Office market expected to remain stable

The office market in Polish regional cities continues its strong momentum including Katowice. In 2016, the volume of new supply in the city will be one of the highest in comparison to other regions, however the vacancy rate will be stable due to the activity of tenants, according to Cushman & Wakefield.

In the first three quarters of 2015 the total volume of lease transactions on the Polish regional office markets reached around 350 000 sq. meters. Tenants from the sector of business services, including outsourcing, shared services centers and IT, accounted for approximately 80% of that take-up. Occupier interest focused on office developments close to city centers due to improved city transport and increased employee requirements regarding office location and its immediate neighbourhood.

„Limited supply is expected to drive vacancy rates down gradually in Kraków (3,72% of vacant space), Łódź (6,13%) and Tricity (11,31%), while Katowice’s rate is expected to remain stable at 12,25%. Vacancy rates at the healthy level of around 10% point to a balance between supply and demand. Higher vacancy rates in Katowice, Wrocław and Poznań stimulate market demand, boosting transaction levels in 2016” – commented Krzysztof Misiak, partner, head of regional cities at Cushman & Wakefield.

Yields on regional office markets range from 6,75% to 8% for prime assets. The most liquid markets such as Kraków and Wrocław offer prime yields of less than 7%, while in other cities such as Łódź and Katowice yields usually stand at more than 7,5%.

According to Cushman & Wakefield’s data, most office space (130 000 sq. meters) will be delivered by the end of 2016 in Kraków, followed by Wrocław with around 95 000 sq. meters, Katowice (around 45 000 sq. meters) and Łódź (around 45 000 sq. meters). Approximately 20 000 sq. meters of new office space is expected to come on stream in Poznań and Tricity each. In addition, around 25-30% of office space planned for 2016 has already been let.

The most spectacular office schemes under construction include Skanska’s phase three of Silesia Business Park, the second stage of Silesia Star and the third building of A4 Business Park. All the three developments will be delivered in 2016.