Walter Herz consulting company summed up 2019 on the office real estate market. The report includes information that Warsaw with the resources of 5.6 million sq m. of space remains an unsurpassed office leader in Poland. The capital agglomeration has facilities comparable in size to the total offer in the 6 largest regional cities in the country. Warsaw offices are primarily located in three districts: Mokotów, Śródmieście and Wola. They include about 75 per cent of space available in the city. Over a quarter of the resources are situated in the largest office buildings, exceeding 30 thousand sq m.
However, 2019 was not successful for several Warsaw investments, the opening of which has been postponed to this year. Hence, office resources in Warsaw increased last year only by about 165 thousand sq m. of space, which is the lowest result in years. Among the office buildings that have appeared on the market, one may mention Wola Retro, Spark B, Generation Z, Moje Miejsce I, Vector and The Park B6.
COVID-19 curbed the record high growth of the Warsaw market
– The structure of supply in Warsaw, however, is changing dynamically, as several large-scale projects are being implemented in the agglomeration, mostly in the central area of the city. They are to enter the market this year and the next. Developers’ activity is now concentrating mainly in Wola, especially around the Daszyńskiego roundabout, with the largest amount of construction sites. Over 750 thousand sq m. of space is currently under construction in Warsaw. And if it wasn’t for COVID-19, this year’s new supply could have reached a record high in the capital – over 400 thousand sq m. of space – informs Krzysztof Foks, Analyst at Walter Herz.
Varso Place, Warsaw Hub, Skyliner Generation Park, Skysawa, Mennica Legacy Tower, Moje Miejsce II and DSV headquarters are among the facilities currently under construction.
In order to lease the highest class space in the central area of the city, one has to spend up to EUR 27/ sq m./month. An office outside the center can be found at a price of around EUR 10/sq m./month. There is no shortage of those willing to pay for lease in these locations. 2019 saw the highest demand for Warsaw offices in history. The year ended with a result of almost 900 thousand sq m. of leased space.
A small amount of space delivered with such a high demand for offices in Warsaw resulted in a decrease in the vacancy rate to 7.8 per cent.
Regional markets with the largest supply in history
– In 2019, we observed high developer activity in regional business centers in the country. Over 60 office projects were commissioned, which brought a total of about 550 thousand sq m. of modern space. In terms of total supply, the regions have caught up and even slightly surpassed Warsaw. At the end of last year, total office resources in Poland already amounted to over 11 million sq m. of space – says Bartłomiej Zagrodnik, Managing Partner/CEO at Walter Herz.
Last year in Cracow, 16 commissioned buildings provided a similar amount of space as in Warsaw – about 160 thousand sq m., and in Wrocław a little less, nearly 150 thousand sq m. of offices have been launched to the market. Over 85 thousand sq m. of space was delivered in Poznań, due to which the total resources of the city increased to around 565 thousand sq m. In the Tri-City, office supply increased by over 60 thousand sq m. A similar number of new offices also appeared in Łódź, thanks to which the city already has office resources of over 0.5 million sq m. of space.
In Cracow, the office map has gained, among others V Offices Fabryczna Office Park and Mogilska Office, whereas Wrocław has gotten the second stage of Business Garden, Carbon Tower, Nowy Targ and City Forum City One. Among the new projects completed in 2019 in Poznań, was the second stage of Business Garden, a building in Nowy Rynek complex and Castor, while in Łódź, building B in Brama Miasta complex, Imagine Stara Drukarnia and Monopolis M1.
There are as many offices under construction in Warsaw, as there are in total in the regions
Nearly 1.6 million sq m. of office space is under construction in the largest cities in the country. Apart from Warsaw, the largest development of the office segment can be observed in Cracow, Katowice and the Tri-City. Over 190 thousand sq m. of space is under construction in Cracow, in projects such as High 5ive, Unity Centre, and Wadowicka 3 Podium Park. 170 thousand sq m. of offices is being built in the Tri-City in, among others, Palio, Wave Oficyna, 3 T Office Park, Waterfront. In Katowice, the pace of market development is faster than in Wrocław or Poznań. Around 135 thousand sq m. of space is being implemented in the city, in such projects as Global Office Park, Face 2 Face and DL Center Point II.
In Wrocław, in turn, 100 thousand sq m. of space is under construction, among others, in MidPoint, Centrum Południe and West 4 Business Hub investments. About 85 thousand sq m. of space is under implementation in Poznań, and in Łódź 90 thousand sq m. of offices in, among others, such investments as HiPiotrkowska 155, Monopolis React and Fuzja.
Market absorption is higher than new supply
Last year, our country recorded a record high demand for offices, absorption amounted to 1.6 million sq m., with almost 700 thousand sq m. of space leased the largest office centers outside Warsaw. In Cracow, the volume of transactions reached 266 thousand sq m. of space, in Wrocław it amounted to 123 thousand. sq m., and in the Tri-City it exceeded 100 thousand sq m. of space. In Katowice, demand reached a record high of 85 thousand sq m. last year. Lease transactions registered on the Łódź market amounted to almost 55 thousand sq m. of space, and in Poznań slightly over 40 thousand sq m. of offices was delivered to tenants.
At the end of 2019, the largest amount of vacant office space was in Wrocław (12.5 per cent) and Łódź (11.2 per cent), and the lowest vacancy rate was recorded in the Tri-City (4.9 per cent) and in Katowice (5.6 per cent).
Rental rates in the regions range from EUR 9/sq m./month for the cheapest offices, to EUR 16/sq m./ month for the highest standard of space located in city centers.
