In the coming years, administrative institutions and state-owned companies will actively stimulate the development of the domestic office market. Their influence will be significant not only through leasing space but also as a major player in the investment sphere, through modernization, as well as purchasing and selling, and constructing office properties for their own use.
Thus, the activities of state entities will have a significant impact on the evolution of the sector, including decisions related to the implementation of new projects, especially in the Warsaw market, where a supply gap is already noticeable. The activities of state entities will give investors the potential to utilize their resources and will be a determining factor in launching new projects. In Warsaw, projects awaiting realization include Drucianka Campus, Fort 7, and further stages of The Park Warsaw.
“The Polish office market is characterized by high absorption, significantly influenced recently by the demand for offices reported by the public sector. The demand for space remains at a level close to the record results before the pandemic. It is supported by the trend related to employers’ emphasis on returning to office work. This year, we expect another increase in the number of rental transactions, including large areas, which are contracted among others by state administration units and companies with state treasury shares,” informs Emilia Legierska, Transaction Director at Walter Herz.
However, while there is ample supply in regional markets, in modern buildings located in the center of Warsaw, there are no large vacant offices. This resulted in an increase in the share of pre-lease agreements in the total rental volume in the second half of 2024 in the Warsaw market.
The choice of spaces under construction, however, is not too large. In the regions, new office investments have completely stalled, and in Warsaw, several projects are under construction, including The Bridge, Studio II, Office House, Skyliner II, UpperOne, Warta Tower, and Vena.
Strategic investment decisions of the public sector
State entities are currently showing increased activity in the sector. We observe an intensifying trend related to actions towards the consolidation and modernization of administrative spaces by public units.
Last year, decisions were made to move headquarters to modern spaces by entities such as the Wielkopolski Regional Branch of the National Health Fund, which moved into a modern office building at Baraniaka Street in Poznań. The NHF also modernized the building at Chałubińskiego 8 in Warsaw. Bank Gospodarstwa Krajowego (BGK) decided to extend the lease agreement in the exclusive office building, which is part of the Varso Place complex in Warsaw.
PKP, in collaboration with HB Reavis, developed the areas around the Western Station, and now the railway company Xcity Investment with Ghelamco will start a new project at the Gdańsk Station. The release of PKP lands for business purposes will improve supply in the Warsaw market. Around the new station on an area of 2.4 hectares, a new business center of Warsaw is to be created.
Bank Pekao S.A. put up for sale the building at Grzybowska 53/57 in Warsaw, which had been its headquarters for over 30 years. The Environmental Protection Institute (State Research Institute) decided to sell the office-laboratory building at Krucza 5/11D.
Polish Power Grids (PSE) opted to build a new headquarters in Radom. Two buildings with a total volume of about 158,000 sqm are to be put into use at the beginning of this year.
PZU also effectively manages its assets, having moved to the Generation Park Y building by Skanska in Warsaw and plans to rebuild its old headquarters. The PZU Tower skyscraper located at the intersection of Grzybowska and Aleja Jana Pawła II is likely to be demolished. It will be replaced by a 150-meter tower. PZU Investment Fund Society is conducting negotiations on this matter.
IMMO Park Warsaw, belonging to Mota-Engil Central Europe, built a four-story underground parking in Warsaw with 420 parking spaces and will carry out the first stage of the revitalization of the Warsaw Uprising Square. In a public-private partnership format, it previously built parking under the New Market Square in Wrocław. It also holds PPP contracts for the construction and operation of parking lots in Gdańsk and Łódź.
Polish capital with increasing participation in investments
Domestic capital in 2024 recorded the highest activity in history. It accounted for about 10-15 percent of investment transactions in the first half of the past year. The recorded value was twice as large as the previous year, while until 2022, the average participation of Polish investors in the total transaction volume did not exceed 2 percent.
“In 2024, we witnessed a significant revival of investment activity in the commercial real estate market in Poland. The office sector was particularly successful, with interest growing exponentially. The estimated value of transactions in the office sector last year was 1.6 billion euros, almost four times greater compared to the volume registered a year earlier. Walter Herz advised on a transaction involving a public sector entity, which at the end of 2024 acquired an office building in Warsaw,” says Katarzyna Tencza, Transaction Director at Walter Herz.
Domestic capital played a key role, especially in regional cities, where there was increased interest in well-located and modernized facilities. This year, further large transactions in the office sector are expected, also outside Warsaw, where there is a wide choice of attractive, modern facilities.
Expected interest rate cuts will translate into more attractive returns for investors. Rate cuts by the ECB last year led to increased interest in prime office properties. In Warsaw, for example, the sale of the Warsaw Unit building for 280 million euros was finalized. It was the largest office transaction, not only in Poland but also in Europe. In Poznań, the Nowy Rynek E building also changed owners.
Source: ManagerPlus