The office market in regional cities (Krakow, Wroclaw, Tri-City, Katowice, Lodz, Poznan, Szczecin and Lublin) is adjusting to changing conditions. The large availability of space (average 17.8%) leads tenants to expect greater flexibility in lease negotiations from landlords, while developers are reducing their activity (120,000 sqm of new supply brought to use in 2024). Despite challenges, gross demand remains stable (710,000 sqm, -5% YoY), with office building owners focusing on improving building standards and introducing flexible leasing models. AXI IMMO, the largest Polish advisory company in the commercial real estate market, presents a report summarizing the situation on the eight largest regional office markets in Poland.
Supply slowdown – developers acting cautiously
The total resources of modern office space in regional cities currently amount to 6.78 million sqm (+2% YoY). The scale of new investments is clearly decreasing – 120,000 sqm were put into use in 2024 (-56% YoY). The largest regional markets remain Krakow, Wroclaw, Tri-City with shares in the total office resources in the Regions at 27%, 20% and 16%, respectively. Among the largest completed projects were investments by Cavatina – Grundmana Office Park A in Katowice (20,700 sqm) and Quorum Office Park A in Wrocław (18,200 sqm), while Vastint delivered B10 office building (14,100 sqm) to the Wrocław market. There are currently 230,000 sqm of office space under construction, with Krakow and Poznan being the dominant markets. High levels of vacant space mean that developers are starting to act more cautiously. The average vacancy rate in regional cities is 17.8% (+0.3pp YoY). The largest share of free space was noted in Katowice (23.2%), while Szczecin remains the market with the lowest vacancy rate (7.7%).
Emilia Trofimiuk, Research Manager, Market Analysis and Research Department, AXI IMMO Group, explains: “Decisions to start new investment projects are taken with great caution. The commercialization of them at the preparation stage will be a key factor – before a project enters the implementation phase, owners will try to secure a stable level of leasing. Meanwhile, the high availability of office space favors tenants and increases their negotiating opportunities. Building owners are adapting their offers by proposing more competitive lease conditions and investing in modernization and further amenities for tenants in their properties.”
Demand – Lease Extensions a Key Trend
In 2024, tenant activity in regional cities was 710,000 sqm (-5% YoY). The structure of transactions shows a clear increase in renegotiations and extensions of contracts (51%), at the expense of new contracts (41%). The most office space was rented in Krakow, Wroclaw and Tri-City in 2024, with their share in total demand in the Regions amounting to 37%, 21% and 16%, respectively. Subleasing remains a popular trend, allowing companies to optimize rental costs. The IT and business services sectors continue to dominate in the tenant structure. The largest new transaction of 2024 in regional cities was the renting of 10,100 sqm by Volvo Tech Hub in Brain Park C in Krakow.
Stable rents, rise in operating costs
Asking rents in most buildings in regional cities remain stable at 9.00-17.80 EUR/sqm/month, with the highest rates recorded in Krakow and Poznan. However, operating costs have increased, ranging from 9.00 to 36.80 PLN/sqm/month. The increases in operating costs result from rising building maintenance and energy costs.
Monika Rykowska, Director of Market Analysis and Research Department, AXI IMMO Group, summarises: “Forecasts for 2025 point to moderate developer activity – regional markets will receive approx. 160,000 sqm of new office space. Decisions on further investments will be based on the level of pre-lease and market demand. On the demand side, we expect that tenants will continue to focus on optimizing the space they occupy, while also caring for a high office finishing standard and its design. The importance of flexible formats is also growing – both in the coworking model and serviced offices, managed by an external operator or building owner”.
Source: https://managerplus.pl/rynek-biurowy-w-miastach-regionalnych-deweloperzy-ostroznie-podchodza-do-nowych-inwestycji-32475
