Tricity Office Market Slows: New Supply Hits 20-Year Low

REAL ESTATETricity Office Market Slows: New Supply Hits 20-Year Low

The growth rate of new office supply in Tricity (Gdansk, Sopot and Gdynia) has visibly slowed down. In the first half of the year, only one building with an area of 5 000 square meters was added to the market. The future in this regard does not look better, as the construction area is the smallest in two decades.

At the end of the second quarter of 2024, the total office resources in Tricity were estimated at 1.05 million square meters. The vast majority (76%) is located in Gdansk, mainly along Aleja Grunwaldzka and around the historical city center. About 21% of the Tri-city area is in Gdynia, and the remaining 3% is in Sopot.

“We have been observing a steady decline in developer activity since 2021. In the first half of the year, only one office building with an area of 5 000 square meters was put into use, which was established as the headquarters of LPP company. A record of low number of office spaces are under construction – only 29 000 square meters. If developers keep the assumed schedules, then 17 000 square meters will be completed by the end of this year,” – explains Dorota Lachowska, Head of Research, Knight Frank.

The activity of Tricity tenants, after a record year in 2023, also declined in the first half of 2024.

“The tenants’ signed contracts for almost 56 000 square meters, meaning a 19% decrease compared to the same period in the previous year. Companies mostly chose offices in Gdansk, where almost 47 000 square meters were leased. The sector generating the largest demand was consistently IT. In the first six months, it accounted for 32% of the total leased resources,” – adds Joanna Gomułkiewicz, Associate Director, Knight Frank.

In the structure of lease agreements, the share of new contracts increased, accounting for 44% of the volume. In the same period in 2023, this share was 36%. Not much less, as 42% were renegotiations. Still, few tenants decide to expand, which accounted for 3%. The remaining part was rental for their own needs.

Limited new supply resulted in a decrease in the vacancy rate, which at the end of June 2024 was 12.5% (at the end of the first quarter it was 13.4%). This is the third lowest result among regional cities, with only Szczecin and Lublin ahead of Tricity.

Asking rents in Tricity at the end of the first half of 2024 remained stable and typically ranged from 11.00 to 15.50 EUR/square meter/month. However, due to factors such as high construction costs and the ongoing high costs of servicing construction loans, rents for the best spaces in newly emerging buildings may exceed this level. The fees for operating costs have stabilized at a level usually ranging from 17.00 to 30.00 PLN/square meter/month.

Source: https://ceo.com.pl/spowolnienie-na-rynku-biurowym-w-trojmiescie-nowa-podaz-najnizsza-od-20-lat-39837

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