With total office stock amounting to 848 000 sq m, of which 797 000 sq m is rentable, Wrocław remains 2nd largest regional office market in Poland. The market is constantly growing thanks to numerous global companies and strong Polish players. The new investments tend to be more and more modern and eco-friendly.
|Centre||Subcentral locations||Western Business District||Southern Business Axis|
|Total stock (sq m)||193 000||231 400||258 800||61 500|
|Vacancy rate (% of total stock)||12.4%||13.4%||11.7%||12.6%|
|Asking rents (EUR/sq m/month)||11-15.5||12-15.5||10-13||10-13.5|
|Space under construction (sq m)||6 300||82 300||36 300||30 800|
Increasing office stock
New supply in 2016 amounted to unprecedented level of 141 500 sq m (vs average annual supply in 2011-2015 estimated at 61 000 sq m). Further 166 000 sq m is under construction, of which 95 000 sq m is scheduled for 2017 and 71 000 sq m should be delivered to the market in 2018.
Market driven by global players
Office demand in Wrocław has been driven mainly by companies of the BPO/SSC, financial, R&D and IT sectors. According to Knight Frank’s estimations, above 36% of office space in the city is occupied by companies representing business services sector.
Forecasted growth of vacancy rate
Approximately 106 300 sq m remained vacant at the end of December 2016, which equals 12.5% of total stock – an increase by 4.5 pp. when compared to the end of 2015 resulting from a record-breaking volume of new supply delivered to the market and not fully leased upon completion.
Numerous global and Polish developers
Previously, international developers focused mainly on Warsaw, while in regional cities like Cracow, Wroclaw, Tricity, Katowice, Poznan or Lodz, office space was delivered mainly by local investors. Currently, we can find at least several A-class projects representing the highest world quality in each of the abovementioned cities (including Wroclaw).
In 2016, record-breaking volume of 124 500 sq m of office space was leased in Wrocław (compared to the five-year average annual take-up of 78 900 sq m).
Stable asking rents
Asking rents in Wrocław are at the similar level as in other major regional cities in Poland and noticeably lower when compared to other European markets. In Q4 2016, rents in the A-class office buildings in Wrocław ranged from EUR 13 to EUR 15.5 per sq m per month, and in case of B-class buildings, the rates varied between EUR 10 and EUR 13 or PLN 40 to PLN 55 per sq m per month.
Wroclaw office market in numbers
VACANCY RATE IN WROCLAW
Investment market gaining momentum
- The dynamic growth of regional office markets and their development potential reflected in both the number of transactions and the more opportunity-seeking behaviour of local and foreign investors.
- Currently, yields for office assets located outside the Warsaw market fluctuate between 6.25-6.50% and their fall is expected in the coming quarters.
- In terms of contracts in the office sector over 66% in 2015 and approximately 44% in 2016 of the Polish office transactions volume was concluded in the regional markets.
- Since 2015 acquisitions of four schemes have been finalised in Wrocław of the value exceeding EUR 193m, which gave the city 2nd place among regional cities (after Kraków, where 8 schemes were sold for EUR 382m in total).
Where to start renting office space and if it’s worth to make use of advisory services?
Finding office space in good location for founding future headquarter it’s a big challenge for those who have little knowledge of local real estate market’s specificity. Finding adequate property it’s only beginning of the process, it’s necessary to assure good terms of rent to prevent problems and expenditures in future.
Acquiring office space process consists of following steps:
Recommended by Knight Frank Company scenario of searching office and conducting negotiations by potential Renter in Wroclaw.
Taking into account introduced by Renter need for office space we offer – in order to secure all of his interests and business risks – conducting negotiations leading to signing of rental agreement for minimum duration of 5 years with inhered to Renter possibility of extension for next 5 years on terms in force in last rental year. The Renter, to make use of this option, has to declare intention of using it for 12 months before ending ruling rental agreement. Additionally, we offer implementation to agreement of next one-sided and inhere by Renter, giving him the right to dissolve renting agreement after 3 years. This kind of mechanism is often used on the Polish market. This option allows the Renter lead business operations freely and enables him to dissolve the agreement e.g. in order to change office localization, if further development in current localization won’t be possible.
Additionally, we offer conclude in the agreement the clause ensuring the Renter the liberalization of rental rate in additional rental period after extension of the agreement. It is possible by introducing into agreement provisions concerning rent review. It empowers to compare rent in last year of the rental agreement with market stake by external arbiter(s) appointed by contracting parties. If it turns out, that market stakes in the last year of agreement were lower, than rent paid by Renter, the Renter is inhered to reduce rent to market stake in next rental period. If the market stake was higher than rent paid by Renter, rent stake will remain legally binding for both parties in case of agreement extension.
Market practice shows, that it’s worth to carry out the process of renting office space with experienced on agent, because Renter will shorten the time destined for searching office and gain feeling, that his interests will be properly represented during negotiations with the Owner of the building.
The article was prepared by partner of Invest in Wroclaw – Knight Frank.