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Increased office development activity in Poland

The full report

At the end of H1 2016, Poland’s office stock totalled 8.7 million sq m. Warsaw remains the largest office market with Kraków, Wrocław and Tricity becoming major regional office hubs. Nearly 572,000 sq m of modern office space was delivered onto the Polish market in H1 2016, setting a new semi-annual record. Cushman & Wakefield, a global real estate services firm, presents its data on the Polish office market in H1 2016 in its report Property Times: Office Market In A Growth Phase.
At the end of H1 2016, the total office stock in Warsaw and eight largest regional cities (Kraków, Wrocław, Tricity, Katowice, Poznań, Łódź, Szczecin and Lublin) stood at 8.7 million sq m. The largest office markets are: Warsaw (4.99 million sq m), Kraków (833,000 sq m), Wrocław (757,000 sq m) and Tricity (629,000 sq m).
In H1 2016, the Polish market posted a new high in terms of office supply which totalled 572,000 sq m, of which 350,000 sq m (58%) was delivered in Warsaw and the remaining 222,000 sq m (42%) in regional markets. The largest completions were in Warsaw, including Ghelamco’s Warsaw Spire Tower (59,100 sq m), HB Reavis’ Gdański Business Center II (buildings C and D totalling 49,000 sq m) and Echo Investment’s Q22 (46,400 sq m). Office schemes which received occupancy permits in regional cities included the following: Echo Investment’s Tryton Business House in Gdańsk (21,300 sq m), Echo Investment’s O3 Business Campus I in Kraków (19,200 sq m), GTC’s University Business Park in Łódź (18,700 sq m) and UBM Polska’s Pegaz in Wrocław (18,500 sq m).
In H1 2016, the lowest supply of office space was in Szczecin, where only 7,200 sq m was delivered, whilst no new space was added to Lublin’s office stock.
Bolesław Kołodziejczyk, Senior Consultant, Consulting & Research, Cushman & Wakefield, said:Some 310,000 sq m is likely to be added to Poland’s office stock by the end of 2016, which is why we are expecting the annual supply to set a new record high. Among the regional cities, the highest levels of new supply are expected in Kraków (87,800 sq m), Tricity (46,800 sq m) and Katowice (44,700 sq m). Given the development pipeline for 2017–2018, if all the currently planned projects, that is more than 1.5 million sq m, of which around 771,000 sq m is to be delivered in Warsaw and 751,000 sq m in regional cities, come to fruition, supply levels are likely to remain equally high over the next two years.”
In H1 2016, office take-up remained healthy in Poland at 620,000 sq m, up by just over 2% or 12,000 sq m on the corresponding period in 2015. The strongest leasing activity was once again in Warsaw, which accounted for 60% or 372,000 sq m of Poland’s total take-up. Leasing transactions in the country’s eight regional agglomerations totalled 248,000 sq m, representing a 12% year-on-year growth. The highest take-up volumes were posted in Kraków (112,000 sq m) and Wrocław (36,500 sq m), whilst in the smallest markets of Szczecin and Lublin only 3,600 sq m was transacted. As in previous years, demand for modern office space in regional cities came mainly from IT, insurance and banking sectors.
Net absorption was positive and totalled 280,000 sq m at the end of H1 2016, down by 2.8% on H1 2015. The largest hikes in occupied space were in Warsaw (133,400 sq m), Kraków (48,000 sq m) and Tricity (31,500 sq m), whilst absorption levels fell in Katowice (-68%) and Szczecin (-78%) compared to H1 2015. High supply levels in most cities pushed vacancy rates up, averaging 13.4% for Poland and 10.8% for its regional markets. The lowest vacancy rate was in Kraków (6%), whilst the highest in Szczecin (17.7%). Compared to the end of H1 2015, the strongest rise in vacancies was in Katowice (up by nearly 6.5 percentage points), whilst Poznań saw the largest decrease in the volume of vacant office space.
Richard Aboo, Partner, Head of Office Agency, Cushman & Wakefield, said: “The last 6 months saw increased activity from both the supply and take up side, which clearly shows encouraging signals that Poland still remains an attractive place to locate business, especially in the tech and financial sectors. This is expected to continue to the end of the year with 2016 being yet another record breaking year.”