Almost half of the offices leased in the largest regional cities in Poland goes to tenants in Cracow.
With over 300 thousand sq m. of office space leased in the first half of this year in the largest business centers in the country, apart from Warsaw, as many as 140 thousand sq m. of offices were contracted in Cracow. Companies from the modern business services sector had the largest share in the record high demand for offices on the Cracow market. Demand of tenants from the flexible space segment is also increasing. In the first six months of this year flexy operators signed contracts for around 13 thousand sq m. of offices in the capital of Małopolska Province, generating almost 10 per cent of demand.
Demand is followed by new unprecedented supply in the agglomeration. – In the first half of this year, a dozen or so facilities were commissioned in Cracow, which resulted in a total of nearly 100 thousand sq m. of office space becoming available on the market. This is even more than what emerged on the market at that time on the country’s largest market of Warsaw – says Mateusz Strzelecki, Partner and Head of Regional Markets at Walter Herz.
Cracow is developing its potential
The investments completed at that time included, among others, V.Offices (21.6 thousand sq m.), Mogilska Office (12.5 thousand sq m.), DOT Office F1 (9.8 thousand sq m.), and building B1 in Fabryczna Office Park investment (13.5 thousand sq m.).
Huge investors’ appetite for Cracow offices motivates developers to intensify work. Mateusz Strzelecki informs that about 270 thousand sq m. of office space investments is currently under construction in Cracow. – When compared with regional markets, Cracow is also an absolute leader in this respect – says the expert.
According to Walter Herz, Cracow’s office resources today offer approximately 1.36 million sq m. of modern office space. The company’s analysts estimate that by the end of 2019, Cracow’s resources will increase by another 75 thousand sq m. of office space. Among others, ten-storey Tischnera Office office building by Cavatina, which will offer 33.6 thousand sq m. of offices, is almost completed.
In progress
The largest companies investing in the office segment in Poland are building on the Carcow market. Near the Main Railway Station and Galeria Krakowska mall, Skanska is implementing High5ive complex, which will include five buildings. The investment will provide 70 thousand sq m. of modern office space. Two buildings within the first stage have already been commissioned. The next two will be completed next year, and the construction of the last one is being planned.
Nearby Mogilskie roundabout, the largest traffic junction in Cracow, Unity Center is building a mixed-use project, which will replace the so called ‘skeleton’. The complex is to include office buildings, apartments and a hotel. The first office building in this project is to be commissioned next year.
In the former State Vodka Factory in Cracow on Fabryczna Street, Inter-Bud is implementing Fabryczna City investment. Plans cover the construction of office buildings, whereas the historic part of the four-star Mercure Kraków Fabryczna City hotel is to include a gym, swimming pool, SPA, vodka museum and passageway with restaurants, as well as apartments and service and retail points. Four office buildings have been planned in the office zone of Fabryczna Office Park complex, one of which has already been commissioned, two are under construction and the construction of the last one is yet to begin.
Southern and south-eastern parts of Cracow are dynamically developing, with subsequent stages of Bonarka for Business, Wadowicka 3 and Zabłocie Business Park investments under construction.
Announced projects
Cavatina also intends to build a new complex in this area – Klimeckiego Office, on Klimeckiego Street. Two office buildings are to offer almost 36 thousand sq m. of space. The developer has just begun the implementation of the next stage of Equal Business Park on Wielicka Street and is preparing further investments in Cracow with nearly 78 thousand sq m. of office space commissioned in the next three years.
Other major real estate development companies are also announcing the construction of new, large projects in the capital of Małopolska Province. The largest planned investment is White Star at 25 Saska Street. A total of 100 thousand sq m. of office space is to be commissioned in eight buildings of The Park complex.
Bonarka for Business is also expected to expand. The complex now offers 75 thousand sq m. of offices. TriGranit company has recently commissioned office building H with 9.8 thousand sq m. and is preparing the construction of the next two buildings, I and J. New office buildings are to bring approximately 10 thousand sq m. to the market. Their construction is to start this year. Echo Investment also mentioned the construction a new project in Cracow.
Cracow is running on outsourcing
Record high demand for office space in Cracow is primarily associated with creation of new and development of the existing centers providing modern business services. Cracow is not only a leading Polish and global location for companies from the BPO/SSC sector and new technologies industry.
Last year, companies from this sector contracted a quarter of leased office space in Poland, that is over 400 thousand sq m. of offices. Walter Herz data shows that in regional cities, apart from Warsaw, business service centers generated over a half of total demand for office space in 2018. In the first half of this year, nearly 190 thousand sq m. of offices found new tenants from the modern business services sector in the largest business centers in our country.
Almost 60 per cent of space from 3 million sq m. of offices currently occupied by the BPO/SSC sector in Poland, is located in Cracow. The city offers this industry’s investors a well-qualified workforce and relatively low costs of labor, as well as office space rental, when compared with both Warsaw and Western European markets.
Pre-let is becoming more and more popular
Walter Herz advisors point out that today, companies in Cracow are eager to move their headquarters to buildings close to the center, where employees have easier access to public transport and a wide range of services. In addition to office buildings in the very center of the city, buildings located in the vicinity of Mogilskie roundabout, are also popular among tenants.
Vacancy rate in Cracow currently reaches 10 per cent. The limited availability of finished space means that much more new contracts are now concluded in the form of pre-let, even at the early stages of the investment.
Asking rental rates in the center of Cracow are at EUR 13.0 – 15.5/sq m./month, and outside it ranges from EUR 9.5 – 14/sq m. In many cases, however, it is possible to negotiate attractive budgets for finishing premises, or obtaining several-month rental breaks, as a result of which effective rents are much lower.
