Companies investing capital in our country can still count on a higher rate of return on investment compared to the largest European markets. International funds play a dominant role. Foreign capital comes to us mainly from Germany, Austria, South Africa, South Korea, Singapore and the USA.
Just like the entire real estate market in Poland, the office space sector has been growing recently. However, this growth is not uniform throughout the country. By juxtaposing the largest cities, one can see differences in the pace of development. Much depends on the specificity of the region – both its geographical location and the businesses operating there.
The commercial real estate market is becoming increasingly popular among investors. In 2018, EUR 7.2 billion was invested in the Polish real estate market, including over EUR 2 billion in the office sector, which accounts for 40% of the commercial real estate market share. The value of the purchase transactions of commercial real estate in Poland in 2018 was the highest in the history of the market. Poland is one of the few countries in Europe where investment activity in the commercial real estate segment is growing. A good economic position of the State, including indicators concerning the lease of commercial spaces, creates favourable conditions for investment. The development of the office space market in individual regions depends on a number of factors. First of all, we should mention the dynamics of economic development of the regions themselves. It determines the attractiveness for foreign investors. They, in turn, influence the pace of development of the modern office real estate market. Finally, a strategic location may prove to be an important asset, which is clearly visible in the case of Pomerania, where all the conditions necessary for this process are intertwined.
Local markets
Not surprisingly, Warsaw is still the leader in terms of office spaces. Their total stock in the city amounts to 5.2 million square metres. There is currently over 1.8 million sq m of office space under construction, 44% of which, i.e. 800 ,000 sq m, is in the capital city. Despite the increase in rents, caused by the demand outstripping the supply, land for business purposes is still the most popular in this city. It should be noted, however, that the capital’s advantage has diminished over the years in favour of other large cities. In Warsaw, the rate of return for the best office properties in the city centre has also been reduced to approximately 4.7%, a decrease by 10 percentage points. Apart from Warsaw, there are also eight well developed business centres. This is much more than in other countries in our region and in most countries of Western Europe. They attract mainly investors and tenants from the banking and financial sector, as well as modern business services. Profitability of office buildings in regional markets in the largest centres: Kraków, Wrocław, Trójmiasto, Poznań, Łódź and Katowice oscillated between 5.9 and 7.5%.
One of the largest centres in terms of office space is Kraków. The office space offer of the capital of Małopolska already exceeds 1.2 million square meters. One of the most important assets of Kraków in this respect is an extremely rich labour market and the fact that the city is a thriving academic centre, which attracts investors especially from the sector of modern business services. The demand for the majority of office space is generated by companies from the BPO/SSC and IT sectors, while Wrocław boasts over a million square metres of modern office space. This is an absolute record of the last decade and developers are not slowing down.
Uniqueness of Tri-City
This agglomeration, just missing a place on the office space podium – also with approximately one million square metres, combines in an interesting way the most important features of the region, which is extremely attractive for potential investors. The basic pillar of its uniqueness is the fact that it combines three large business centres – Gdańsk, Gdynia and Sopot. In terms of population it has almost 750,000 inhabitants and a quality of life confirmed by many awards. In addition, to those who want to do business there, Tri-City offers attractive sports and recreation areas, direct access to the sea and a lot of cultural facilities. Clean air is another asset for potential investors. Tri-City is also a dynamically developing port and shipbuilding industry. In Gdańsk and Gdynia there are some of the largest container terminals on the Baltic Sea. This in turn has a strong impact on the development of shared services sector companies.
Foreign investors
Companies investing capital in our country can still count on a higher rate of return on investment compared to the largest European markets. International funds play a dominant role. Foreign capital comes to us mainly from Germany, Austria, South Africa, South Korea, Singapore and the USA. The South African Globalworth Fund is one of the most important foreign entrepreneurs in Poland. In 2018, it invested EUR 0.5 billion in the Polish office market, while within two years, the value of its investments exceeded EUR 1 billion, which is the first such case in our office space market.
Developers see a good chance in this respect in the Economic Zones Act. These regulations are aimed, among others, at attracting investors, which, combined with appropriate human resources potential, may result in large investment projects and thus effectively stimulate the development of the office market.
Also Premium
Finally, it is worth mentioning that as the office market matures, more and more Premium class buildings and premises dedicated for this purpose are added, offering tenants a number of amenities. Such buildings include Equal BP in Krakow, Poznan’s Bałtyk or Wroclaw’s Green 2Day. Others are currently under construction or in the process of being commissioned. In Warsaw, the highest office building in Europe – VARSO – is under construction, which is also the largest office property currently being built. Other large Warsaw projects include the Mennica Legacy Tower and The Warsaw HUB. In Tri-City, the largest new project is Alchemia IV, in Kraków Tischnera Office and in Poznań Business Garden.
There are many indications that the current market rally, which has been going on for at least five years, will continue. Furthermore, the data clearly show that it is the regions and smaller centres that will be the driving force behind it. In addition, Poland has a good chance of maintaining its leading position in Central and Eastern Europe, and also of competing with Western countries.
