Twice as many offices went to tenants than got completed

In 2018, over 1.5 million sq m. of offices has been delivered to the tenants in the largest office centers in the country. Over 850 thousand sq m of space was contracted on the Warsaw market, which recorded the best result. A total of nearly 650 thousand sq m. of offices was leased on regional markets - informs Walter Herz.

Cracow is responsible for one third of the lease in the regions. In the capital of Malopolska province, the demand reached 220 thousand sq m. Wrocław market was also highly absorbent, with signed contracts for the lease of 165 thousand sq m. of space. Most of the office space leased outside of Warsaw was contracted in Cracow and Wroclaw. The Tri-City recorded its share in the total rental volume of 87 thousand sq m., in Poznan the demand exceeded 70 thousand sq m.

- The new phenomenon that we could observe last year, particularly visible on the Warsaw market, was the expansion of co-working space and serviced offices operators. This group of tenants generated over a dozen per cent of demand for offices in Warsaw. The development of this segment has a significant impact on the evolution of the office market in our country, which is vital for its future shape - says Mateusz Strzelecki, Partner and Head of Regional Markets at Walter Herz.

Last year, office resources in our country increased by almost 750 thousand sq m. of modern space. Only 230 thousand sq m. of offices were commissioned in Warsaw, which is the weakest result in several years. However, the regional markets, which together increased the offer by about 520 thousand sq m. of space were successful. 

In the largest cities in Poland, there are already over 10 million sq m. of modern office space. The most is in Warsaw - over 5.5 million sq m., in Cracow - 1.27 million sq m. and 1.07 million sq m. in Wroclaw.

Wroclaw saw the best result in history in 2018, both in terms of the value of demand and new supply - says Mateusz Strzelecki. According to Walter Herz, last year, 147 thousand sq m. of offices appeared on the Wroclaw market. Wroclaw, like Cracow, which gained over 155 thousand sq m. of offices last year, already has over a million sq m. of office space.

-The Katowice market, where the supply at the end of last year exceeded 0.5 million sq m. of space is also worth noting. Thus, Katowice overtook Poznan, which last year increased its offer by just over 20 thousand sq m. and currently offers around 480 thousand sq m. of offices - adds Walter Herz expert.

The largest office buildings completed in 2018 include: Olivia Star in Gdansk (43 thousand sq m.), Olivia Prime A in Gdansk (29 thousand sq m.), Sagittarius Business House in Wroclaw (25 thousand sq m.), Ogrodowa 8 in Łódź (28 thousand sq m.), Equal Business Park C in Cracow (23 thousand sq m.), Centrum Praskie Koneser (21 thousand sq m.) in Warsaw, Proximo II in Warsaw (20 thousand sq m.), Equator IV in Warsaw (19 thousand sq m.), O3 Business Campus III in Cracow (19 thousand sq m), Retro Office House in Wrocław (18 thousand sq m.), KTW I in Katowice (18 thousand sq m.), and Spokojna 2 in Lublin (18 thousand sq m.).

In the largest cities in the country, over 1.7 million sq m. of office space is under construction. According to Walter Herz analysts, about 790 thousand sq m. of offices is under construction in Warsaw, of which about 260 thousand sq m. is to be completed by the end of this year. Most of the space to be built in the agglomeration over the next two or three years will be delivered in large office complexes, including the high-rise buildings, such as Varso, The Warsaw Hub, Warsaw Unit and Generation Park.

Investments in the regions will soon bring about 915 thousand sq m. of office space. The largest number of new projects is to be delivered in Cracow (250 thousand sq m.) and Wroclaw (208 thousand sq m.), where Business Garden complex with 90 thousand sq m. of space is under construction. In the Tri-City, 130 thousand sq m. of offices is under construction , and in Poznan investors announce 110 thousand sq m. of space to be delivered this year. 

The extraordinary absorption of our office market resulted in last year’s vacancy rate dropping in all major business centers in the country to an average level of 8.5 per cent.

In Warsaw, the vacancy rate, which remains relatively similar, has not been so low for many years. Office buildings handed over in the capital are generally commercialized in around 80 per cent. Fully leased buildings at the time of completion of construction and not the exception. A great example is Mennica Legacy Tower office complex, at the intersection of Prosta and Żelazna Streets. The building consists of a 140-meter high tower and the neighboring 36-meter West Building with 14.8 thousand sq m. of space, which has been fully leased by WeWork, co-working space oparator. Most of 50.7 thousand sq m. of space offered in the tower was contracted by mBank. Agreement regarding renting over 40 thousand sq m. of space for the new head office of the bank is one of the largest transactions in the history of the office market in Poland.

Warsaw projects that are under construction, have about 40 per cent of space secured by lease agreements. It is extremely difficult to find vacant offices in the buildings located in the central part of the city.

In 2018, all office markets in the country saw a decrease in the vacancy rate. Even in cities such as Cracow and Wroclaw, where there has been a significant increase in office resources. This shows very clearly the high demand for office space reported by tenants.