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The highest appetite for office space in Kraków, Wrocław and Tricity

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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 square metres. In the reported period, tenants leased a total of 305 800 square meters (+18% 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 square meters
  • 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% 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 square meters 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% higher than in the corresponding period of 2018. Capitalization rates for prime office assets remain at 5.75% in Kraków and 6% in Wrocław.

Occupier activity was highest in Kraków, Wrocław and TriCity, their share in all executed transactions accounted for, respectively, 44%, 15% and 12%. 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% of all transactions, and the share of renegotiations and expansions totalled, respectively, 29% and 11%. Moreover, pre-lease agreements accounted for more than 53% of the net demand.

The new office supply in regional markets totalled 241 300 square meters in the first half of 2019, which represents a 6% decrease as compared to the corresponding period of 2018. The largest projects completed in H1 2019 include Poznań Business Garden (46 100 square meters), City Gate I in Łódź (25 500 square meters), Nowy Rynek B in Poznań (23 500 square meters) and V.Offices in Kraków (21 650 square meters). In the first six months of 2019, the highest amount of new office space was delivered in Kraków (90 400 square meters) and Poznań (77 400 square meters).

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 square meters. The highest amount of office space under construction was located in Kraków (272 200 square meters), Wrocław (207 500 square meters) and TriCity (167 700 square meters).

The vacancy rate for all regional office markets amounted to 9.4% and was 0.1 pp higher than in the corresponding period of 2018. The vacancy rates in regional cities ranged from 5.3% in Szczecin to 12.1% 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