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Krakow’s Thriving Office Market: Strong Demand Despite Global Headwinds

REAL ESTATEKrakow's Thriving Office Market: Strong Demand Despite Global Headwinds

According to the latest report from Newmark Polska, Krakow’s total office stock will surpass 1.8 million sqm in 2023, posting an annual growth of 5.5%. Occupier demand remains strong despite global economic headwinds. Krakow is mainly targeted by tenants from the technology, financial and modern business services sectors.

Although development activity has become noticeably more sluggish this year due to rising financing and construction costs, 97,000 sqm of new office space was delivered onto the Krakow market by the end of November 2023. The largest new projects delivered in 2023 include Building B of the Ocean Office Park (28,600 sqm, Q1), Kreo (24,000 sqm, Q3), Fabryczna Office Park B5 (14,000 sqm, Q1) and Mogilska 35 Office (13,500 sqm, Q4). This year’s total expected new office supply is unlikely to exceed 100,000 sqm and will be 4% lower than last year’s and over 39% below the average of 158,000 sqm for the years 2016-2020.

“Tenants continue to show strong interest in the Krakow office market, even though there is an increased focus on relocations and lease renegotiations – largely due to a trend towards optimisation of lease costs and a more efficient use of occupied office space,” says Patryk Kowalkowski, Advisor, Office Department, Newmark Polska.

During January-September 2023, office take-up hit nearly 121,100 sqm, the third-highest leasing volume for regional cities after that recorded in Tricity (127,100 sqm) and Wrocław (121,900 sqm). New lease agreements accounted for 56% of the total take-up, followed by renegotiations and expansions which made up 29% and 10% respectively. The business services sector, including ITO, generated 30% of the leasing volume.

“The IT sector in Krakow is growing at a rapid pace, which is translating into a growing number of jobs on offer. The number of IT job adverts in Krakow has doubled over the year on the back of the rapid expansion of the IT sector in Poland,” says Katarzyna Kucharek, Strategic Business Development Manager, Randstad.

“Kraków is a city that combines tradition and modernity, sustainability and innovation, eco-friendly investments and concern for the quality of living. Foreign investments and the growth of local business in the city show that Krakow has everything that companies expect an ideal business location to have,” says Jacek Majchrowski, Mayor of Krakow.

“Despite cost and construction challenges, developers are planning new office projects that will make the market more attractive for future tenants. Schemes in the pipeline include Nowy Format, Wita Stwosza, Tischnera Green Town and Cavatina Holding’s new project, which are expected to deliver another 150,000 sqm of modern office space. With a wide choice of offices and attractive rental rates, Krakow continues to beckon companies looking for modern and innovative solutions in office buildings,” concludes Agnieszka Giermakowska, Research & Advisory Director, ESG Lead, Newmark Polska.

Krakow offers a large variety of offices built to various specifications and commanding diverse rental rates. Average office rents are in the range of EUR 13.50-14.50/sqm/month, with prime office buildings in the most sought-after locations fetching EUR 15.50-17.50/sqm/month. Developers are, however, trying to outdo one another in delivering increasingly advanced technological and ESG innovations to ensure that their office buildings are not only modern but are also future-proofed and environmentally friendly.

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