The Polish office market has witnessed two major trends over the past 12 months, according to experts at Colliers – the lowest volume of new space in history and a 16% increase in the vacancy rate. They also predict changes that the sector is likely to see in 2024. A key factor influencing the market will continue to be hybrid work, resulting in a reduction in rental space by 10-25%. In the coming months, the vacancy rate and rental prices are expected to stabilize. There is increasing pressure to implement ESG regulations, and intelligent solutions that enhance productivity, collaboration, and promote health in the workplace are gaining importance.
Top events in the Polish office market in 2023:
1. Historically low supply of new offices in Warsaw
In 2023, only about 60,000 square meters of office space hit the capital’s market – the lowest volume in history. A slowdown in developer activity was also noted in some regional markets, such as Gdansk, Katowice, Lodz, and Poznan. Factors such as high inflation, financing costs, rising prices of construction materials, land, utilities, especially energy, and wages contributed to this.
2. Increase in the vacancy rate
In 2023, most regional markets saw an increase in unused office space. Overall availability in the eight major markets increased by 16%, reaching 1.15 million square meters of office space. In Warsaw, this rate was 10.6%, compared to 12.1% in the same period in 2022.
3. Change in tenant activity patterns
As a result of most companies adopting flexible working rules, the average size of transactions in the office sector fell by 20-30%. However, companies are more willing to secure office space for a longer period.
4. Comprehensive designing
The shift to a hybrid work model prompted property owners and tenants to more consciously determine their needs in terms of office space.
5. Technologies in demand
In the process of adapting to ESG regulations, companies are looking for office properties with green certificates or the potential for eco-friendly modernizations.
Forecasts for 2024:
1. Further development of hybrid workplaces
Like in 2023, a decrease in the office space by companies implementing a hybrid work model (10-25%) will continue. At the same time, these companies will further integrate technology integration.
2. Stabilization of vacancy rates
Forecasts show that after a period of increasing vacancy rates on most regional markets in 2023, the volume of vacant office space can be expected to stabilize in the coming quarters.
3. Interest in intelligent solutions
The evolution of the hybrid work model increases tenant demand for intelligent technology solutions in office buildings.
According to Izabela Kapil, Director of the Owner Representation Department in the Office Space Department at Colliers, on mature office markets, innovative solutions have a chance to significantly change the situation of aging office buildings and increase their competitiveness in the market. Older buildings can be renovated and adapted to modern standards without the need for extensive renovations.
The growing importance of ESG criteria will influence the increase in interest of owners and tenants in green (LEED, BREEAM), wellbeing (WELL, Fitwel) and technological (SmartScore and WiredScore) certificates for new and modernized buildings.
4. Stabilization of office rental rates
The passing year 2023 brought an increase in base and effective rents. Also in 2024, a slight pressure on the increase in rental rates can be noticeable on the largest markets.
