In its latest report, Savills, a real estate advisory firm, summarizes the first half of the year on the office market in Krakow. Despite the challenges associated with the growing vacancy rate and a significant decline in developer activity, the Krakow office market shows signs of stabilization and is seeking perspectives for further development.
By the end of June, the total supply of modern office space in Krakow amounted to 1.82 million sq m, making it the largest regional office market in Poland. In the city center, there is 434,200 sq m of space (24% of total supply), emphasizing its importance as a key office area. In the first half of the year, 14,400 sq m of modern office space was leased, a decrease of 65% compared to the same period last year. The new supply was wrapped up in two projects: Brain Park C in the city centre and Roko Office Point in the southeastern zone. A positive sign is the 85% occupancy rate recorded in the buildings put to use.
By the end of the first half-year, there were 44,900 sq m of office space under construction in Krakow across six projects, representing a 54% decrease on a yearly basis. Over 70% of this space is located in the city center, with the largest project, WITA, being carried out by Echo Investment. The developer has planned 26,700 sq m of space in the urban residential-commercial complex, which will be set up as workspaces.
Despite the challenges, the Krakow office market has seen an increase in tenant activity – the total level of occupancy stood at 93,500 sq m, representing a year-over-year increase of 13%. The highest tenant activity took place in the southeastern and city center zones, where 24,400 sq m and 23,800 sq m of office space were rented, respectively.
“Krakow remains one of the most important office centers in Poland. Despite the increase in the vacancy rate to just over 20%, we see stable demand for class A office spaces. In the city center, the vacancy rate is at the lowest at 11.9%, indicating that tenants still prefer well-located and high-quality offices. New projects currently under construction and stable demand provide hope for further market development,” says Jarosław Pilch, Head of Tenant Representation Office Agency at Savills.
The authors of the Savills report also emphasize that, despite the challenges, the Krakow office market reported a positive net absorption of 4,100 sq m, representing a significant improvement compared to the result of 5,800 sq m for the same period last year.
In recent quarters, the Krakow office market has seen an increase in rental rates, especially for the best buildings. Asking rents for class A office space at the end of June ranged from 13.50 to 16.50 EUR per sq m per month.
“The increases in rents are driven by high inflation and rising construction costs. In addition, there is a visible trend in the market of increasing incentive packages offered by landlords, which is compensated by higher asking rents,” adds Jarosław Pilch. It is noted in the report that operating charges for well-maintained and managed properties usually range from PLN 18.00 to PLN 25.00 per sq m per month, although in some cases they can exceed PLN 30.00 per sq m.
Source: https://managerplus.pl/krakowski-rynek-biurowy-w-pierwszym-polroczu-2024-wyzwania-i-perspektywy-52488
