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Office Market in Poland

Wyślij Print Pobierz added: Przemysław Buczkowski | 2017-03-30 22:41:13
office

Poland has consolidated its position as an attractive location for investment, maintaining opportunities for the dynamic growth of the office sector

At the end of 2016, the total office stock in Poland was estimated at over 9m sq m with a diverse range of office buildings on offer mainly in the seven largest cities. It is worth emphasizing that the Polish office market is unique in terms of numbers of office locations when compared with other CEE countries, where almost all the stock is concentrated in one city, which is typically the capital.

Warsaw remains the dominant market with a total modern office stock amounting to 5M sq m, with a further 3.6M sq m of modern office stock located in six major regional cities: Krakow, Wroclaw, Tricity, Katowice, Poznan and Lodz. The remaining office stock is located in the emerging office markets.

Warsaw is the largest and the most expensive office market in Poland. Monthly asking rents range from EUR 14 to 24 per sq m in the Central Business District, while in non-central locations they vary between EUR 10.5 and 18 sq m/month.

The capital city is, at the same time, the most dynamically developing market, where the rapid growth of office stock currently outpacing the relatively stable demand resulting in the increasing availability of office space.

The largest regional cities, including Krakow, Wroclaw, Tricity, Katowice, Poznan and Lodz, are also relatively rapidly developing office markets, which offer a well-developed business infrastructure and provide a competitive level of investment costs. While in Warsaw these are the financial, public, telecommunication and IT sectors that traditionally make up the largest share of lease agreements volume, in regional cities in the last five years tenants from the growing business services sector have played the essential role.

According to our estimates, they currently occupy from 20% of office space in Tricity to nearly 50% in Krakow, and the percentage will increase together with projected employment growth in the sector, and the opening of other business services centres in Poland.

In comparison to the capital city, the regional cities allow investors to generate savings from lower labour costs while offering a large supply of well-qualified employees and tax incentives in special economic zones, as well as lower rental rates for office space. Asking rents in A-class and B-class buildings in most major regional cities range from EUR 8.5 to 15.5 sq m/month.

Increasing developers’ activity has been observed in Poland over previous years and the trend is going to be continued due to the growing amount of entities choosing Poland as the location for their investments. The Polish real estate market is currently in an exceptionally dynamic development phase with 1.4M sq m under construction. According to developer’s schedules, nearly 920,000 sq m of office space is due to be delivered in 2017.

Ever improving quality of office space goes hand in hand with the growing expectations of tenants.

Over recent years, partly because of great demand from Polish and international investors from the BPO/SSC, IT and R&D sectors for the highest class modern office buildings, in each of regional cities we can find at least several A-class projects representing the highest global quality, which were completed in the last five years or are currently being developed. Developers compete strongly amongst themselves not only in terms of location or rent exemptions. Environmental awareness of tenants is causing an increasing emphasis to be placed on energy-efficient buildings, water savings, reduction of heat production and loss, and operating costs optimization. LEED or BREEAM certificates are standard in the majority of new A-class projects, while the owners of older schemes are also trying to retro-certify, or at least implement some green solutions on the occasion of modernization of existing buildings.

 

Total stock

in sq meters

Under construction

Asking rents per sq m/ month

Warsaw

5,045,000

856,000

EUR 10.5-24

Krakow

916,000

260,000

EUR 12-14.5

Wroclaw

848,000

166,000

EUR 10-15.5

Tricity

634,000

150,000

EUR 10-14

Katowice

443,000

52,000

EUR 9-14

Poznan

428,000

40,000

EUR 10-15

Lodz

360,000

130,000

EUR 8.5-13

 

Poland has a leading position in Central and Eastern Europe in terms of modern office stock. What makes Poland so unique among all of the countries of the CEE region is undoubtedly the large number of urban hubs, such as Warsaw, Krakow, Wroclaw, Tricity, Katowice, Poznan and Lodz, to name only the main ones.

Other cities which offer a well-developed infrastructure and trained workforces are also being given a closer look by potential tenants who are looking for a high quality office space. The diversified range of properties available is certainly a significant asset of Poland.

The office market in Poland is not slowing down. Currently, there is approximately 1.5M sq m of new office space under construction, 37% of which is located in Warsaw. These record-breaking volumes have been seen for several quarters now, which shows that new offices are constantly being opened and that new office projects are being started.

The extensive amount of developer activity is mirrored by the high level of occupier activity on the Polish office market.

In particular, tenants from the modern business services sector have in the last couple of years become important market players in terms of occupied office space, mainly in the regional markets. In 2016, companies from that sector were responsible for almost 60% of all take-up registered in Poland (excluding Warsaw). Poland is one of the top countries in Europe when it comes to employment growth (currently holding eighth position in financial and business services).

This increase in headcount should have a positive impact on take-up levels and boost the expansion of services in Poland.

It is worth noting that in 2016 Warsaw surpassed Berlin, Frankfurt am Main, Madrid and Barcelona – each of which are more mature and better established office markets – in terms of the amount of occupier activity registered. Krakow also outstripped Lisbon in that respect.

The analysed seven major Polish office markets offer approximately 1.14M sq m of vacant space available for potential tenants, which is almost the same amount of the available office space in the whole Madrid. The variety of destinations (in terms of both cities and the office projects available within the boundaries of each city) gives potential tenants a good number of options to choose from.

Prime headline rents in Poland are some of the lowest amongst comparable European cities, providing convenient lease terms for occupiers. Nonetheless, due to the very large pipeline some rental pressures can be seen. The pressure is, however, more likely to be reflected in more generous incentive levels (usually rent-free periods and contributions towards fit-out expenses) rather than reductions in headline rents.

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Source: “Poland Your Place To Invest 2017”, report by real estate agencies affiliated with PORF (The Polish Office Research Forum) – CBRE, Colliers International, Cushman & Wakefield, JLL, Knight Frank and Savills, the Randstad Recruitment Agency and The Polish Investment and Trade Agency (formerly The Polish Information and Foreign Investment Agency).