“Leasing activity bounced back, with tenants largely seeking offices featuring modern technologies that optimize office lease expenses and bring long-term savings,” says Anna Osiecka, Associate Director, Office Tenant Representation, Newmark Polska. “Rental rates are, however, likely to hold firm in the coming quarters as office availability remains high in both existing buildings and projects in the pipeline.”

At the end of Q4 2022, the combined office stock of Poland’s eight largest regional city markets (Kraków, Wrocław, Tricity, Katowice, Poznań, Łódź, Lublin, and Szczecin) amounted to over 6.4 million sqm, surpassing that of the capital by close to 3%. And given the regional development activity, regional cities are poised to further outpace Warsaw. Last year’s total new office supply reached 405,250 sqm, up by close to 80% on 2021 but down by almost 26% on the peak year of 2019, which witnessed nearly 547,000 sqm come onto the market.

Development activity was the strongest in the first quarter of the year, accounting for over 60% of last year’s total new supply. The largest office completions in 2022 included A1 and A2 of the Global Office Park in Katowice (55,200 sqm, Q1), .KTW II in Katowice (39,900 sqm, Q1), Midpoint71 in Wrocław (36,200 sqm, Q1) and Brain Park’s buildings A and B in Kraków (31,000 sqm, Q4).

At the end of Q4 2022, the development activity in Poland’s key regional cities was broadly unchanged over the quarter, with the total stock under construction comprising approximately 583,000 sqm, down by close to 21% year-on-year.

“The office development under construction is currently around 35% below the average for 2015-2019, when around 900,000 sqm on average came onto the market annually,” says Agnieszka Giermakowska, Research & Advisory Director, Newmark Polska. “This shows that developers remain cautious about commencing new projects, closely watching the market, especially occupier demand and the overall macroeconomic situation.”

Q4 2022 was the best-performing quarter on the core regional markets in terms of leasing activity throughout 2022, with close to 174,700 sqm of office deals, up by over 65% over the previous three months. In 2022, the total take-up in the largest regional cities surpassed 623,250 sqm, representing an almost 5% increase on 2021, with regional occupier activity gradually returning to pre-pandemic levels. Last year’s regional office take-up came predominantly from the IT and business services sectors: 26% and 19%, respectively. Manufacturing came third, accounting for 11% of the total leasing volume.

New leases accounted for 48.6% of the total regional city office take-up in 2022, followed by regearing and renewals (30.4%). The remaining 21% was spread across pre-lets (10.4%), expansions (6.2%) and owner-occupier deals (4.4%). However, regional cities – just like Warsaw – also witnessed a shift in occupier interest toward lease renegotiations and renewals which made up 40% of the total leasing activity in Q4 2022.

At the end of Q4 2022, the overall vacancy rate in the core regional office markets remained virtually unchanged since the third quarter at 15.3% (up by 0.1 pp), but edged up by 1.2 pp year-on-year. The combined office availability in the eight regional city office markets amounted to 985,100 sqm.