2014 brought a record in terms of the amount of office space leased in Poland. Gross demand registered from the first to the fourth quarter exceeded 1 million sqm. This is not the only record of last year – developers have delivered to the Kraków market over 100,000 sqm of offices, the largest amount in the history of this market. Wrocław, in turn, is the leader in terms of the number of projects under construction, where over 160,000 sqm of office space is being built – according Colliers International in its office market report summarizing 2014.
At the end of December 2014, the total office stock in the nine major Polish markets reached 6,9 million sqm. During the year, developers completed over 580,000 sqm of office space. Two thirds of the new supply were delivered in Warsaw (280,000 sqm) and Kraków (111,000 sqm).
The vacancy rate for all major Polish office markets recorded a slight growth to the level of 12.4 percent (as compared to 11.9 percent at the end of 2013). Rental rates for office space in Warsaw ranged from €12 to €24 sqm/per month, while in major regional markets from €11.5 to EUR 15.5/sqm per month.
Warsaw – at the end of Q4 2014, the supply of office space stood at 4.39 million sqm. During the analysed period, 280,000 sqm of new office space was delivered to the market. In 2014, the next office projects including Business Garden, Biura Koszyki, Astoria, Wołoska 24 and KróLEWska entered the construction phase. At the end of December over 700,000 sqm were under construction. A positive aspect observed in 2014 was an increase in the amount of absorbed space, which accounted for 179,000 sqm – 14 percent higher than last year. In comparison to the end of December 2013, the vacancy rate increased by 1.5 p.p. and stood at 13.3 percent. The vacancy rate in two central zones reached 15.2 percent, while in non-central locations the indicator grew to 12.4 percent. Rents for office space in the city center varied from €18 to €24/sqm per month, while outside the city center rents ranged from €12 to €16/sqm per month.
Kraków – in 2014 Kraków recorded the largest increase in office stock since the beginning of the market. During the four quarters of 2014, twelve office projects totaling 111,000 sqm were delivered to the market. The largest new projects included Kapelanka 42, Avia and Enterprise Park C. Kraków boasts strong developers’ activity as nearly 140,000 sqm of office space is still under construction. Demand noted between Q1 and Q4 stood at 117,200 sqm. Pre-let deals constituted 30 percent of registered volume. The vacancy rate reached 5.6 percent, which translated into 34,000 sqm of vacant space.
Wrocław – at the end of December 2014, the existing supply amounted to 516,000 sqm. During the year, nine office buildings totaling 56,000 sqm were completed. The next 162,000 sqm are under construction, which is the highest result among the major regional markets. In 2014, the total transaction volume exceeded 94,700 sqm. During the period, several significant lease agreements were concluded, including two deals by HP (pre-let of 16,400 sqm in Dominikański and the renegotiation of 10,600 sqm in Renoma) and Nokia Networks (pre-let, 14,000 sqm, West Gate). The vacancy rate stood at 11.1 percent (against 12.9 percent in Q4 2013).
Tricity – thanks to new supply at a level of 46,700 sqm the total office stock in Tricity grew to 397,000 sqm. Amongst the newly completed investments the largest were Neptun Office Centre, Olivia Four and the third building within the BPH Office Park complex. 95,000 sqm of office space is currently under construction, 73,000 sqm of which in Gdańsk. Gross demand for office space recorded during the past twelve months reached 65,600 sqm. The share of new deals (including owner-occupied space) amounted to 80 percent. The vacancy rate for the whole agglomeration stood at 12.6 percent at the end of 2014 (against 13.4 percent at the end of 2013).
Poznań – at the end of the fourth quarter of 2014, the existing supply reached 285,200 sqm. During the analysed period, four properties totaling 19,300 sqm were built. 76,700 sqm of office space is currently under construction. More than a half of this space will be delivered to the market within the first phase of the Business Garden complex. Demand registered in 2014 amounted to 18,800 sqm, which was a drop by a half as compared to the same period of 2013. New deals made up 69 percent of all concluded lease agreements. In comparison to the fourth quarter of 2013, the vacancy rate stood at a relatively stable level and reached 14.3 percent.
Łódź – in 2014 the Łódź office market recorded marginal growth. During the period only one office building was completed – Synergia C. As a result, the total stock stood at 241,500 sqm at the end of December 2014. Currently 30,000 sqm of office space for lease is under construction. Tenants’ activity reached a record level of 45,700 sqm, mainly due to the lease agreement concluded by Infosys in the Green Horizon complex (renegotiation, 21,000 sqm). Due to limited new supply, the vacancy rate decreased by 5.5 p.p. to the level of 11 percent.
Katowice – 2014 was characterized by high developers’ activity. Seven projects totaling 55,800 sqm were completed, which was twice as much as in 2013. Currently, 43,000 sqm of office space is under construction. Gross demand amounted to 43,900 sqm, 18 percent of which was leased in buildings under construction. Due to the high level of new supply delivered in Q4, the vacancy rate increased to 13.2 percent at the end of December.
Szczecin – at the end of the year, the total supply reached 99,200 sqm. In 2014, one office building was delivered to the market (Piastów Office Center II). As much as 17,200 sqm of office space is under construction, scheduled for delivery in 2015. Tenants’ activity registered between the first and the fourth quarter accounted for 17,700 sqm. New deals constituted 92 percent of total demand, while renewals and renegotiations made up 8 percent. The vacancy rate decreased during the year and reached 15.8 percent at the end of December.
Lublin – is the smallest of the major Polish regional markets. At the end of the 2014, the supply of modern office space accounted for 98,300 sqm. Four buildings totaling 8,800 sqm were completed during the analysed period, all delivered by local developers. Demand recorded in 2014 amounted to 6,400 sqm. Tenants concluded mainly new agreements (approx. 97 percent). The vacancy rate stood at the level of 13.5 percent.
According to Colliers 1.3 million sqm of modern office space is currently under construction, of which 700,000 sqm in Warsaw. New supply planned for delivery in this year is estimated at 700,000 sqm. The Warsaw office market will grow by 330,000 sqm. Amongst regional cities the biggest growth will be recorded in Kraków (88,000 sqm) and Wrocław (84,000 sqm). In 2015, the overall vacancy rate is anticipated to trend upward. Due to increasing number of new investments, the rise in the vacancy rate will particularly concern older B-class properties.
In the upcoming year, base rents are not expected to weaken as much as in 2014. Property owners will probably offer more favorable packages of incentives (such as fit-out budget) instead of another rent reduction.