Key findings:

• The total office stock of Poland’s nine largest markets expanded by 6% year-on-year in H1 2020.
• Gross take-up was down by 7% on the same period in 2019.
• The office investment volume fell by 21% compared with the same period last year.
• The all-market vacancy rate stood at 8.9% in Q2 2020.

Supply

In H1 2020, the total office stock of Poland’s nine largest markets (Warsaw, Krakow, Wrocław, Tricity, the Upper Silesian Metropolis, Poznań, Łódź, Lublin, and Szczecin) reached close to 11.5 million sqm, up by 6% on the same period in 2019.

Warsaw’s new supply in H1 2020 amounted to 106,800 sqm delivered in five office buildings. Regional cities saw a total of 175,600 sqm completed across 15 projects; the largest office completions included Olivia Prime B in Gdansk, High 5ive in Krakow, the first building of the Face2Face complex in Katowice, and the Giant Office in Poznań.

“Although no legislation limiting construction works was introduced during the lockdown, completion of some projects was postponed from the second to the third quarter of 2020 due to protracted administrative procedures, limited labour availability and potential disruptions to supply chains,” says Jan Szulborski, Senior Consultant, Cushman & Wakefield.

At the end of June 2020, the development pipeline included 106 projects totalling 1.6 million sqm of floor space, most of which was under construction in Warsaw (28), Krakow (21), Tricity (17), Łódź (14), and Katowice (13). Most projects are running to schedule, but a supply gap is, however, expected on most markets in the years 2022-2023 as decisions to commence new projects have been mothballed. Projects fully financed using own funds may be an exception though.

Take-up

Office take-up hit a total of 669,600 sqm in H1 2020, down by 5% on the same period in 2019, with most transactions having been commenced in the pre-pandemic environment. The largest deal on the Warsaw office market was the PZU Group’s pre-let of 46,500 sqm in Generation Park Y, and in regional cities – the renegotiation of ABB’s 20,000 sqm lease in Axis.

Vacancies

The deteriorating health of the economy pushed the overall vacancy rate up by 0.6 pp quarter-on-quarter to 8.9% at the end of Q2 2020, albeit still lower year-on-year compared to where it was in the same period in 2019. In addition, due to the economic uncertainty caused by the outbreak of the COVID-19 pandemic, there was a notable increase in sublease listings on the market. Cushman & Wakefield estimates that at the end of Q2 2020 there was nearly 120,000 sqm of office space available for sublease, which volume is not included in the statistics for available office space.

Rents

Despite the worsening sentiment of market participants, prime headline rents remained unchanged at €24/sqm/month in the very heart of Warsaw, and at €12-15/sqm/month in regional cities. Rental rates remained flat as some deals were closed on pre-pandemic terms, say experts of Cushman & Wakefield.

“A correction to commercial conditions is likely in the coming quarters if demand for office space weakens and the economy remains stuck in low gear,” concludes Katarzyna Lipka, Head of Consulting & Research, Cushman & Wakefield.