State-owned entities are gradually increasing their influence on the development of the office sector in Poland.

In the coming years, administrative institutions and state-owned companies will actively stimulate the development of the domestic office market. Not only through leasing space. The State Treasury will play a significant role as a key player in the investment sphere, including through modernization, acquisition, sale, and construction of office properties for its own needs.

Thus, the activity of state-owned entities will have a significant impact on the evolution of the sector, including decisions related to the implementation of new projects, especially in the Warsaw market, where a supply gap is already palpable. The activities of state-owned entities will give investors the potential to utilize their existing resources and will be a determining factor in the launch of new projects. In Warsaw, projects such as Drucianka Campus, Fort 7, and the next stages of The Park Warsaw are awaiting development.

"The Polish office market is characterized by high absorption capacity, which has been significantly influenced recently by the demand for offices from the public sector. Demand for space remains close to record levels from before the pandemic, supported by the trend related to employers' emphasis on returning to in-person work. This year, we expect a further increase in the number of leasing transactions, including large spaces contracted by, among others, state administration entities and state-owned companies," says Emilia Legierska, Transaction Director at Walter Herz.

However, while supply is plentiful in regional markets, there are no vacant large-scale offices in modern buildings located in central Warsaw. This has resulted in an increase in the share of pre-lease agreements in the total leasing volume in the second half of 2024 in the Warsaw market.

The selection of space under development is limited, however. New office investments have completely slowed down in the regions, while several projects are under construction in Warsaw, including The Bridge, Studio II, Office House, Skyliner II, UpperOne, Warta Tower, and Vena.

Strategic Investment Decisions in the Public Sector

State entities are currently showing increased activity in the sector. We are observing a growing trend of public entities taking steps towards consolidation and modernization of administrative spaces.

Last year, the Wielkopolska Branch of the Provincial National Health Fund (NFZ), among others, decided to relocate its headquarters to modern spaces, moving into a modern office building on Baraniaka Street in Poznań. The NFZ also modernized the building at 8 Chałubińskiego Street in Warsaw. Bank Gospodarstwa Krajowego (BGK) decided to extend its lease in an exclusive office building belonging to Warsaw's Varso Place complex.

PKP (Polish State Railways) in partnership with HB Reavis developed the area around the Western Railway Station, and now the railway company Xcity Investment with Ghelamco will begin implementing a new project at Gdański Railway Station. The release of PKP land for business purposes will improve supply in the Warsaw market. A new business center for Warsaw is to be built around the new station on an area of 2.4 hectares.

Bank Pekao S.A. has put up for sale the building at 53/57 Grzybowska Street in Warsaw, which served as its headquarters for over 30 years. The Institute of Environmental Protection (National Research Institute) has decided to sell the office and laboratory building at 5/11D Krucza Street.

Polskie Sieci Elektroenergetyczne (PSE) has decided to build a new headquarters in Radom. Two buildings with a total cubic capacity of approximately 158,000 square meters are scheduled for completion at the beginning of this year.

PZU is also effectively managing its assets, having moved to Skanska's Generation Park Y building in Warsaw and planning to renovate its old headquarters. The PZU Tower, located at the intersection of Grzybowska Street and Jana Pawła II Avenue, will likely be demolished. It will be replaced by a 150-meter tower. PZU Investment Fund Company is in talks to do so.

IMMO Park Warszawa, owned by Mota-Engil Central Europe, has built a four-story underground parking garage in Warsaw with 420 parking spaces and will implement the first phase of the revitalization of Powstańców Warszawy Square. It previously built a parking garage under Nowy Targ Square in Wrocław under a public-private partnership. Its portfolio also includes PPP contracts for the construction and operation of parking garages in Gdańsk and Łódź.

Polish capital with a growing share in investments

Domestic capital in 2024 saw its highest level of activity on record. It accounted for approximately 10-15 percent of investment transactions in the first half of last year. This figure was twice as high as in the previous year, while until 2022, the average share of Polish investors in the total transaction volume did not exceed 2 percent.

"In 2024, we saw a significant revival of investment activity in the commercial real estate market in Poland. The office sector was particularly popular, with interest growing exponentially. The estimated value of office transactions last year was €1.6 billion, almost four times higher than the volume recorded the previous year. Walter Herz advised on a transaction involving a public sector entity that acquired an office building in Warsaw at the end of 2024," says Katarzyna Tencza, Transaction Director at Walter Herz.

Domestic capital played a key role, particularly in regional cities, where we saw increased interest in well-located and modernized properties. Further large transactions in the office sector can be expected this year, including outside Warsaw, where there is a large selection of attractive, modern properties.

The expected interest rate cuts will translate into more attractive returns for investors. The ECB's interest rate cuts led to increased interest in prime office properties last year. In Warsaw, the sale of the Warsaw Unit building for €280 million was finalized. This was the largest office transaction not only in Poland but also in Europe. In Poznań, the Nowy Rynek E office building changed hands.