International advisory firm JLL has summarised performances and conditions, at the end of Q4 2021, for Warsaw and the largest regional office markets (Kraków, Wrocław, the Tri-City, Poznań, Katowice, Łódź, Lublin and Szczecin):
- At the end of 2021, the total stock of office space in Poland stood at 12.2 million sqm, with the largest regional cities[1] increasing their share (49.5%).
- Almost 1.2 million sqm of office space is under construction in Poland, with as much as 870,000 located in the country’s largest regional cities. In the capital, however, an 12-year low in developer activity may lead to a demand-supply gap as early as 2023.
- Poland’s office market saw leases signed for a total of 1.24 million sqm last year. Warsaw, with 646,500 sqm of leased space, recorded a 7% increase in demand compared to 2020. Although the result of eight regional cities – 594,500 sqm – was on a par with the previous year, Q4 saw a marked increase in tenant activity.
- In the second half of the year, the activity of companies from the modern business services sector increased. Tenant interest in flexible space was also noticeably higher, especially in Warsaw's central locations.
- Investment volumes in the office market reached €1.7 billion in 2021.
Renegotiations, flexible spaces and a longing for normality
Tenants were still quite cautious about making long-term office decisions, as evidenced, for example, by the relatively high share of renegotiations, 45% for Warsaw and 43% for the other analysed markets. However, the increased activity from the modern business services sector in the regions in H2 2021, coupled with the sector’s announcements of further activity in the Warsaw market and the significant scale of ongoing processes, may well have a positive impact on lease transaction volumes in the next few months,
says Tomasz Czuba, Head of Office Leasing and Tenant Representation, JLL.
Some companies are still at the stage of developing new work environment strategies and are not able to clearly estimate the demand for offices in the long term. On the other hand, we observed an increase in the number of lease transactions at the end of the year, which augurs well for the entire domestic office market,
comments Tomasz Czuba, Head of JLL’s office agency.
Growing regions and low developer activity in Warsaw
There were various reasons for these delays, such as the absence of a key tenant, prolonged administrative processes and disruptions to supply chains. These factors all had an impact on the construction process. However, most of these buildings will be delivered to the market at the beginning of this year,
explains Mateusz Polkowski, Head of Research & Consultancy, JLL.
The pause in investment decisions following the outbreak of the pandemic has meant that the pace of development in the capital’s market has slowed significantly. This allows us to expect a rather sizable gap between supply and demand over the next year. Demand for premium office space will increase as interest grows in buildings developed in accordance with ESG requirements and principles, and which offer the best technological solutions and a range of amenities to office users. These, however, will not be coming onto the market quickly enough, which is why rental rates in prime buildings are expected to rise,
comments Mateusz Polkowski, Head of the Research and Consultancy Team at JLL.
Warsaw primarily attracted investors
Prime buildings continued to attract investors throughout the year, primarily in Warsaw. These are predominantly well-located A-class buildings that guarantee long-term income and a stable lease structure. The most interesting transactions that were finalised in 2021 included the sale y Echo Investment’s sale of its Warsaw Brewery Malthouse Offices (Biura przy Warzelni) in the Warsaw Brewery complex in Wola. The facility was acquired by Deka Immobilien for EUR 152.3 million. In the regional markets, the biggest transaction was the acquisition of the Buma group's portfolio by Partners Group. The value of the purchase of the facilities in Kraków and Wrocław totalled over EUR 200 million. The bullish sentiment that investors displayed at the end of the year, looks set to continue in 2022. Transactions already finalized in January allow us to assume that the current year has the opportunity to become one of the office market’s best ever for total transactions value,
concludes Marcin Sulewski, Head of Office Investment, JLL.
[1] Kraków, Wrocław, Tri-City, Poznań, Katowice, Łódź, Lublin i Szczecin
