According to the latest “Occupier economics: Office market in Krakow 2019” report prepared by Cresa Poland, the city’s total office stock reached 1.42 million sqm at the end of last December, up by nearly 13% year-on-year. Flexible office leases are becoming ever more popular.
In 2019, take-up hit nearly 266,000 sqm, the highest level in the history of the Krakow office market and more than 30% above the 2015-2019 average. Large deals included both pre-lets and renegotiations. The strongest demand came from the banking and IT sectors.
The largest transactions of the 2019 included UBS’s lease for 19,300 sqm in Fabryczna Office Park, the renegotiation of the 17,100 sqm lease by Motorola Solutions Systems in Green Office, Sabre’s deal for 16,000 sqm in Tischnera Office and Akamai lease renegotiation of the 11 200 sqm. in Vinci Office Center.
“Flexible offices are becoming increasingly popular in Krakow as an alternative to typical five-year leases. Tenants can have a lease term tailored to their individual needs. Demand for flexible office space is being reported predominantly by start-ups which, being at an early stage of development, are unable to quantify their precise and target office requirements. Krakow’s office market is seeing robust demand for office buildings scheduled for delivery in 2020,” says Karolina Słysz, Advisor, Office Department, Cresa Poland.
“Larger companies that decided to move at the end of 2019 had a limited choice of office space available immediately or in a short time. The demand and supply imbalance is expected to continue at least until the end of 2020,” added the expert.
Four office buildings with a combined area of 69,000 sqm of office space were delivered to the Krakow market in Q4 2019. These included Cavatina’s Tischnera Office (33,000 sqm), which is one of the largest office buildings in the city and offers more than 2,600 sqm of green terraces and a patio.
Office absorption surpassed 113,000 sqm in 2019, down by more than 27% on 2018’s level, largely due to the very weak absorption of just 8,000 sqm in the third quarter.
“The city’s vacancy rate stood at 10.7% at the end of Q4 2019, up by 2.1 pp compared to where it was in the same period in 2018 as 2019 witnessed more than a twofold increase in new supply over the year. Strong occupier demand for office space is likely to push the vacancy rate down in 2020,” says Bolesław Kołodziejczyk, PhD, Head of Research & Advisory, Cresa Poland.
Rental rates range between EUR 13.50–15 sqm/month in Krakow’s upper class office buildings, with lower class buildings commanding rents of EUR 10–12,5/sqm/month.
Cresa is the world’s largest commercial real estate advisory firm that exclusively represents occupiers and specializes in the delivery of fully integrated real estate solutions. It serves clients through more than 80 global offices. Cresa Poland offers unbiased, independent commercial real estate advice. Its integrated services include conflict-free tenant representation, capital markets, market research and advisory, valuation, design & project management and workplace strategy. Cresa Poland is headquartered in Warsaw, with regional offices in Wrocław, Tricity, Łódź and Krakow. To learn more, please visit: www.nmrk.pl
