According to Walter Herz’s latest research on the Cracow office market, one of the main criteria for choosing office space in Cracow are the financial terms, which next to the location and access to public transport, are the most important for tenants looking for new offices. The respondents also value the standard of the building, parking and services available in the area.
Companies plan to expand
The objectives of business expansion, which is planned by over 83 per cent of the surveyed companies from 27 industries with offices in Cracow, sound optimistic. This is a good omen for the second largest office market in Poland (after Warsaw), and an announcement of further development of investments in the city.
– Office market in Cracow is still in the development phase, although its pace is slower. Therefore, the vacancy rate remains at a fairly high level of over 18 per cent. In the first half of 2023, approximately 43 thousand sq m. of modern space was delivered on the Cracow market. At the end of June, nearly 100 thousand sq m. of space remained at the implementation stage in Cracow, including Kreo project and Mogilska 35. This is three times less than during the years of the market boom, before the pandemic, when up to 300 thousand sq m. of offices was under construction in the city. – says Mateusz Strzelecki_Partner and Head of Tenant Representation at Walter Herz.
Walter Herz analysis was aimed at verifying the direction in which the office market in Cracow is heading, which is crucial for tenants from individual industries, and to determine what role will the office play in the upcoming years.
For small and medium-sized companies, the most important factors when choosing a new office turned out to be business expansion and cooperation with the property owner, respectively. In addition, access to public transport, budget for lease, location as well as standard of the building and parking are important for smaller entities.
In the case of large companies, the most important aspects when making decisions are, in turn, the budget for lease, access to public transport, location, parking and services in the area, while the standard of the building is less crucial.
High cost of changing the office pleads in favor of renegotiations
The study showed that the perception of the current function of the office is quite complex. It is to simultaneously fulfill several tasks and combine various business and employee needs. Integrate the team, enable the use of equipment and technical infrastructure by employees, represent the company’s image and ensure the comfort of conducting business meetings.
The results of the analysis carried out by Walter Herz also show that only 7 per cent of respondents see ESG as a key factor when choosing an office. With a very strong global trend in this field, still a small percentage of companies in Cracow are interested in projects that meet environmental standards. This aspect was mostly mentioned by large, international corporations.
The survey shows that 27 per cent of the surveyed companies changed offices in the last 24 months, of which 52 per cent. of tenants decided to renegotiate the lease and stay in the current office. The main reasons for keeping the occupied location were financial terms and good cooperation with the landlord. Higher costs related to the possible lease of a new office and fit-out turned out to be crucial.
– The demand for office space in Cracow remains at a relatively good level. However, its structure shows a growing share of renegotiations and a decrease in the volume of pre-lease agreements. As in all domestic markets, developers are holding back the start of new office projects due to the high costs of financing their construction and bank requirements, as well as excessive prices of construction materials and labor. Therefore, the level of new supply in Cracow will decrease significantly in the upcoming years – says Kamil Kowalewski, Associate Director at the Cracow branch of Walter Herz.
70 per cent. of companies are satisfied with their current office
Walter Herz’s study conducted on the Cracow market showed that as much as 70 per cent. of surveyed companies declare that the current office meets their needs, and only 30 per cent. of respondents plan to look for a new place to work. Over 80 per cent of companies among those that conducted a workplace analysis are satisfied with their current office. Nearly half of the organizations participating in the survey chose it.
The most satisfied with the current office are respondents from companies whose lease agreement will stay in force for over 36 months, and the least satisfied are companies whose lease expires in the next 12 months. Therefore, it can be concluded that companies whose employees rate the current office well have recently changed it, rearranged the space or renegotiated the lease terms.
For companies that indicated that the office they occupied did not meet their expectations, the biggest inconveniences were insufficient number of meeting rooms, small work space and a low standard of the building.
