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Strong interest, but few offers on the officea market in Poland's largest cities. Newmark Poland report.
In what condition is the office market in Wroclaw and major Polish cities? Which industries are most interested in renting an office? These and other data are presented in a report by the consulting firm Newmark Poland, 'Office Occupier - Office Market in the Regions', which summarizes the first half of 2022.
Who is most often looking for an office to rent
According to a report by consulting firm Newmark Polska, 'Office Occupier - Office Market in the Regions', for the first 6 months of 2022, tenants in major regional markets in: Krakow, Wroclaw, Tri-City, Katowice, Poznan, Lodz, Lublin and Szczecin leased a total of almost 343,000 sqm, and this is the best result in the history of regional office markets in the first six months.
Almost half of the demand was generated by business services and IT companies - 24.8% and 22.1%, respectively. In third place was the manufacturing sector, whose share of the total lease volume reached 13.1%.
Office market in the first half of 2022
The authors of the report point out that tenant activity is increasing from quarter to quarter. In Q2 2022, total demand in the major regional markets amounted to nearly 190,000 sqm, up nearly 24% from the previous quarter and up more than 12% from Q2 2021.
As in Warsaw, the regions also saw an increase in tenant activity in terms of lease renegotiations and renewals. Transactions of this type in regional markets in Q2 2022 accounted for 35% of total demand (up 18 p.p. compared to Q1 2022). In the six months of this year, the total share of renegotiations was 27.0%. New contracts accounted for 48.4% of total demand, while the remaining 24.6% were pre-leases (12.4%), expansions (6.9%) and captive transactions (5.3%)
Agnieszka Giermakowska, director of the Market Research and Advisory Department at Newmark Poland.
Lots of leasing, not much building. Office market
At the end of Q2 2022, the total stock of modern office space in the eight largest regional markets outside of Warsaw was more than 6.34 million sqm. After the first quarter, in which a record amount of more than 243,500 sqm of office space was completed, the second quarter saw a significant decline. During the period, developers completed just over 68,000 sqm in 10 buildings.
Among the largest completions in H1 2022 were buildings A1 and A2 within the Global Office Park complex in Katowice (total 55,200 sq. m., Q1), .KTW II in Katowice (39,900 sq. m, Q1), Midpoint71 in Wrocław (36,200 sqm, Q1), buildings C and D within the Fusion complex in Łódź (total 18,700 sqm, Q2), Format in Tricity (16,000 sqm, Q1) and CZ Office Park D in Lublin (15,000 sqm, Q1).
Wroclaw, Krakow and the Tri-City have surpassed the 1 million sq. m. office space threshold
At the end of Q2 2022, Poland already had three office markets with office space stock exceeding the 1 million sqm threshold. Krakow and Wroclaw were joined by the Tri-City. At the opposite pole are Lublin and Szczecin, which offer a total of nearly 410,000 sqm. The remaining cities (Poznan, Katowice and Lodz) account for more than 31% of the total stock of modern office space located in the regions.
Fewer offices under construction: high demand with shrinking supply
- For another quarter in a row, we have seen a decline in office space under construction in Poland's major regional markets. At the end of Q2 2022, there was almost 560,000 sqm under construction, down 10% from the previous quarter and more than 30% less year-on-year. Both persistently high construction costs and rising financing costs mean that fewer new developments are currently being started, adds Agnieszka Giermakowska.
Where is the most office vacancy
At the end of Q2 2022, the vacancy rate in major regional office markets stood at 15.2%, down 0.3 p.p. compared to Q1 2022 and up 1.7 p.p. year-on-year. An increase in the vacancy rate was recorded in Szczecin, the Tri-City, Krakow and Lodz, while in Katowice, Lublin and Wroclaw the vacancy rate decreased. In Poznan, the vacancy rate remained unchanged. In total, tenants in the eight regional office markets have more than 961,000 sqm of vacant space at their disposal - the most in Krakow and Wroclaw.
The authors of the report note that in all regional office markets in Poland they are observing upward pressure on rents while at the same time reducing the package of incentives offered by developers and office building owners. This is especially true for prime buildings and locations characterized by limited availability of office space.
New offices in Wroclaw and an office building sold for €100 million
A record-breaking office market transaction took place in Wroclaw in 2022. The MidPoint71 complex on Powstancow Slaskich Street was sold for more than €100 million. This is the largest office building in Wroclaw completed this year. Thus, Echo Investment's investment has increased the Wrocław office market by more than 36 thousand square meters of space. See who is already working at MidPoint71.
MidPoint 71 was built in the vicinity of Sky Tower, the tallest skyscraper in Wroclaw, and the Centrum Południe complex on Powstancow Slaskich Street.