Poland Rents remain stable, developers are cautious

At the end of the Q2 of 2024, the combined office stock of Poland’s nine largest markets amounted to nearly 13 mln sqm.

Total new office supply hit approximately 125,000 sqm, most of which was delivered in Warsaw, Wrocław and Krakow. The pace of office deliveries slowed significantly in the last three years. Although a handful of office projects broke ground in this period, development activity remains subdued. For example, there is approximately 215,000 sqm of new office space under construction in Warsaw – almost the same as in regional cities. The office development pipeline in the largest regional cities stands at approximately 210,000 sq m compared to the pre-pandemic 850,000 sqm.
Ewa Derlatka-Chilewicz, head of Research, Cushman & Wakefield

The largest office completions were Cavatina Holding’s Quorum Office Park A in Wrocław (18,200 sqm), Yareal’s Lixa E in Warsaw (16,900 sqm), the refurbishment of CA Immo’s Saski Crescent in Warsaw (15,500 sqm), and Ghelamco’s Vibe I in Warsaw (15,000 sqm).

We estimate that approximately 225,000 sqm, including office completions in the year to date, will be added to the Polish office market this year. Development activity is expected to pick up slightly in 2025, which is likely to see another 240,000 sqm come on stream. Higher supply levels are unlikely until after 2026.
Vitalii Arkhypenko, Market Analyst, Cushman & Wakefield

Total leasing activity in Warsaw in the H1 of 2024 amounted to more than 316,000 sqm, down by a mere 2 pct from the same time in 2023.

Office take-up remained largely unchanged year-on-year, which is attributed to gradual stabilization on the office rental market and a trend towards optimizing office footprints. Leasing activity in regional cities amounted to 286,000 sqm in the first six months of 2024, down by 14 pct year-on-year. Regional take-up predominantly came from the IT, service and manufacturing sectors.
Jan Szulborski, Business Development & Insight manager, Cushman & Wakefield

In the H1 of 2024, the structure of demand in Warsaw was dominated by renewals which accounted for approximately 51 pct of all deals. New leases and expansions made up 42 pct and around 7 pct respectively. Regional cities posted a similar structure of demand, with renewals accounting for a large share of take-up at 49 pct, followed by new leases and expansions making up 46 and 5 pct respectively. In the Q2 of 2024, absorption in regional cities slightly exceeded new supply.

At the end of the Q2 of 2024, Poland’s overall vacancy rate was 14.4 pct, down by 0.1 pp over the quarter but up by 0.3 pp year-on-year. Warsaw’s vacancy ratio stood at 10.9 pct, a decrease of 0.1 pp compared to where it was in the previous quarter. Of all the regional cities, Tricity and Wrocław recorded the largest drops in vacancies, with Łódź and Szczecin seeing the largest increases.

The average regional city vacancy rate was 17.7 pct. Office availability in all the surveyed markets amounted to 1.87 mln sqm, representing a 4 pct increase compared with the H1 of 2023. In the Q2 of 2024, prime office rents in Warsaw stood at EUR 22-26/sqm per month in the Centre and at EUR 13,50-16,50/sqm per month in non-central locations. Average prime office rents in central locations in regional cities were EUR 12,50-16,50/sqm per month, with new office buildings in prime locations commanding above average rental rates.

Elevated office construction, fit-out and project financing costs continue to significantly impact rental rates in projects underway. Rents in existing office buildings largely depend on the attractiveness of a building to prospective tenants, its solutions supporting ESG goals and individual market dynamics.
Ewa Derlatka-Chilewicz