Cracow is generating almost half of the total demand for office space in regional cities, outside Warsaw.
Cracow office market has been unrivalled in the regions. Over the last decade, Cracow’s resources have quadrupled, to 1.36 million sq m. of modern space. As a well-known academic center and popular tourist destination, Cracow is today, apart from Warsaw, the most attractive location for international investors and developers implementing commercial projects in Poland. The biggest driving force in development of the office market in the agglomeration, are business operations of the companies from modern business services sector, which in the capital of Małopolska province, have about 60 per cent share in the lease volume.
According to Walter Herz consulting company data, by the end of 2019, developers are planning to complete the construction of buildings in Cracow, which will provide a total of over 110 thousand sq m. of office space. In the first half of this year, almost 100 thousand sq m. of offices appeared on the Cracow market, including in such facilities as V.Offices, Fabryczna Office Park B1, Mogilska Office and DOT Office F1.
Record supply
Mateusz Strzelecki, partner and Head of Regional Markets at Walter Herz, admits that this year may end with Cracow enjoying a record new supply exceeding the level of 200 thousand sq m. of space. – In recent years, Cracow office market has been growing on average around 15 per cent annually. And the current pace of supply growth in the city is unique among the regional cities. Today, only Warsaw is building more office space than Cracow – adds Mateusz Strzelecki.
According to Walter Herz calculations, there are currently about 270 thousand sq m. of offices under construction on the Cracow market. Tischnera Office implemented by Cavatina Holding, has just received operation permit, provides almost 34 thousand sq m. of office space. The investment, which has already won awards, includes 2.6 thousand sq m. of green areas.
Cavatina has also recently started the construction of the fourth stage of Equal Business Park complex on Wielicka Street, with 11 thousand sq m of space currently under construction. The company is preparing more projects. In the area of Zabłocie district, at the intersection of Klimeckiego and Nowohucka Streets, the developer is also conducting preparation works for the construction of a new office building as part of Klimeckiego Office complex. The investment is to include two buildings. The first office building will bring almost 8 thousand sq m. of space, and another will provide 28 thousand sq m. of offices. According to the investor, in the next three years, thanks to business conducted by the company in Cracow, the city’s office resources will increase by nearly 78 thousand sq m. of space.
Spectacular investments
Grupa Buma company is also introducing its new investments in Cracow. The company is implementing Tertium Business Park office complex on aleja Bora Komorowskiego and Lublańska Street. Together with Quattro Business Park, Five and Rondo Business Park buildings already built by the developer in this location, the facility will create a modern office district, offering over 115 thousand sq m. of space.
In the south of Cracow, within the Special Economic Zone of Cracow Technology Park on Czerwone Maki Street, Grupa Buma is also building Dot Office investment, which will provide a total of over 120 thousand sq m. of office space. Seven buildings have already been constructed in the project, including the recently completed F1 office building with 9.8 thousand sq m. of space, with more under preparation and implementation.
Buma Group is also planning to begin the construction of Ten Office building. The complex of two A-class buildings will offer over 31.7 thousand sq m. of lease space located at Tischnera Street, in the vicinity of Wadowicka and Zakopiańska Streets. Leisure zones have been arranged on the premises, including a green, roof terrace on one of the buildings and a green courtyard, where, apart from places to relax, there will be tennis table and foosball table, as well as place for growing herbs.
The biggest developers operate in Cracow
Skanska company is also operating on the Cracow market. Near the Main Railway Station and Galeria Krakowska mall, the company is implementing High5ive complex, which will eventually bring 70 thousand sq m. of office space. Project involves construction of five buildings, two of which are already commissioned. Two more office buildings providing 32 thousand sq m. of space are to be ready next year, and the construction of the last one is under preparations.
In addition, in the former State Vodka Factory in Cracow on Fabryczna Street, Inter-Bud is building Fabryczna City investment. The office part of the facility – Fabryczna Office, includes four office buildings, one of which has been commissioned, two are under construction, and the construction of the last one has just begun. Moreover, the investment is to include four-star Mercure Kraków Fabryczna City hotel with fitness center, swimming pool and SPA, vodka museum, arcade with restaurants, as well as apartments and retail units.
A mixed – use complex is also being built near Cracow’s Mogilskie roundabout. Unity Center is to include office buildings, hotel and apartments. Next stages of Bonarka for Business investment are also under construction in Cracow. In the vicinity of Matecznego roundabout, Wadowicka 3 complex is also under construction (31,3 thousand sq m. in three buildings), in which currently implemented office building is applying for the first Fitwel certificate in Poland. Zabłocie Business Park complex is also under construction in the Cracow agglomeration.
In addition, White Star announced the construction of a new project at 25 Saska Street in Cracow. The Park investment is to include eight buildings that will offer a total of 100 thousand sq m. of office space.
Extremely high demand
According to Walter Herz, in the first half of this year, less than 140 thousand sq m. of office space was contracted on the Cracow market, almost twice as much as a year ago. This is almost half of the lease volume generated at that time on the regional markets, outside Warsaw. Like in the other cities, in Cracow the most offices went to companies from modern business services sector.
It is worth noting that recently more contracts for leasing exceptionally large spaces have been signed on the Cracow market. One of the largest transactions in the history of the Cracow market concluded in recent months was a record pre-let of 19.5 thousand sq m. of space in two office buildings of Fabryczna Office Park complex by UBS company. And the pre-letting of nearly 16 thousand sq m. of offices in Tischnera Office investment by Sabre company.
Companies that are looking for large space in the central parts of the city are forced to conclude pre-let contracts due to a small amount of completed, vacant space, of which there is only about 10 per cent in Cracow.
Expansion of BPO/SSC sector and development of flexible work space
Extremely high demand for office space in Cracow is associated with both the expansion of IT companies and the BPO/SSC sector. The capital of Małopolska province is one of the world’s leading centers where market for modern business services is developing. In 2018, companies from this sector signed contracts for over 400 thousand sq m. of office space in Poland, which accounted for about 25 per cent of total lease volume. Outside Warsaw, business service centers generated over half of total demand for office space last year. In the first six months of this year, nearly 190 thousand sq m. of offices found new tenants from this industry, informs Walter Herz.
Cracow is also a leader in the regions when it comes to increasing the potential of flexi space. Cracow’s resources of flexible offices are around 24 thousand sq m. of space. In the first half of this year, out of 21 thousand sq m. of this type of space was leased on regional markets, outside Warsaw, up to 13 thousand sq m. was contracted in Cracow. And in the new Cracow facilities, another 15 thousand sq m. of co-working space have already been planned. In this respect, only Wrocław where the resources of flexible space are about 17 thousand sq m., can compete with the capital of Małopolska in the regions.
Developers are happy to arrange flexi spaces in new office buildings, because tenants pay attention not only to whether the building offers various services on site, but also whether it provides flexible space and instant offices. They enable companies to quickly optimize the occupied space in the event of an increase in employment or temporary demand for additional space during specific projects.
