Tenant activity in the office market surged in the fourth quarter of 2024, with expectations for 2025 indicating a marked increase in rental transactions, including large leases exceeding 20,000 m², according to CBRE’s Head of Office Sector, Radosław Pawlak. This uptick in demand is likely to encourage investors to initiate new office projects. “In 2024, tenant activity on the office market was subdued, which led to reduced investor interest and a lack of funds willing to acquire buildings. As a result, the availability of sought-after, modern office spaces in prime locations across Poland’s largest cities has begun to dwindle. Particularly for tenants seeking large office spaces, choices are increasingly limited,” Pawlak commented. A Reversal in Market Trends The final quarter of 2024 marked a turning point, with tenant activity rising significantly and year-end transactions intensifying. This increased demand is expected to continue in 2025, spurring a noticeable rise in rental transactions, including major leases. “We’re seeing funds return to the Polish market, driven by improved financing conditions, including interest rate cuts in the eurozone. Developers have prepared land banks, setting the stage for new projects,” Pawlak noted. Recent examples of market revival include the high-profile sale of Warsaw UNIT to Swedish company Eastnine AB, one of the largest transactions in Europe. Pawlak predicts more such deals, including a growing presence of Scandinavian investors. Demand for Modern Spaces and Longer Leasing Periods The limited supply of modern office spaces, caused by reduced developer activity in recent years, is driving interest among investment funds in prime locations. At the same time, tenants are taking longer to finalize leases for newly built offices, carefully tailoring spaces to their operational needs. Current leases often span 7–10 years, reflecting the higher costs of customizing offices for specific organizational requirements. This shift aligns with changing work habits. The 2024 European Office Occupier Sentiment Survey revealed an increase in employees working from offices for three or more days a week, rising from 37% to 43% in just a year. Pawlak observed similar trends in Poland, where hybrid work patterns are shifting toward more time spent in the office. Repurposing Older Office Buildings Another trend shaping the Polish office market is the transformation of older office buildings for alternative uses, particularly those in prime locations but less appealing to tenants. An example is Wrocław’s Sky Tower, which is being considered for conversion into a hotel. Such projects highlight the industry’s adaptability in maximizing the value of older properties. As the Polish office market heads into 2025, rising demand, increased leasing activity, and evolving work habits are expected to shape its trajectory, with both tenants and investors seizing opportunities in this dynamic landscape. Source: CBRE and ISBnews