Regional office markets in Poland – Q3 2022
As a result of low level of developer activity and the current situation, a new supply gap is expected in Poland's largest office markets, outside of Warsaw, from 2024.
At the end of Q3 2022, nearly 560,000 m² was under construction, most of which will hit the market by the end of 2024. It is likely that not all of these projects will be completed on time, and some will even be temporarily suspended due to the lack of a key tenant. As a result of this level of developer activity and the current situation, a new supply gap is expected in Poland's largest office markets, outside of Warsaw, from 2024.
Only two developments were delivered to the regional office markets in Q3 2022: Quorum Office Park D (16,200 m²) and L'Uni (4,000 m²) - both buildings are located in Wrocław.
On a quarterly basis, a gentle slowdown in tenant activity was noticed. After a very good first half of the year, in which demand for offices amounted to more than 340,000 m², Q3’s total stood at 106,300 m².
At the end of September 2022, the vacancy rate for the eight major regional markets stood at 15.2%. The index remained at a comparable level to the previous quarter, but was still 1.7 p.p. higher than the same period in 2021.
After an increase in H1 2022, prime rents remained stable over the third quarter. The highest rates among the main regional markets were registered in Kraków (€ 14-16 / m² / month), Wrocław (€ 14-15.5 / m² / month) and the Tri-City (€ 13.5-15.5 / m² / month).
As of the end of September, total office investments in Poland stood at €1.8 billion (45% in regional markets), exceeding the full-year volume of the previous year. As of the end of Q3, prime cap rates in Kraków and Wrocław, which remain the core regional cities, are currently at approx. 6.00%, on a five-year lease agreement basis.