In 2020, demand for office space in regional cities was 16% lower compared to 2019, the vacancy rate increased by 3.2 pp and the volume of office space under construction is at its lowest in about five years.
Demand – subleases and renewals
In the largest markets outside Warsaw, take-up fell by 16% year-on-year to over 580,000 sqm, with renewals accounting for 38% of this total. However, from April to December their share rose to nearly 50%. Companies are opting to stay put more often than before the pandemic, as contract renewals are usually signed for a shorter period than when relocating to a new building, and with uncertainty in global markets, tenants are more cautious about long-term commitments,
explains Karol Patynowski, Director of Regional Markets, JLL.
One of the main office trends is the growing offer of sublease offices. At the end of last year, the volume of this type of space totalled 280,000 sqm, of which 150,000 sqm was available outside of Warsaw. Among the regional markets, companies in Wrocław (45,000 sqm), Kraków (approx. 35,000 sqm) and the Tri-City (nearly 30,000 sqm) have the largest choice of space for sublease. As in the case of the increasing scale of contract renewals, this trend should also increase until the pandemic is brought under control,
adds Karol Patynowski.
Supply – developers are more cautious when it comes to launching new projects
In Poland, there is currently 1.2 million sqm under construction and over 700,000 sqm is being built outside Warsaw. This result is lower than in previous years, when the under-construction total ranged from 800,000 sqm up to 900,000 sqm. This reduction is mainly due to the fact that developers are continuing construction work on projects that have already started but are not launching many new investments. This may lead to a supply gap in some cities in the next 2-3 years. Interestingly, development activity outside Warsaw is very much concentrated in Katowice (27%), which is only the fifth largest office market in Poland,
explains Hanna Dąbrowska, Research Analyst, JLL.
Office investment market – a strong H1
The total value of office transactions in Poland was almost EUR 2 billion, of which 66% - about EUR 1.3 billion was in Warsaw, with nearly EUR 672 million in the regional markets. Among the regional cities, the leader was Kraków - EUR 373 million, followed by Katowice with EUR 127 million. It is worth noting, however, that the yearly result is largely due to a strong first half of the year, when many transactions initiated in 2019 were finalized. Investors' cautious strategies in the second half of the year were particularly visible in regional cities, where only three office transactions were closed from July to December. However, in 2021, we expect an increase in investor activity in these markets,
explains Tomasz Puch, Head of Capital Markets, JLL.
