The absorption capacity of Poland’s regional office markets in the first half of this year turned out to be similar to last year’s level. In terms of demand, Kraków and Wrocław went almost head to head. Krakow ranked second with a slightly lower lease volume. In the capital of Malopolska, 83,000 sqm of office space was contracted, and the lease structure was dominated by new agreements, according to Walter Herz.
Krakow also remains the regional leader in terms of inventory growth, which increased by 43 thousand sq. m. of space in the first half of 2023. Less than 40 percent of the total space completed in the regions entered the Krakow market. Among others, the Ocean Office Park complex was expanded and the Fabryczna Office Park B5 project completed, which entered the market in the first quarter of 2023. No projects were completed in the second quarter of this year.
The Krakow office market stands out in the regions for the amount of office space under construction. Nearly 100,000 sqm of office space is under construction in the agglomeration, which compares with the pre-pandemic period, when Krakow had around 250,000-300,000 sqm of offices under construction, and represents a significant drop in developers’ activity.
In the region, projects under construction include Kreo (22.9 thousand sq. m.), Mogilska 35 (12.4 thousand sq. m.), Brain Park C (13 thousand sq. m.), and The Park Krakow 2 (11.7 thousand sq. m.), which are scheduled to be completed before the end of the year. As Walter Herz calculates, about 90 percent of the space under development is expected to be completed as early as 2023.
Krakow currently has a stock of 1.75 million sqm of modern space. More office projects are being prepared within the city. Planned investments include Aleja Pokoju, Lubicz, Dekerta, Kapelanka, Ten Office, The Park Cracow 5-8, Podium Park 3, Dot Office, Wadowicka, Wita Stwosza, and Chopin Office.
“As in all regional office markets, office availability is increasing in Cracow. The vacancy rate has risen by 3 percentage points in the Krakow market since the beginning of this year and has exceeded 18 percent. However, high construction costs and the still high cost of servicing construction loans are limiting investors’ negotiating power, especially in the newest buildings. Tenants are now carefully analyzing office rental expenses, looking primarily at operating costs in individual buildings. There is a noticeable trend of companies reducing the space they occupy, while at the same time raising its standard and adapting it to today’s work system,” reports Kamil Kowalewski, Associate Director at Walter Herz.
Krakow is the second largest coworking market in Poland, after Warsaw. It has more than 40 coworking spaces for lease, and the total stock of flexible offices exceeds 47,000 sqm of space, representing nearly 15 percent of the facilities available to this segment nationwide. Coworking spaces and shared offices can be found all over the city. They are very popular among tenants. Prices for a one-person position vary, with the cost of rent ranging from about PLN 700 to PLN 1,450 per month. Stable rents and high occupancy rates mean that this segment of Kraków’s office market is growing steadily.
Rental rates for office space in Krakow range from €10 to €18/sqm/month. Operating costs range from PLN 16 to PLN 29/sq.m./month. Krakow is a relatively uniform office market. Lease rates are highest in the center, and the lowest priced offices are offered in buildings located in Czyżyny and Mistrzejowice.
Developers are focusing on well-connected parts of the city, such as Grzegórzki, Podgórze and Zabłocie.
Source: Walter Herz
Photo: Ocean Office Park B
