Poland New supply stagnates as tenants rethink strategies

Office developers have significantly curtailed construction activity in recent months, adding just under 124,000 sqm of new office space to Poland’s regional city markets since the beginning of the year. Despite stable occupier demand, development activity slowed due to persistently high vacancy rates. Office projects developed over the past three years have remained limited in scale, with only a handful of new office buildings delivered.

The Q4 of 2024 saw several new office completions, the largest being Cavatina Holding’s Grundmana Office Park A, spanning 20,600 sqm, in Katowice. The next largest were the 9,700 sqm Medyczna Complex in Krakow, developed by Elite GPS, and Aleja Architektów 7 with 6,000 sqm of office space in Wrocław, delivered by Entire M. BNP Paribas Real Estate Poland notes that some developers were forced to put ongoing projects on hold due to low pre-let levels which prolonged the commercialisation process for developments under construction and made securing funding more challenging.

Market data for the Q4 of 2024 indicates a rebound in office demand across Poland’s regional cities. Total leasing activity in the three months to December 2024 hit 220,000 sqm, up by 4 pct from the previous quarter and by 5 pct year-on-year. Meanwhile, office take-up for the whole of 2024 reached nearly 714,000 sqm – on par with 2023’s total of 740,500 sqm.

Office leasing activity from October to December 2024 was dominated by renewals which accounted for 51 pct of the total take-up, signifying that tenants are temporarily opting to stay in their current locations due to high fit-out costs. By contrast, those choosing to relocate tend to favour the newest office developments.
Małgorzata Fibakiewicz, senior director, Office Agency, BNP Paribas Real Estate Poland

The largest transactions of the Q4 of 2024 included the renewal of a confidential tenant’s lease of over 14,000 sqm at Tertium Business Park II in Krakow and the extension of the over 10,000 sqm agreement by State Street Bank International at Kraków’s Kazimierz Office Center. New leases saw a confidential tenant take 6,600 sqm at Ocean Office Park B in Krakow, with a pre-let signed for 8,900 sqm at .Punkt in Gdansk. In addition, the Chamber of Fiscal Administration secured 6,400 sqm at Bronowice Business Center 11 in Kraków under an owner-occupation transaction. Notably, IT companies remained the most active tenants in 2024, accounting for 27 pct of total gross take-up across regional cities.

At the end of December 2024, office availability in Poland’s eight key regional cities stood at 1.2 mln sqm, equating to a vacancy rate of 17.8 pct. This marked an increase of 0.5 pp from the previous quarter and 0.3 pp year-on-year. The high vacancy rate is stalling development activity. Older office buildings – those over 10 years old – with significantly higher levels of unoccupied space are increasingly being taken off the market for refurbishment work, often involving repurposing.

Vacancy rates varied by city at the end of 2024, with the lowest in Szczecin (7.7 pct) and the highest in Katowice (23.2 pct) and Łódź (22.7 pct). Wrocław and Krakow recorded vacancy rates of around 20 pct – 19.3 pct and 19 pct respectively, while unoccupied office space accounted for less than 14 pct of total stock in Tricity, Poznań and Lublin.

According to BNP Paribas Real Estate Poland’s report, office consolidations and optimisations in prime office buildings continue to dominate on the market. Fit-out projects focus on maximising space utilisation to meet modern requirements. Key challenges such as ensuring proper acoustics and managing hybrid work models are driving the adoption of modular solutions to enhance flexibility and reduce costs.

Resource reuse is growing in importance in refurbishment projects, with this shift driven by economic factors and the need to respond to ESG requirements. Although sustainable solutions are increasingly being viewed pragmatically, they remain an important part of corporate strategies. The green shoots of market recovery can be attributed to stricter regulations on remote working and corporate investments funded under the National Recovery and Resilience Plan. It remains to be seen in the coming months whether these investments will lead to long-term growth.
Jan Pawlik, Workplace Management Director, ISS