In 2023, on Poland’s largest eight regional office markets, developers delivered 280,000 sqm (-31% y/y), bringing the sector’s total stock to 6.68 million sq m (+4% y/y). The new supply slightly increased the vacancy rate, stabilizing around 17.5% (+2.2 pp. y/y) at the end of December 2023. The largest concentration of tenant activity was observed in the largest regional office markets, i.e., Kraków, Wrocław, and the Tricity (about 70% of gross demand), where, in total, companies leased about 520,000 sq m out of 750,000 sq m of all signed contracts in 2023. Polish consulting firm, AXI IMMO, has prepared an analysis of the situation in Poland’s eight largest regional office markets as of the end of 2023, with a supplement for business centers in Kraków, Wrocław, and Tricity, in its report “Office Market in Regions 2023.”
At the end of December 2023, the total stock of office space in the eight largest regional markets (Kraków, Wrocław, Tricity, Katowice, Poznań, Łódź, Lublin, and Szczecin) amounted to 6.68 million sq m (+4% y/y). Traditionally, Kraków (27%), Wrocław (20%), and Tricity (16%) remain the regional leaders, with a total of 4.21 million sq m, accounting for about 63% of the sector’s total supply in the regions.
Of the nearly 280,000 sq m (-31% y/y) delivered between January and the end of December of 2023, developers delivered the most office space in Kraków (97,000 sq m), Wrocław (76,000 sq m) and Poznań (43,000 sq m). In turn, among the completed in 2023, 21 office projects worth noting are Ocean Office Park B (Kraków, 28,600 sq m, Cavatina), Craft (Katowice, 26,700 sq m, Ghelamco) and Nowy Rynek E (Poznań, 25,100 sq m, Skanska).
Emilia Trofimiuk, Research Manager, Research Department, AXI IMMO, explains: “The situation in terms of new supply in regional office markets is still very dynamic. The nearly 290,000 sq m planned for delivery in 2024-2025 should be realized as announced by developers. Information about take-up will be important in deciding whether to expand or exclude office functions from new projects. Although this one has recorded positive dynamics in recent years.”
At the end of 2023, regional office markets had nearly 290,000 sq m of space under construction. The largest amount, 70,000 sq m of new supply under construction, is in Wrocław, slightly ahead of Poznań (67,00 sq m) and Katowice (63,000 sq m). It is also in these business centers that the largest projects currently under construction are located, i.e., AND2 (39,000 sq m) in Poznań, Grundmanna Office Park A (20,700 sq m) in Katowice and Quorum Office Park A of 18,200 sq m in Wrocław.
The new supply delivered in 2023 slightly affected the region’s vacancy rate, which stood at 17.5% at the end of the year (+0.2 pp q/q and +2.2 pp y/y). This result translates into about 1.17 million sq m of vacant space. Markets with office module availability above 20% are Katowice and Łódź, while the vacancy rate is below 5% in Szczecin.
Bartosz Oleksak, Associate Director, Office Department, AXI IMMO, explains: “For years, regional office markets have been centered around the development of two groups of tenants, among them international companies from the business services sector and the IT industry. The relatively high availability of vacant office space presents an opportunity for new players interested in entering the Polish market.”
The total volume of lease transactions in the regional office market in 2023 amounted to more than 750,000 sq m (+20% y/y), while on net demand (excluding renegotiations and lease extensions) signed 450,000 sq m (+29% y/y). The highest tenant activity was registered in the Kraków, Wrocław, and Tricity markets, with 200,000 sq m, 166,000 sq m, and 153,000 sq m, respectively.
As of the end of 2023, average offer rents ranged from EUR 9.00 to EUR 17.5, and in the best projects, even EUR 20.00/sq m/month was expected. In turn, service charges ranged from about PLN 11.00/sq m/month to PLN 30.00/sq m/month, depending on the standard and location of the building.
Jakub Potocki, Associate Director, Office Department, AXI IMMO, concludes: “We expect that the increased availability of office space in regional markets will influence the attitude of landlords and thus give more room for negotiation to tenants looking for alternative space. Base rents should remain stable, and a downward trend is possible in effective rates, especially in older facilities.”
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