In the third quarter of 2023, the office leasing sector experienced a record-breaking volume while maintaining an upward trajectory in vacancy rates. In Poland, the thriving modern business services industry remains a key driver of growth, and prime office rents continue to sustain elevated levels.
New office spaces
According to the "At A Glance – Regional Office Markets in Poland, third Quarter 2023" report, the cumulative modern office space across the eight major regional markets, excluding Warsaw, surpassed 6.6 million sqm. During the third quarter alone, 119,700 sqm were added, constituting 51% of the total office space delivered by developers since the beginning of the year.
Noteworthy increases in new supply were observed in Wrocław (36%), Katowice (22%), and Krakow (20%). Key completed projects include Craft in Katowice (26,700 sqm, Ghelamco), Nowa Renoma in Wrocław (23,400 sqm, Globalworth), Infinity in Wrocław (19,700 sqm, Avestus), and Kreo in Krakow (24,000 sqm, Ghelamco). The construction of Intel HQ in the Tricity (23,000 sqm, Intel) also concluded. Developers are set to deliver over 130,000 sqm by the end of 2023, potentially reaching the highest quarterly supply for the entire year.
Record leasing quarter
The volume of leased office space reached a new record high in the third quarter of 2023. The total transaction volume increased by more than 85% compared to the same period last year. Between July and September, agreements were signed for over 198,400 sqm, representing approximately 37% of the total demand recorded in 2023. The IT sector led in demand, while the manufacturing industry showed the least activity. The cities with the highest office space demand were Tricity (29%), Krakow (19%), and Wrocław (17%). The total gross demand for the first three quarters of 2023 exceeded 530,000 sqm, marking an 18.5 percentage point increase compared to the same period in 2022.
Analyzing the average volume of lease transactions concluded in the last quarter of the year over the past five years, we can assume that tenant activity for the entire 2023 will be close to their record activity recorded in 2019. However, we still observe caution among tenants and a desire to optimize the occupied office space. Tenants carefully analyze their needs, seeking energetically and environmentally efficient buildings and aiming to optimize the costs of finishing the space. – Dorota Mielke, Associate Director, Office Agency, BNP Paribas Real Estate Poland.
Vacancy rate - upward trend
As of the end of September 2023, over 1.1 million sqm of office space were available for rent across the eight analyzed markets, resulting in a vacancy rate of 17.3% (an increase of 0.5 percentage points quarter-on-quarter and a 2.1 percentage point increase compared to the same period in 2022). Katowice recorded the highest vacancy rate at 23.2%, while Szczecin had the lowest at 5.2%. In contrast, the office market in Łódź, which had the highest vacancy rate since the second quarter of 2022, saw a decrease of 0.8 percentage points quarter-on-quarter during July-September 2023.
Rent levels remain high
Rents for prime office spaces on the key regional markets persist high, ranging from 16.00 to 17.00 EUR per square meter per month. Given the substantial availability of office space in existing and under-construction buildings, rental rates will remain stable. However, owners of buildings offering modern technological solutions and aligning with ESG principles are likely to be less inclined to negotiate rental rates.