As at the end of the first half of 2019, the total office stock of Poland’s core regional cities (Kraków, Wrocław, TriCity, the Metropolitan Association of Upper Silesia and Dąbrowa Basin, Poznań, Łódź, Szczecin and Lublin) was equal to over 5.3 million sqm. In the reported period, tenants leased a total of 305,800 sqm (+18 percent y/y). Global real estate services firm Cushman & Wakefield has summarized the first half of 2019 on Poland’s regional office markets.
Office space under construction in the regional markets amounts to almost one million sqm
In the first half of 2019, the highest amount of new office space was delivered in Kraków and Poznań
Kraków, Wrocław and TriCity generated as much as 71 percent of the total demand in the regional markets in the first half of the year; the development activity was highest on these markets as well
Investment volume in regional cities is on the rise, capitalization rates for prime office assets remain stable
Approximately 0.5 million sqm of office space is available offhand in the eight largest regional markets
The total volume of investment transactions executed in regional cities in the first half of 2019 was worth EUR 671.7 million and was 5 percent higher than in the corresponding period of 2018. Capitalization rates for prime office assets remain at 5.75 percent in Kraków and 6 percent in Wrocław.
Occupier activity was highest in Kraków, Wrocław and TriCity, their share in all executed transactions accounted for, respectively, 44 percent, 15 percent and 12 percent. Relatively high demand was also reported in Katowice and Łódź.
In the first half of 2019, new agreements executed in the eight largest office space markets accounted for over 59 percent of all transactions, and the share of renegotiations and expansions totalled, respectively, 29 percent and 11 percent. Moreover, pre-lease agreements accounted for more than 53 percent of the net demand.
The new office supply in regional markets totalled 241,300 sqm in the first half of 2019, which represents a 6 percent decrease as compared to the corresponding period of 2018. The largest projects completed in H1 2019 include Poznań Business Garden (46,100 sqm), City Gate I in Łódź (25,500 sqm), Nowy Rynek B in Poznań (23,500 sqm) and V.Offices in Kraków (21,650 sqm). In the first six months of 2019, the highest amount of new office space was delivered in Kraków (90,400 sqm) and Poznań (77,400 sqm).
In the first half of the year, there were 81 buildings under construction in the eight largest regional markets, with a total area exceeding 985,100 sqm. The highest amount of office space under construction was located in Kraków (272,200 sqm), Wrocław (207,500 sqm) and TriCity (167,700 sqm).
The vacancy rate for all regional office markets amounted to 9.4 percent and was 0.1 pp higher than in the corresponding period of 2018. The vacancy rates in regional cities ranged from 5.3 percent in Szczecin to 12.1 percent in Łódź.
Rents remained stable in the first half of 2019 in most of the reported locations and ranged from EUR 12 to EUR 15 per sqm/month.
Author: Jan Szulborski, Consultant, Consulting and Research, Cushman & Wakefield