In Q3, 121,700 sqm of modern office space was delivered to the market. In Warsaw, one project was completed, while in regional cities the highest level of development activity was recorded in Kraków and Katowice.

The vacancy rate for office projects in the nine major markets in Poland decreased to 12.9% compared to 13.4% at the end of Q2 2016. The level of commercialisation in newly delivered investments is 54%.

Base and effective rates remained stable. Average rents in Warsaw ranged from EUR 12 to EUR 22/m²/month, while in regional cities rates ranged from EUR 10 to EUR 16.5/sqm/month.

Supply

The latest investment, which in the last quarter was delivered to the Warsaw office market, is the first phase of the West Station complex. The office building is located outside the centre in the South West zone and has 28,700 sqm. It is worth noting that from January to September in Warsaw seventeen new projects were completed with a total leasable area exceeding 378,000 sqm, which is a record compared to previous years. In recent quarters the largest office projects in the city were delivered to the market: Warsaw Spire (Tower) – 59,000 sqm and Q22 - 46,400 sqm.

During the period under analysis, regional markets were characterised by an increase in new office resources comparable to previous quarters. Developers delivered 93,000 sqm of modern space in regional markets, the largest completions were recorded in Kraków (34,600 sqm) and in Katowice (24,500 sqm).

The largest projects delivered in Q3 2016 were CH2M (14,200 sqm) in Kraków, Maraton A (13,200 sqm) in Poznań and two projects in Katowice - Silesia Star II B (12,400 sqm) and A4 Business Park III (12,100 sqm). Since the beginning of the year 46 office projects with a leasable area of nearly 315,000 sqm have been completed in regional markets.

Demand

The total volume of transactions signed between Q1 and Q3 2016 in Warsaw amounted to 529,400 sqm. Most contracts were signed in the Upper South (104,700 sqm), South West (110,500 sqm), City Centre (85,900 sqm) and Fringe (96,700 sqm) zones. Gross demand in Q3 2016 in Warsaw amounted to 170,600 sqm.

In Q3 2016, demand for office space in regional markets reached 133,900 sqm. Similarly to the first half of the year, the highest level of activity was recorded in the three largest markets: Kraków (39,600 sqm), Wrocław (26,300 sqm) and Tricity (23,300 sqm). 

Vacant space

The vacancy rate for Warsaw fell slightly to 14.6% (against 15.4% in Q2 2016). The amount of vacant space decreased in most zones in Warsaw. In the city centre, the vacancy rate amounted to 17.1%, while in non-central locations it stands at 13.5%.

In regional markets, the lowest vacancy rate was recorded in Kraków (6.3%) and Łódź (9.3%). In other cities, the vacancy rate amounted to over 10%. The highest availability rate of office space is currently in Katowice (15.5%) and Szczecin (14.7%).

Prognosis

Currently, 1.45 million sqm of new office space in Poland is under construction. Warsaw is the largest market, where over 600,000 sqm is in the implementation phase. In the current year, we expect the completion of at least four office projects, while next year over 320,000 sqm of new offices are planned.

In terms of new investments in regional markets, Kraków is the leader with 284,000 sqm modern office space under construction. Completion of 70% of this supply is planned for next year. The other regional markets with high development activity are Wrocław (151,000 sqm) and Tricity (145,000 sqm). 

Due to the high construction activity, the level of available office space will gradually rise. This trend will continue in subsequent quarters for most major markets.

“The lease terms in the near future will remain stable. However, in the long term in markets that are characterised by high development activity we will observe a fall in average base rents. Building owners are offering a richer package of incentives for tenants, which translates into lower effective rates”, said Paweł Skałba, Partner at Colliers International, Director of Office Agency.

Colliers summs up the office market in H1

Paweł Skałba