Regional city office stock in Poland looks set to exceed 5 million sq m

At the end of December 2018, total office stock in Poland’s core regional cities (Krakow, Wrocław, Tricity, Katowice, Poznań, Łódź, Lublin and Szczecin) stood at 4.9 million sq m. Approximately 45% of that total was constructed in the last five years with office supply hitting a record high of over 512,000 sq m in 2018. The 5 million sq m mark will be surpassed by the end of Q1 2019 following the completions of V. Offices (21,700 sq m, AFI Europe), Fabryczna Office Park I (12,600 sq m, Inter-Bud) and Mogilska Office (10,800 sq m, Warimpex) in Krakow, City Forum: City One (9,300 sq m, Archicom) in Wrocław and Heweliusza 18 (7,900 sq m, Apollo-Rida) in Gdansk.

“Office developers recognised the potential of regional markets long ago. 2018 witnessed both a record-breaking supply and the highest absorption level in history, which is a clear evidence of a healthy occupier demand for office space in these locations. This bodes well for further regional growth and strengthening of one of Poland’s key advantages in the eyes of overseas investors: the number of strong regional cities,” says Wioleta Wojtczak, Head of Research at Savills.

According to Savills latest report “Spotlight: Office Market in Regional Cities”, Krakow and Wrocław remain the biggest regional office markets with 1.26 million sq m and 1.05 million sq m, respectively. The two cities also recorded the highest supply levels in 2018: 155,200 sq m in Krakow and 146,600 sq m in Wrocław, and the largest volumes of space under construction: 247,000 sq m and 208,000 sq m, respectively.

“Krakow and Wrocław account for nearly half of Poland’s total regional city office stock. The office markets in the two cities remain buoyant amid robust occupier and developer activity. Other cities in southern Poland attracting businesses include Katowice, whose office stock exceeded half a million square metres in 2018,” says Rafał Oprocha, Head for Southern Poland, Office Agency, Savills.

According to Savills data, overall regional take-up in 2018 reached nearly 645,000 sq m, just 4% below last year’s record-breaking leasing volume but 67% ahead of the ten-year average. The strongest leasing activity was recorded in Krakow (nearly 210,000 sq m) and Wrocław (approximately 160,000 sq m), followed by Tricity and Poznań with 85,000 sq m and 70,000 sq m transacted, respectively.

“The Poznań market contains nearly half a million square metres of modern office space. The city’s strength is reflected in robust leasing activity which in 2018 exceeded 70,000 sq m for the second consecutive year and was just under take-up levels in Krakow, Wrocław and Tricity, which are however much larger markets. The healthy take-up in the last two years pushed Poznań’s vacancy rate down from 15.3% in 2015 to 7.3% at year-end 2018, which represented more than a twofold decrease,” said Piotr Skuza, Regional Manager, Office Agency, Savills.

At the end of December 2018, the overall regional office vacancy rate stood at 8.4%, the lowest since 2008. Office rents have held firm in regional cities for an extended period of time. Rising construction costs have, however, caused an upward trend in rental rates which will be most pronounced in the coming months at best-in-class buildings in prime locations. Headline office rents vary by city and office building, ranging between EUR 10–15/sq m/month.

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