In the first half of this year, the capital city of Lesser Poland became the second city in Poland, following Warsaw, where office stock exceeded 1 million sqm. Completion and delivery to the market at the end of June of office schemes with the total area of 61 700 sqm means that office stock in Kraków reached a volume of 1 032 700 sqm. Furthermore, authors of the report highlight the considerable increase in the volume of space under construction, which as compared to the first 6 months of 2016 is higher by 47%.
Another million under construction
The eight key regional office markets may increase by more than 1.2 million sqm of modern space in the next 24 months. At the end of June there was just over 1 million sqm of office space under construction, and schemes with a building permit already in place, completion of which should be expected to take place first, will add further 200 000 sqm.
When we look at office space in the regions in terms of schemes under construction and those planned, it becomes apparent that significant changes will take place as regards the leading positions over the next few years, with Kraków, Wrocław and the Tricity remaining in the lead
Małgorzata Fibakiewicz, Head of Office Agency, BNP Paribas Real Estate Poland
At the end of June, schemes located on the three abovementioned main markets represented as much as 65% of the office space currently being developed.
Vacancy rate drops, however not everywhere
Growing interest from tenants in office space in regional cities subsequently translates into decreasing average vacancy rate, which over the past 6 months dropped by 0.8 p.p. and currently stands at 10.5%.
Kraków is one of the cities analysed where vacancy rate has increased drastically, i.e. 4 p.p., thus reaching a level of 10.2%. This, however, is a natural consequence of delivery to the market of considerable volume of new space. Furthermore, despite growing stock, office space in the capital city of Lesser Poland do not have to wait long for tenants. This is caused by, amongst others, ongoing interest shown in this market by players from the modern business services sector interested in expanding existing schemes and development of new projects
Anna Staniszewska, Head of Research and Consultancy, CEE, BNP Paribas Real Estate Poland
According to the report, at the end of June this year, the lowest volume of vacant space was in Łódź (only 5.8%) and in the Tricity (6.9%) where a drop in vacancy rate by as much as 5 p.p. was recorded. In turn, the highest volume of vacant office space was recorded in Szczecin (14.3%) and Poznań (13.7%). However, it has to be stressed that a decrease in the share of vacant space was recorded in both of the above cities despite the relatively high vacancy rate.
Lease terms without change
In the majority of the cities analysed rents have not changed from January to June, which results from the balance maintained between increase in supply and growing demand from tenants.
We observed a slight rent correction on the smaller markets only, i.e. in Szczecin and Lublin, and in schemes that for some time how struggled to attract new tenants
Tomasz Skrzypek, Senior Consultant, Office Agency, BNP Paribas Real Estate Poland
Subsequently, the most expensive office space is in Kraków and Wrocław, where the cheapest offices are to be found in Lublin and in a number of schemes in Łódź. Businesses looking for more attractive lease terms should consider what the schemes currently under construction have to offer as there is usually more room for negotiation there. Average take-up for schemes under construction is 33.6%.
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Kraków
- In H1 2017 supply of office space exceeded 1 million sqm
- Largest schemes completed and delivered to the market in H1 2017 were Astris (12 100 sqm), DOT Office D (11 500 sqm) and Zabłocie Business Park A (10 400 sqm)
- Completion of new schemes led to considerable increase in vacancy rate from 6.2% at the end of 2016 up to 10.2% at the end of H1 2017
- Following Warsaw, Kraków is the largest university city in Poland. At the end of 2016 there were more than 154 000 students in the city, and each year Kraków universities release 40 000 graduates
- According to the latest Tholons Services Globalization City Index 2017 ranking, Kraków holds second place in Europe and eighth in the world as a BPO/SSC business destination
Wrocław
- The capital city of Lower Silesia holds second place amongst regional cities in terms of office supply under construction, which is just slightly behind Kraków
- Largest schemes under construction include: new phase of the Business Garden Wrocław complex with the total area of 66 800 sqm, Sagittarius (25 000 sqm) and Nowy Targ (22 000 sqm)
- In turn, largest schemes completed and delivered to the market in H1 2017 were Bielany Business Point (12 000 sqm) and Komandorska 12 (3 900 sqm)
- Vacancy rate has not changed significantly and still oscillates around 12%
- According to the Tholons Services Globalization City Index 2017 ranking, Wrocław holds 78th place, which means it is amongst the 100 top worldwide BPO/SSC business destinations
Tricity
- The largest office market in the north of Poland is divided into two main areas: Gdańsk and Gdynia, which hold 69% and 28% of the Tricity’s office space respectively. Sopot holds the remaining 3%
- One office scheme was completed and delivered to the market in the Tricity in H1 2017: Yoko (5 000 sqm). Small increase in new supply meant considerable absorption of previously vacant space and led to highest drop in vacancy rate amongst regional cities from 11.9.9% at the end of 2016 down to 6.9% at the beginning of July 2017
- 153 100 sqm of office space remain under construction, where the largest schemes being developed are: Olivia Star (43 700 sqm), the Argon building within the Alchemia complex (36 000 sqm) and Olivia Seven (30 000 sqm)
- The Tricity as an office markets attracts high interest from tenants due to the presence of the largest university centre in this part of Poland and high quality of life
Katowice
- Katowice is the fourth largest office market amongst regional cities, slightly ahead of Poznań and Łódź
- The capital city of the largest urban area in Poland successively attracts new tenants, which led to a drop in vacancy rate in the first half of the year from 16.8% down to 12.1%
- In H1 2017 total office stock in Katowice increased by more than 6 000 sqm due to completion and delivery to the market of the BREMA building in April
- Katowice authorities are actively striving to promote the city’s image as a convenient business location, as demonstrated by development of one of the most contemporary conference centres in Poland and proactive assistance in planning transport solutions for the schemes being developed
Poznan
- Poznański rynek biurowy powiększył się w I połowie 2017 r. o 12 500 m kw. za sprawą ukończenia biurowca Bałtyk.
- There is currently a total of 30 600 sqm of office space under construction, where the largest schemes are: Pixel IV (9 000 sqm) and Pixel V (8 500 sqm)
- Poznań has one of the highest vacancy rates in the country; however it is now continually decreasing. Over the first six months of 2017, vacancy rate has dropped by 1.3 p.p. and currently stands at 13.7%. High vacancy rate means that tenants’ negotiating position is now strengthening
- A characteristic common for the majority of Greater Poland is the extremely low unemployment rate standing at only 1.8% in Poznań itself. This translates into increased quality of live and wealth of society on the one hand, leading however to increasing difficulties in finding workforce on the other hand
Łódź
- Development of Nowe Centrum Łodzi (NCŁ), a complex urban scheme aiming to create convenient and accessible business space in the city centre became the driving force for growth of the office sector in the city
- There is currently a total of 148 300 sqm of office space under construction in Łódź, where completion and delivery thereof to the market will increase the city’s total stock by 36%
- Largest schemes currently under construction are: Brama Miasta A and B (42 300 sqm), Nowa Fabryczna (21 500 sqm) and Piotrkowska 155 (21 000 sqm). It has to be stressed that the first two schemes are being developed within the Nowe Centrum Łodzi area
- Vacancy rate in the city at the end of June stood at 5.8%, which represents lowest value amongst all regional cities. This confirms the high level of interest from tenants attracted by attractive rents, broad access to workforce and high quality of modern office buildings
Szczecin
- As compared to other regional cities, Szczecin is still a small office market, however it has great growth potential
- The city’s location means that it is becoming an attractive location for Scandinavian and German businesses looking to optimize their costs
- A drop in vacancy rate from 16.8% down to 14.3% was recorded in the first half of 2017. However, this still represents highest value amongst all regional cities
- There is currently a total of 42 800 sqm of office space under construction developed mainly as part of the Posejdon (20 000 sqm) and Szczecin Odra Park (10 900 sqm) schemes. Nearly 50% of the space under construction is already leased
Lublin
- Lublin is the largest office market in the east of Poland. It attracts tenants looking for lower costs and broader access to workforce
- Office stock in this still small cluster will increase rapidly due to the schemes currently under construction with the total area of 55 000 sqm. Completion and delivery to the market of all projects will lead to a 35% increase in supply
- Vacancy rate decreased in the first half 2017 by 2.5 p.p. and currently stands at 12.4%
- As at the end of June, a slight decrease of lease costs was recorded as compared to a corresponding period last year. This trend applies mainly to schemes with continuously high vacancy rate
