Over 1.1 million sq m is currently under construction in Poland. The most active markets in terms of office space in the pipeline are Warsaw, Kraków, Wrocław and Tri-City. Refurbishment trend gains pace in Warsaw.
Warsaw, 25 July 2014 – International advisory company JLL presents its report summarising Q2 2014 and analysing key trends on Poland’s office market.
Mateusz Polkowski, Associate Director, Research and Consultancy, JLL, said: “Construction activity in Warsaw remains high. Currently, approximately 579,000 sq m is under active construction, and an additional 62,000 sq m is under refurbishment. Remodelled and renovated buildings account for around 10% of the developed office space in Poland’s capital city. We think that the trend of older buildings being refurbished and tailored to market needs and expectations will continue. In 2014, a total of ca 350,000 sq m of new offices will be completed, including the above- mentioned refurbishments. The Warsaw market will roughly maintain its current pace in 2015 and 2016 with ca 300, 000 sq m of new supply being completed for each of these two years. The volume of new office projects will be reflected in the continued upward pressure on the vacancy rates. We expect that in 2016 the total office stock in Warsaw will hit 5 million sq m”.
Demand – Mokotów as a leading district in Warsaw
In H1, tenant demand in Warsaw stood at 258,900 sq m, of which 129,500 sq m was accounted for by transactions concluded in Q2. The leading district was Mokotów, with 44,700 sq m of modern office space leased in Q2 (95,900 sq m in H1 representing 37% share of all take-up). New deals and renewals are still taking a clear lead, with a 50% and 35% share, respectively. The biggest deals in Q2 included: PwC (10,800 sq m renewal in International Business Center), Citibank (7,900 sq m expansion in Marynarska 12), and Regional and District Court (new deal for 6,000 sq m in Płocka 9/11).
In H1, 189,000 sq m of modern office space was leased in office markets outside Warsaw  (90 600 sq m in Q2 alone). The biggest transactions in Q2 were signed by UPC (renewal of 6,500 sq m in Green Park, Katowice), IT company (5,600 sq m expansion in Enterprise Park C, Kraków) and a bank (renewal of almost 5,000 sq m in Silver Forum, Wrocław). The largest change was observed in Łódź, where gross take-up amounted to 14,200 sq m. As the gross take-up in Łódź over the last two years has hovered around an average of 5,800 sq m per quarter, this means that H1 2014 demand has already hit 85% of 2013's total. In Q2 the most active market in terms of tenant demand was Katowice (22,000 sq m of leased space).
Stock and supply – 1.1 million sq m under construction across Poland
In H1, 190,300 sq m of office space was commissioned in Warsaw. In Q2 alone, approximately 106,000 sq m was delivered to the market, with the largest office building completions being Eurocentrum Office Complex I (38,700 sq m), GreenWings (10,800 sq m) and Gdański Business Center 1-A (29,600 sq m). Non-Central stock exceeded 3 million sq m of existing modern office space.
Office completions (sq m), future supply (sq m) and vacancy rate (%) in Warsaw
Source: JLL, WRF, Q2 2014
H1 2014 brought 123,100 sq m of new office space to the market outside Warsaw (68,000 sq m in Q2). The leading cities were Katowice (which accounted for 24% of all completions), Tri-City and Kraków (each with 20%). In Q2, major new deliveries included Olivia Four in Gdańsk (12,500 sq m), Alma Tower in Kraków (10,400 sq m) and GPP Business Park II in Katowice (7,500 sq m). Łódź was the only city with no new completions.
Currently, 531,400 sq m of office space is under active construction in Poland’s major cities. Kraków, Wrocław and the Tri-City account for 67% of all projects. Kraków is taking a clear lead in this respect, with 136,500 sq m of office space under construction, 64% of which will be delivered by the end of 2014. Moreover, almost 44% of all space under construction in Kraków is secured by pre-let agreements, outperforming other major cities, where between 18.5% and 25.5% is pre-let (the exception being Szczecin, with 8.5%)
Completions and pipeline in major office markets outside Warsaw in 2014 (sq m)
Source: JLL, Q2 2014
In total, over 1.1 sq m is under construction across Poland.
The vacancy rate in Warsaw went up slightly comparing to the end of 2013 when it stood at 11,8%. At the moment 13.4% (574,400 sq m) of Warsaw's modern office stock remains vacant (13.6% in Central Warsaw, 13.3% in Non-Central locations).
Quarterly vacancy rates were stable at the end of H1 2014 in major cities outside Warsaw. The lowest vacancy rate is still found in Kraków (4.5%) and the highest in Szczecin (24.4%). The largest decrease compared to the end of 2013 was recorded in Łódź (from 13.4% to 9.2%).
Prime headline rents in Warsaw City Centre range between €22 and €24 / sq m / month. In Q2, tenants leased office spaces in the best Non-Central locations for €14.50 to €14.75 / sq m / month.
Prime headline rents in the major cities outside Warsaw currently range from €11 to €12 / sq m / month in Lublin to €14 to €15 / sq m / month in Wrocław and Poznań. The average headlines rents remain highest in Kraków (€13.7 to €14 / sq m / month) and Katowice (€12.5 to €13.75 / sq m / month), lowest in Lublin (€10 / sq m/ month).
“We expect that the vast majority of office markets in Poland will remain favourable to tenants. The situation will be more balanced in those markets characterised by stable demand for office space and relatively low vacancy rates”, Mateusz Polkowski summarized.
 Kraków, Wrocław, Tri-City, Poznań, Katowice, Łódź, Szczecin and Lublin