POLAND Polish office market surviving but set for a correction – C&W
Office & mixed-use developmentGross take-up, however was down by 7 pct on the same period in 2019. And the office investment volume fell by 21 pct compared with the same period last year. The vacancy rate for the cities came to 8.9 pct in Q2 2020.
At the end of H1 2020, the total office stock of Poland’s nine largest markets (Warsaw, Kraków, Wrocław, the TriCity, the Katowice conurbation, Poznań, Łódź, Lublin and Szczecin) approached 11.5 mln sqm. Warsaw’s new supply in H1 amounted to 106,800 sqm delivered in five office buildings, while regional cities saw a total of 175,600 sqm completed across 15 projects; the largest completions included Olivia Prime B in Gdańsk, High 5ive in Kraków, the first building of the Face2Face complex in Katowice, and the Giant Office in Poznań.
Although no legislation limiting construction work was introduced during the lockdown, the completion of some projects was postponed from the second to the third quarter of 2020 due to the more protracted administrative procedures, limited labour availability and potential disruptions to supply chains.
Jan Szulborski, a senior consultant at Cushman & Wakefield
At the end of June, the development pipeline included 106 projects totalling 1.6 mln sqm of floor space, most of which was under construction in Warsaw (28), Kraków (21), the TriCity (17), Łódź (14), and Katowice (13). Most projects are on schedule, but a supply gap is, however, expected on most markets in 2022 and 2023 since decisions to begin new projects have been mothballed. Projects fully financed using a company’s own funds may be an exception though.
Office take-up reached a total of 669,600 sqm in H1 2020, down by 5 pct on the same period in 2019, with most transactions having started in the pre-pandemic environment. The largest deal on the Warsaw office market was the PZU Group’s pre-lease of 46,500 sqm in Generation Park Y, while in regional cities it was the renegotiation of ABB’s 20,000 sqm lease in Axis in Kraków.
The overall vacancy rate was pushed up by the worsening economy 0.6 pp over Q2 to 8.9 pct. In addition, there was a notable increase in sublease listings on the market. Cushman & Wakefield estimates that at the end of Q2 2020 there was almost 120,000 sqm of office space available for sublease.
Prime monthly headline rents, however, remained unchanged at EUR 24 per sqm in Warsaw city centre and at EUR 12–15 in regional cities. Rents remained flat as some deals were closed on pre-pandemic terms, according to Cushman & Wakefield.
A correction to commercial conditions is likely in the coming quarters if the demand for office space weakens and the economy remains stuck in low gear.
Katarzyna Lipka, the head of consulting and research at Cushman & Wakefield
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