Demand for office space decreased by 41% in Q1 2021

The demand for office space in Poland has reached 208,000 sqm in Q1 this year, according to JLL data. This result is 41% lower compared to the same period last year. The total office stock in Poland amounted to 11.9 million m2 at the end of Q1 this year.

"In the largest office markets outside Warsaw [in Kraków, Wrocław, Tricity, Katowice, Poznań, Łódź, Lublin, Szczecin], the demand in the first quarter was 98,300 m2, and tenants were most active in the Tri-City, Kraków and Wrocław. Interestingly, 45 % of total activity in regional markets was renegotiation of contracts, demand in the first quarter was 98,300 m2, and tenants were most active in the Tri-City, Kraków and Wrocław. Interestingly, 45% of total activity in regional markets was renegotiation of contracts "- according to the director of JLL regional markets Karol Patynowski.

The demand for offices in regional markets was generated by technology companies, which accounted for 36% of the transaction volume outside Warsaw. The business services sector (17%) and the financial sector (11%) were followed. Including Warsaw, the IT sector continues to lead in terms of the scale of lease (21% of total demand). The largest lease transactions in Poland included contracts concluded by a confidential tenant from the IT sector in Kraków (11,400 m2, Korona complex), Intel in Gdańsk (9,800 sqm, Tryton Business House) and the Public Transport Authority in Warsaw (9,800 sqm, Fabryka PZO), according to JLL data.

"Although many companies in Poland withhold their final decisions regarding changes in their office portfolio due to the pandemic, we see a certain revival in this area and strategy shaping in a new norm. For example, in the last few months, as JLL, we have acquired new projects in the area of ​​tenant representation. on about 70,000 sqm, of which about 25-30% are inquiries from companies still absent in Poland, mainly from the business services sector, IT or the medical industry or organizations extending the scope of activities and services "- added Patynowski.

One of the most important trends in Poland are sublets, used by companies to optimize their real estate portfolio. In Warsaw, the offer includes approximately 120,000 sqm for sublet, and 167,000 sqm outside of it, mainly in Wrocław, Kraków and the Tri-City.

From January to March, a total of 213,000 sqm (over 167,000 in Warsaw and 46,000 sqm outside Warsaw). Among the regional cities, the largest amount of space was completed in the Tri-City (25,000 sqm in facilities such as Palio A) and Kraków (21,000 sqm, including Equal Business Park D). As a result, at the end of Q1 2021, the total office stock in Poland amounted to 11.9 million sqm, of which 5.8 million sqm was allocated to the largest regional markets, the report stated.

"Currently, about 1.2 million sqm is under construction in Poland - the least since 2013. In Warsaw it is 420,000 sqm, which is the lowest result since 2010. Interestingly, however, the activity of developers on regional markets remains strong - 800,000 sqm at the end of Q1 2021, of which an impressive 200,000 sqm is in Katowice "- emphasized Ewa Grudzień, senior market analyst at JLL.

The largest investments currently under construction outside of Warsaw include: Global Office Park (Cavatina) and .KTW II (TDJ Estate) in Katowice, MidPoint 71 (Echo Investment) in Wrocław, Nowy Rynek D & E (Skanska Property Poland) and Andersia Silver (Von der Heyden Group) in Poznań, as well as 3T Office Park (SGPM) in the Tri-City.

"Investor activity in the office sector remains high, despite the pandemic. In Q1 2021, the value of investment transactions amounted to approximately EUR 605 million, of which nearly EUR 360 million was in the main office markets outside Warsaw. This is the best opening of the year in cities in history. Such a spectacular result was achieved thanks to the sale of the portfolio of buildings in Kraków and Wrocław by the Buma Group to Partners Group for over EUR 200 million Other significant transactions include the sale by Torus of the Alchemia Neon office building in Gdańsk to the DWS fund for over EUR 80 million, and takeover of Brama Portowa in Szczecin by FLE from Vastint "- said Tomasz Puch, director of the Capital Markets Department of JLL.

Due to the moderate level of new supply in the first three months of 2021, the average vacancy rate for the eight regional markets remained relatively stable at 12.6%, compared to 12.7% in Q4 2020. In Poland, the vacancy reaches 12%. At the end of Q1 2021, the highest rents outside Warsaw were recorded in Kraków (EUR 14-15.5 / sqm / month), and the lowest in Lublin (EUR 10.5-11.5 / sqm / month). In the coming quarters, rents for prime office space will remain stable, while the increase in new supply and the accelerating trend of relocation of tenants to better quality buildings will put pressure on lowering rental rates for B-class office space, according to the report.

Source: JLL and ISBnews