Krakow office market is experiencing an investment boom, despite the fact that there are still not enough vacant offices in the city
Last year saw the commissioning of the largest number of offices in the history of the Krakow market. According to Walter Herz specialists, the amount of modern office space in the capital of Malopolska region increased by 160 thousand sq m. Among the largest projects completed in 2016 the experts named Axis, C and D office buildings in the DOT Office complex and CH2M Center. According to Walter Herz calculations, by the end of last year, the supply of office space on the largest regional market in Poland exceeded 950 thousand sq m.
Specialists point out that the similar pace of development of the office segment in the agglomeration will continue in the years to come. The facilities to be commissioned in 2018-2019 will offer a total of over 300 thousand sq m of offices. Among the largest projects in Krakow are the following stages of Enterprise Park, O3 Business Campus and High 5ive, as well as the first stage of the Wadowicka 3 complex and Astris office building.
More leased offices than commissioned buildings
Although the capital of Małopolska sees the development of more office building than ever, there is still very little vacant space on the market. According to Walter Herz analysts, by the end of last year the vacancy rate in Krakow was the lowest in the country with around 7 per cent. There were about 65 thousand sq m of office space to choose from. New investments aren’t likely to affect the increase in vacancy rates, because the supply is followed by high demand for offices. Almost half of the projects which will be commissioned this year has already found tenants.
The capacity the Krakow market is large, with more office space leased than introduced to the market last year. Tenants signed lease contracts for nearly 190,000 sq m of office space. Office space in the existing office buildings were equally popular as in the newly developed facilities. In 2016, almost half of space was contracted in the office buildings under construction.
Almost 70 per cent of the offices was leased by the BPO/SSC sector
The increase in the supply of modern offices in recent years has allowed the city to transform itself from a regional market into an international business location that attracts the largest global companies. Thanks to a large number of qualified university graduates, who attracted BPO/SSC companies, Krakow has become a leading European destination for this sector.
The agglomeration attracts investors not only with modern offices, favorable business environment and attractive standard of living, but mainly with well-educated staff. This is an aspect that is particularly appreciated by companies providing modern business services. The BPO, SSC and ITC sectors have been the main users of Krakow offices for many years. The industry accounts for about 70 per cent of the last year’s demand for office space in the city.
Global companies active on the Krakow market
Walter Herz experts admit that business service companies usually choose to leases large space. They remind that it is one of the fastest growing segments of the Polish economy. The employment in the industry is growing in the country by 15-20 per each year. There are currently about 210,000 employed professionals in the sector.
In Krakow, companies from the industry are eager to open their branches, which are often among the largest in the world. Walter Herz advisors give an example of the recently launched ABB Global Shared Services Center, which has 2,000 employees working on the project. It will provide services in the financial sector, IT systems, human resources and supply chain management for ABB customers around the world.
Walter Herz specialists inform that bidding rates in the best office buildings in Krakow amount to 13-14 euros /sq m/ month. However, as with all office markets in the country, the effective prices are much lower because the owners of the buildings offer tenants rent-free periods and all sorts of other bonuses.
Author: Walter Herz
