaw, the lowest vacancy rate was registered in Krakow (6.0 percent) while the highest was in Szczecin (17.7 percent).

Prime headline rents in Warsaw City Centre are between €21 and €23.5 / sqm / month. Non-Central locations lease at €11 to €18 / sqm / month. As for major office markets outside Warsaw, the lowest rents can be found in Lublin (€11 – €12 / sqm / month), while the highest are in Wroclaw (€14 – €14.5 / sqm / month).

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