RESOURCE STRUCTURE

At the end of March, the total office stock of the eight major regional cities stood at 6.76 million sqm. The most developed markets remain Krakow, Wroclaw and the Tri-City, which together concentrate 63% of the stock. Each of these cities has more than 1 million sq. m. of modern space. Katowice, Poznań and Łódź together account for 31% of the resources, while Lublin and Szczecin account for the remaining 6%.

Less than 203,000 sqm remains under construction, down 26% from a year ago. By comparison, annual average volumes from 2015-2019 reached 908,000 sqm, and from 2020-2024 – 522,000 sqm. Such a pronounced reduction in new investments may result in a further decline in available space in the coming quarters, and thus also in a reduction in leasing options for tenants.

PUSTOSTANS

At the end of March, the regions had 1.18 million sq. m. of vacant space, translating into an average vacancy rate of 17.5% (down 0.3 p.p. y/y). Five cities had vacancy rates of at least 15%, and these were Łódź (22.3%), Katowice (21.1%), Wrocław (20.4%), Kraków (14.6%) and Poznań (15.0%). Space availability was lower in the remaining cities, with the rate between 8% in Szczecin and 12.6% in the Tri-City.

– Limited supply puts landlords in a fairly comfortable position, as it potentially opens up room for rental growth in the near term. Nevertheless, with the current high vacancy rate and strong competition, successful commercialization today requires extremely active efforts to attract and retain tenants

Daniel Czarnecki, Head of Landlord Representation, Office Agency, Savills.

DEMAND AND SECTORS DRIVING THE MARKET

Despite scant new supply, demand in regional cities remained strong, reaching 176,900 sqm in the first quarter. This is 27% better than a year ago and 17% above the average for the first quarters of 2020-2024. Tenants were particularly active in Krakow (56,600 sq m) and Wroclaw (43,800 sq m). Higher gross demand than in the same period last year was also recorded in the Tri-City, Katowice, Poznań and Lublin.

Four industries – IT, business services, manufacturing and finance – generated a total of 58% of total demand. The IT sector had the largest share (18%), just ahead of business services (16%), manufacturing (14%) and finance (10%). 5% went to flex office operators, who chose to expand their business in the regions. The structure of transactions shows that almost half of the volume was accounted for by renegotiations of existing contracts (48%), while new contracts accounted for 41%. In addition, there was an 8% share of expansions and 3% of pre-leases.

– The average regional vacancy rate is still around 18%, which may give a false sense of comfort, but with historically low new supply, this “cushion” may shrink faster than it seems. Companies planning to expand or relocate should therefore book space well in advance and finalize contracts quickly to secure the best locations and terms –

Jaroslaw Pilch, Head of Tenant Representation, Office Agency, Savills.

RENTS AND OPERATING COSTS

Base rates in A-class office buildings in the regions were between EUR 12.00 and EUR 17.00/sqm/month. The highest rents are in Poznań (up to EUR 17), followed closely by Kraków and Wrocław (up to EUR 16.50). Maintenance fees, as a rule, do not exceed 37 PLN/sq.m./month, although their amount depends mainly on the efficiency of the building.

PERSPECTIVES

– By the end of 2027, developers say they will have delivered up to 475,000 sq. m. of new space. The vast majority of this space may not hit the market until the final year of the forecast. Much, however, depends on market conditions, i.e. further decline in office availability, increased tenant activity and access to financing for projects, among others –

comments Wioleta Wojtczak, Head of Research, Savills.

The current market situation favors owners of the best-located and sustainable buildings, but at the same time raises the bar for planned projects – only those of the highest standard, well connected and with confirmed demand in the form of pre-leases – will have a chance for commercialization.

Download the report: Savills MiM Office Regions Q1 2025