Q1 2018 sees sound demand, drop in vacancy rates and 1.8 million sq m of office space under construction. Advisory firm JLL summarizes the situation on the Polish office market in Q1 2018.
Demand
Lease agreements for nearly 330,000 sq m were signed in Q1 2018 with major regional markets[1] accounting for 127,000 sq m. In an encouraging show of confidence, companies from the banking and finance sector have once again displayed trust in the regional markets and were responsible for the three largest deals signed in Q1 outside Warsaw.
The office sector has benefitted from the effort companies have taken in order to improve the working environment so as to support recruitment processes and obtain the best candidates. The modern office is becoming an important advantage in this process and it is significantly affecting demand for space. A large number of companies are finding solutions in non-traditional places, such as converted industrial buildings, as is the case of Clariant, which decided to lease space in Monopolis - a former vodka distillery - in Łódź. Others are looking for brand new landmark developments, such as Fujitsu Global Delivery Center Poland, which has opened a new business operations centre in the KTW building in Katowice. This example also shows the expansion of companies already present in Poland which decide in favor of expanding their presence in new markets. Fujitsu has a centre in Łódź and is now expanding its activities into Katowice.
The most notable leasing deals concluded in Q1 2018 include contracts signed by a confidential company from the public sector (14,800 sq m in Piękna 2.0, Warsaw), Cambridge Innovation Center (13,500 sq m in Varso II, Warsaw), Ad Pilot (10,300 sq m in Wolf Marszałkowska, Warsaw), Santander Consumer Bank (10,000 sq m in Business Garden, Wrocław) and State Street (9,000 sq m in .big, Kraków).
Supply
In Q1 2018, the Polish office market added 153,000 sq m, mainly within the framework of large projects, and a further 1.8 million sq m is under construction. Development activity in the major regional markets totals an exceptional 1.1 million sq m, m. Activity outside Warsaw is focused mainly on Kraków, Wrocław and the Tri-City; however, all of the markets are characterized by increased activity on the supply side. Total office stock in Poland stands at 9.8 million sq m. New supply - including properties completed in Q1 2018 - will likely be around 800,000 sq m, meaning that the office market will soon exceed 10 million sq m.
The largest office projects delivered to market in Q1 2018 were found on major markets outside Warsaw. Major new developments include Olivia Star in the Tri-City - an office tower and the tallest building in northern Poland, O3 Business Campus III in Kraków, KTW in Katowice, and Graffit in Warsaw.
Vacancy rate and rents
“The overall vacancy rate in Poland fell once again in Q1 2018 and now stands at 10.1%. This is in line with constantly improving market fundamentals and robust demand for offices, particularly from the modern business services sector. The lowest vacancy rate was recorded in the Tri-City - 7.7%, the highest in Lublin - 17.1%”, comments Mateusz Polkowski.
In central Warsaw, rents are currently quoted at €17 to €23 / sq m / month, while prime assets located in the best non-central areas lease for €11 to €15 / sq m / month. Outside Warsaw, the highest rents are quoted in Kraków (€13.5 to €14.6 / sq m / month) and Wrocław (€13.7 to €14.5 / sq m / month), while the lowest are found in Lublin (€10.5 to €11.5 /sq m / month) and Szczecin (€11.5 – €14 / sq m / month).
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[1]Krakow, Wrocław, Tri-City, Katowice, Poznań, Łódź, Lublin, Szczecin