Office market booms in Kraków

With an office stock level of over 1 mln sqm, Kraków remains the largest regional market in Poland. The city is growing quickly and is attractive to both developers and tenants. This has resulted in a high level of investment in the city with a large amount of leased office space.

Currently, there are 26 buildings under construction in Kraków, which will deliver almost 270,000 sqm of modern office space in total. Around 170,000 sqm of this space will be delivered by the end of the year. The number of new developments in recent years has been increasing rapidly, making Kraków one of the cities in Poland with the youngest average age for its office buildings. More than half of the existing assets are no more than five years old.

Such a large office stock on the Kraków market is beneficial for tenants, who used to have a very limited choice in terms of space and location. Colliers’ data from 2017 and in the first quarter of 2018 shows that Kraków had a vacancy rate of 9 pct, giving tenants a better negotiation position and a wider choice. Competition on the market ensures the high quality of office space and the attractiveness of what is on offer. Tenants can also expect additional, financial incentives and contributions towards the fit out. Rental rates are also subject to negotiation; however they remain at a sable level in the city.

Financial terms are no longer a key factor in choosing a new office. Companies are well aware that on today's labour market, modern office space is becoming a recruitment tool, which is essential for the acquisition of talent and building up a company’s brand. What are also important, are a building’s surroundings with local access to retail and to public transport, the standard of the office building, facilities for cyclists, technology that improves the comfort of the working environment and modern design. Interior designers are ever more often being commissioned for office projects, which a few years ago was very rare in Kraków.

The Kraków market is still an excellent market for both developers and property owners. According to the latest Colliers data, in the first quarter of 2018, around 43,000 sqm of office space was leased, of which pre-lease transactions accounted for around 40 pct. This proves that the demand for new office space in Kraków is high.

Almost 600,000 sqm of modern office space is scheduled to be delivered to the Kraków market by mid-2021. At the same time booming economy and tightening labour market with a 20 pct increase in staffing levels forecast for companies in the business services sector and a steadily decreasing unemployment rate, which in Kraków already stands at 2.2 pct – makes the future of the market look very rosy.