Global real estate services firm Cushman & Wakefield has summarized the first quarter of 2023 and trends shaping the Polish office market. While development activity in the core office locations continues to slow, occupier demand appears to be recovering, particularly in regional cities. Prime office rents in central locations are, however, on an upward trajectory.
TAKE-UP: regional cities are reporting an upturn in demand
Occupier activity in Poland’s regional cities hit 175,000 sq m, 12% above last year’s quarterly average. This result indicates a gradual recovery in office demand in the largest regional markets,
comments Vitalii Arkhypenko, Office Market Expert, Cushman & Wakefield.
SUPPLY: high construction costs impacting development activity
Poland’s office development pipeline has shrunk significantly over the last three years. This is a notable trend especially in Warsaw, where only around 181,500 sq m[2] is underway. Office stock under construction in regional cities amounts to approximately 410,000 sq m, marking more than a twofold decrease from the pre-pandemic 850,000 sq m. This slowdown is due to high office construction and fit-out costs and the overall economic downturn in Poland and globally,
says Katarzyna Lipka, Head of Consulting and Research, Cushman & Wakefield.
RENTS: upward pressure on rents continues
An upward trend in rents which began in early 2022 continued throughout the first quarter of 2023. We have observed that projects in the pipeline are experiencing the strongest upward pressure on rents,
says Jan Szulborski, Office Market Expert, Cushman & Wakefield.
Office market trends
Demand in regional cities is recovering despite significantly reduced requirements for office space reported by the largest employers. This is partly due to a growing demand from the flexible office sector. We are seeing activity from tenants pursuing high-margin projects in such areas as modern technologies, finance and engineering. Looking ahead, we expect rental growth to continue amid stagnation in supply in some cities and a more pronounced polarization between office locations in the coming years,
comments Michał Galimski, Partner, Head of Regional Markets, Cushman & Wakefield.