According to Knight Frank experts, at the end of 2021 Wroclaw's office stock amounted to over 1.25 million sq m, which placed the city in second place in terms of size among regional markets, just behind Krakow. However, developers' activity has definitely weakened here, and the newly created offices completed in 2021 are several times less than in the years before the Covid-19 pandemic. Last year, only 21.8 thousand sq m of new space was completed, in two projects - Krakowska 35 with 11.8 thousand sq m (Q2 2021) and Wroclaw Business Park - Nowa Strzegomska (10 thousand sq m, Q4 2021).
There is still over 178 thousand sq m of office space under construction, which will be systematically delivered in the following years. If developers meet the planned deadlines, more than half of the offices under construction will be delivered to the market in 2022. The largest developments remaining under construction are MidPoint71, Centrum Południe II and Infinity. Still the main areas of office concentration are the western business district and downtown.
Lots of offices to let
According to the Knight Frank report, compared to other regional cities, tenants in the Wroclaw office market in 2021 remained relatively active. In the fourth quarter of 2021 leases were signed for over 61 thousand sq m, which was the best result among regional cities.
On the other hand, taking into account the annual transaction volume, tenants in Wroclaw leased over 135 thousand sq m of space, which means that in 2021 the demand for office space remained at a similar level as in the previous year. The structure of transactions was dominated by new agreements, which accounted for 48 percent of the total demand in 2021.
Despite the many times lower new supply last year compared to previous years, the vacancy rate increased by almost 2 % year-on-year and amounted to 16.7 percent. This is the highest vacancy level recorded in regional markets.
Rents still stable
In the last quarters headline rents in Wroclaw remained stable, ranging from 10 to 16 euro per sq m per month. However in some office buildings started to appear more expensive offers, above 16 Euro.
According to Knight Frank specialists, high availability of office space and demand not balancing the new supply may encourage tenants to undertake renegotiations of rental rates and incentive packages. On the other hand, rising construction costs, caused by increased prices of building materials and labor costs, as well as rising costs of servicing construction loans, can effectively inhibit investors' negotiating power, especially in new buildings. On the other hand, in all projects an increase in service charges can be expected due to a progressive rise in prices of services and utilities.
Standard lease terms in new buildings are: maintenance fee - 18 zł per sq m per month, rent-free period - 7 months, fit-out budget - 450-500 euro/sq m.
Many assets attracting investors
Authors of the report also indicated many factors that contribute to the city's high investment attractiveness. They listed Wroclaw's high positions in business rankings, including the 1st place in the category of business service centers according to the ABSL Report on modern business services in Poland and the 4th place among medium-sized European cities in the fDi European Cities and Regions of the Future 2020/2021 ranking in the fDi Strategy category. According to them, the 15th place in the "Global Cities of the Future" ranking, the 1st place in. the medium and small cities category in the "Global Cities of the Future" ranking, the 1st place in the "2020 Return on Investment" ranking and the "Specialism Awards" distinction within the "Strategy Awards 2020" ranking in the BPO category are also significant.
Significant quality of life in the city
Investment incentives include the project: "Development of entrepreneurship and support for low-emission economy through financial instruments in Lower Silesia" 2014-2020 and exemption from property tax in connection with an investment in a photovoltaic system, heat pump, recuperator, ground heat exchanger and solar collector. Apx inQube Program, Lower Silesian special economic zones and property tax exemption in the city were also mentioned as advantages of investing in Wroclaw.
According to the Knight Frank report, investors may also be attracted by the high quality of life in the city confirmed by the 100th place in the "Quality of life" 2018 ranking of the consulting company Mercer and the 88th place in the Cities in Motion Index 2020.
Knight Frank is one of the largest and most experienced real estate market monitoring teams in Poland. It provides advisory services as well as develops forecasts and diagnoses all sectors of the real estate market.
Partner of Knight Frank report is Wroclaw Agglomeration Development Agency.