The changing structure of demand for offices, and the increasing amount of space aimed at subtenants, raises the question of whether the office sector in Poland is facing the imminent prospect of oversupply.
Oversupply? Not so fast!
Tenants reacted to the developing pandemic fairly quickly, temporarily withholding expansion or relocation plans. At the same time, since the beginning of the year, the vacancy rate began to increase - in the regional markets by 2.8 p.p. and in Warsaw - by 1.8 p.p. It is worth noting, however, that as early as 2019, we were forecasting an increase in this parameter in cities which were experiencing a high level of new office supply.
Mateusz Polkowski, Head of Research and Consulting, JLL
According to our data, developer activity has returned to a level similar to that which was registered in 2014. At the moment, there is 1.3 million sqm under construction, compared to 400,000 sqm more in the same period last year. When we put all these variables together, we can say that between 2021 and 2022, 24% less space will be delivered to the market than was forecast in 2019. This, in turn, is likely to translate into a gradual absorption of available office space and will offset the increasing level of vacancy.
Piotr Kamiński, Director, Office Leasing, JLL
Funds react to the pandemic
So far, Warsaw has seen transactions worth EUR 1 billion with regional markets attracting EUR 600 million. According to our forecasts, total investment volume on the Warsaw market in 2020 will be similar to the average of the last ten years and will amount to approximately EUR 1.16 billion. In the case of regional cities, an optimistic scenario, could see a total volume of EUR 920 million. For comparison, last year, the office investment market in Poland registered EUR 3.62 billion transactions in total.
Sławomir Jędrzejewski, Director, Office and Industrial Investment, JLL
Interest in the office sector in Poland among international funds is not waning, and investor activity should increase again in 2021. After all, we are the largest commercial real estate market in this part of Europe. On the other hand, the reduced supply of a new product than in previous years should motivate office building owners to reshuffle their business strategies. The office market in Poland has already reached a certain maturity, which means that there are a lot of older office buildings in Warsaw and regional cities that need to be modernised or for the tenant-mix to be adjusted by introducing, for example, flex operators. This will increase their value and help to balance the quality of the product available on the Polish office market.
Sławomir Jędrzejewski, Director, Office and Industrial Investment, JLL
