More than 1 million sq m of office space under construction across Poland – Cushman & Wakefield summarizes Q2 2021 on the Polish office market

• At the end of Q2 2021, the total office stock of Poland’s nine largest office markets surpassed the 12 million sq m mark, having maintained a 7% growth rate.
• The largest lease transaction on the country’s regional city markets was the renegotiation and expansion for 19,500 sq m in A4 Business Park III in Katowice by Rockwell Automation.
• The overall vacancy rate stood at 12.9% at the end of Q2 2021.
• Sublease availability remains high due to the economic uncertainty caused by the outbreak of the pandemic.

Supply: the office development pipeline stands at 1.16 million sq m

In the first half of 2021, new supply in Warsaw amounted to more than 226,000 sq m delivered across ten office projects. The largest completions included office towers: Warsaw Unit, Skyliner and Generation Park Y. Regional city markets reported the same number of new office developments but due to the smaller size of these projects the total regional supply reached close to 126,500 sq m, over 40% less than in the capital. The largest office completions were Nowy Rynek D in Poznań (35,800 sq m, Skanska) and Palio Office Park A in Gdansk (16,500 sq m, Cavatina).

“Cushman & Wakefield estimates that 420,000 sq m will be built across Poland by the end of 2021, followed by approximately 545,000 sq m in 2022. Given the current pandemic situation and subdued occupier activity, we expect a limited number of new projects coming onto the market in 2023-2024,” says Vitalii Arkhypenko, Junior Consultant, Consulting & Research, Cushman & Wakefield.

Vacancy rate up

According to global real estate services firm Cushman & Wakefield, high supply levels and the suppressed occupier activity since the onset of the pandemic pushed the overall vacancy rate up to 12.9% at the end of Q2 2021, representing an increase of 0.7 pp quarter-on-quarter and 3.9 pp year-on-year.

“Sublease availability remains high due to the uncertainty caused by the outbreak of the pandemic. Experts of Cushman & Wakefield estimate that at the end of Q2 2021 there was close to 147,000 sq m of office space marketed for subleasing in Warsaw and 141,000 sq m in regional cities, down by 3,000 sq m compared to the previous quarter,” adds Katarzyna Lipka, Head of Consulting & Research, Cushman & Wakefield.

Renegotiations continue to account for a large share of take-up

In the first half of 2021, regearing accounted for a substantial proportion of the leasing volume at 43%, while new leases for office space in existing buildings and those underway made up 51% of all deals, followed by expansions (6%).

Amid a slowdown in occupier activity, total take-up came to 513,500 sq m in the first half of 2021, down by 22% on the same period last year. Weaker demand is largely due to the cautious approach adopted by tenants toward relocation and leasing additional space on account of the uncertainty over the economic outlook.

Headline rents remain flat

Following a downward rental correction in the early months of the pandemic, prime headline rents in Warsaw now hold firm, standing at EUR 23.00–25.00/sq m/month in the Centre and at EUR 13.50–16.50/sq m/month in non-central locations. Prime headline rents in regional cities also remained unchanged at EUR 12.00–15.00/sq m/month. Looking ahead, headline rents are expected to remain stable in the coming quarters, supported by a gradually improving pandemic situation and a recovery in leasing activity.

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Author:

Cushman & Wakefield

Last Updated on October 15, 2021 by Anastazja Lach