Demand for offices is higher than supply

According to Walter Herz analysts, in the first six months of the year, the total demand on the office market in Poland has reached 700 thousand sq m. Most of this space was leased in Warsaw. The capital attracts by far the most investors, exceeding in this respect all the other office markets. First half of the year ,with almost 440 thousand sq m of leased office space in Warsaw, turned out to be the best in history.

During this period, the main regional markets, according to the Walter Herz calculations, had almost 40 percent of the total share in demand, which exceeded 260 thousand sq m of space. The most popular were Cracow's offices, which are mainly leased by companies from the business services sector, IT and financial institutions.

Less and less free space in Warsaw

- In Warsaw, the number of complete, vacant offices is decreasing. It is confirmed by the lowest vacancy rate in five years, and the interest in lease is not declining. Therefore, tenants who plan expansion are often forced to sign contracts for offices that are still under construction. In the first half of the year, such agreements included almost a quarter of space contracted on the Warsaw market - says Bartłomiej Zagrodnik, CEO of Walter Herz.

Bartłomiej Zagrodnik notes that due to the low supply this year, Warsaw is becoming the tenant's market. - What's more, high demand for Warsaw offices, which has been maintained for a long time, makes rents in certain locations go up. Apart from companies operating in the field of IT and new technologies, as well as in banking, finances, insurance and investment sectors, the demand is generated in Warsaw by the operators of instant offices and co-working centers who regularly increase their occupied space. In the first six months of the year, the companies offering shared space have leased about a fifth of the contracted space located in the city center - informs the expert.

Office market under development

According to Walter Herz’s calculations over 1.8 million sq m of office space is under construction in the largest cities in the country. Less than 740 thousand sq m of which is in Warsaw and 1.06 million sq m of offices is under construction in the regional markets. In addition, in the regional Poland, more offices are being built and commissioned than in the capital. The vast majority of the new space is under construction in Wroclaw, Cracow and the Tri-City.

In the Warsaw agglomeration, developers are also initiating many new projects. In the first half of 2018, the construction of almost 160 thousand sq m of offices began in nine investments. Most of the new space will enter the capital market in two years, when the construction of large scale projects, such as Varso (100 thousand sq m), Warsaw Hub (80 thousand sq m), Mint Legacy Tower (60 thousand sq m), Generation Park (84 thousand sq m), and Skyliner I (43 thousand sq m) will finish. Walter Herz specialists estimate that by the end of 2020, the business zone in Wola alone, will gain over 400 thousand sq m.

Regional markets are growing

Due to the large activity of investors, especially visible outside of Warsaw, Polish office market currently has resources exceeding 10 million sq m of space. Wroclaw became the third office center this year, after Warsaw (5.4 million sq m) and Cracow (1.1 million sq m), in which the supply of office space exceeded 1 million sq m. The Tri-City is chasing these three markets, and accounts for over 40 per cent of office space completed in the first half of the year in the regions.

According to Walter Herz, from January to the end of June 2018, a total of 430 thousand sq m of office space was commissioned in the largest office centers in the country. About 255 thousand sq m of which has entered the markets outside the capital. It is a result of over one third better than the one recorded a year earlier. During this time, the supply in Warsaw increased by almost 175 thousand sq m.

Over 10 per cent of vacant offices

Among the largest facilities commissioned in the first half of the year were, among others, the Tri-City office tower Olivia Star with over 45 thousand sq m of space, Wroclaw's Sagittarius Business House with around 25 thousand sq m of offices and Warsaw Proximo II with 20 thousand sq m, as well as Cracow complexes: High 5ive, where two buildings with over 20 thousand sq m of offices have been completed, and O3 Business Campus III with over 19 thousand sq m of space. In Wrocław, there was also a Retro Office House with over 18 thousand sq m of space, and in Warsaw, Equator IV with over 19 thousand sq m as well as Koneser H&O P with over 17 thousand sq m of space.

According to Walter Herz specialists, over 10 percent of the existing office resources in Poland are waiting for tenants. In Warsaw, the vacancy rate has decreased to 11 per cent, and in the regions there are on average over 9 per cent of vacancies. The smallest amount of available space can be seen in the Tri-City, where only 6.6 per cent of office space has not been leased.

In the center of Warsaw, the rental rates are EUR 17 - 24/sq m/month, and in other parts of the city EUR 11 – 16.5/sq m/month. In Cracow, Wroclaw and Poznan, rents range between EUR 13.5 - 14.5/sq m /month.

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Demand for offices is higher than supply

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