Poland Challenges and stabilisation

At the end of June, the total supply of modern office space in Kraków reached 1.82 mln sqm, making it the largest regional office market in Poland. 434,200 sqm of space (24 pct of the total supply) is located in the city centre, underlining the importance of this zone as a key office area. In H1, 14,400 sqm of modern office space was completed, down 65 pct year-on-year. New supply closed in two projects: Brain Park C in the city centre and Roko Office Point in the south-east zone. A positive sign is the as much as 85 pct rental rate recorded in the completed buildings.

At the end of H1, there was 44,900 sqm of office space under construction in six projects in Kraków, a 54 pct year-on-year decrease. More than 70 pct of this space is located in the city centre, with the largest project Wita being developed by Echo Investment. The developer has planned 26,700 sqm of workspace in the city's residential and commercial complex.
Despite the challenges, the Kraków office market recorded an increase in tenant activity - the total level of leases amounted to 93,500 sqm, an increase of 13 pct year-on-year. The highest tenant activity took place in the south-eastern zones and the city centre, where 24,400 sqm and 23,800 sqm of office space were leased respectively.

Kraków remains one of the most important office centres in Poland. Despite an increase in the vacancy rate to just over 20 pct, we are seeing stable demand for A-class office space. The city centre has the lowest vacancy rate at 11,9 pct, which shows that tenants still prefer well-located and high-quality offices. New projects currently under construction and stable demand give hope for further market growth.
Jarosław Pilch, head of Tenant Representation Office Agency, Savills

The authors of the report also emphasise that despite the challenges, the Kraków office market recorded a positive net absorption of 4,100 sqm, which is a significant improvement compared to the result of 5,800 sqm in the corresponding period last year.
In recent quarters, the Kraków office market has seen an increase in rental rates, particularly for the best buildings. Headline rents for A-class office space at the end of June ranged from EUR 13.50 to EUR 16.50 per sqm per month.

Rental increases are dictated by high inflation and rising construction costs. In addition, there is a trend in the market of increasing incentive packages offered by landlords, which is compensated by higher asking rents.
Jarosław Pilch

The report shows that service charges for well-maintained and managed properties typically range from PLN 18 to PLN 25 per sqm per month, although in some cases they can exceed PLN 30 per sqm.