Is there enough office space being built in Poznań?

Poznań is a relatively intimate city when we compare it to Kraków or Wrocław, but it has an exceptionally diverse and strongly developed economic structure based on sectors including retail, automotive, food production, and business services. The rapid development of service centres has translated into an increasingly rich office that has contributed to the city's brand as a modern business location. Poznań’s potential was confirmed by last year's A- rating given to the city by the ratings agency Fitch, which emphasized the rich and diversified economy of this agglomeration,

explains Zuzanna Kowalczyk, Director, Tenant Representation, JLL.

For several years, Poznań has been strengthening its position among European business services locations. Investors appreciate not only the maturity of the local market, high quality of life and rich infrastructure, but also wide access to qualified employees who speak foreign languages. All of these, combined with the ability to adapt to fast-changing conditions, which characterises the Poznań market, attract potential investors and allow to look to the future with optimism,

emphasizes Miłosz Jankowski, Business Services Client Manager, Hays Poland.

Despite the pandemic, leasing activity in Poznań remained relatively high last year at 63,000 sqm. This total included Allegro's record-breaking agreement for 26,000 sqm in Nowy Rynek, and the nearly 6,000 sqm taken up by Rockwool in the same office complex,

says Ewa Grudzień, Senior Research Analyst, JLL.

Although demand for offices temporarily slowed down over H1 2021, occupiers' appetite for quality space should return by next year at the latest. Even now, Poznań’s Investor Service Office estimates that up to 1,000 new jobs may be created in the service sector, and this will naturally generate a rise in interest in the city’s office offer,

adds Zuzanna Kowalczyk.

2019, when nearly 90,000 sqm of space was delivered to the market, was a record-breaking year in terms of new supply for Poznań’s office market. The following months, however, were marked by moderate developer activity. Only 18,300 sqm of new space was completed in 2020, with most of this number being delivered by the Giant Office project. At the end of 2020, projects under construction totalled a rather modest 77,000 sqm,

comments Ewa Grudzień.

Due to the limited activity of developers, we can expect a supply gap in Poznań. Developer activity is of course likely to be driven by an expected acceleration in the modern business services sector, but new investments are a time-consuming process, so potential new projects are not expected to enter the market before H2 2023. This may intensify competition between occupiers for the best office space in the city,

adds Zuzanna Kowalczyk.

In the Poznań office market, we are facing rental rates that are on a par with Krakow or Wroclaw. This means that prime office schemes in the city can generate income comparable to the best office assets outside Warsaw. In terms of the capital value of office investments, Poznań should still be considered a market with considerable growth potential. Investor activity in Poznań reached its peak in 2019, when the city accounted for almost 24% of turnover outside Warsaw,

comments Sławomir Jędrzejewski, Senior Director, Capital Markets, JLL.

A surge in new supply in 2019 has pushed the vacancy rate to 10.8%. This upward trend continued in 2020 as many companies postponed strategic decisions, such as expansion, due to the ongoing pandemic. At the end of 2020, the vacancy rate stood at 13.0%, which represents 75,900 sqm of immediately available supply. In the short term, the vacancy rate should remain stable, however moderate developer activity combined with relatively high demand is likely to mean a decrease in the medium term,

concludes Ewa Grudzień.