The Tri-City office market is booming, benefiting developers, tenants and fit-out companies
By Adam Zdrodowski
The Tri-City is now emerging as one of the most vibrant regional office markets in Poland, with demand for new class-A office space in the agglomeration currently outstripping supply. The BPO/SSC sector is the driving force behind the dynamic growth of the market. While there is a considerable amount of under-constructed space in the Tri-City, prospective occupiers have already leased or reserved a sizable portion of the area available in the ongoing schemes. Also fit-out companies active in the region have been very busy.
Beyond the south
According to JLL data, the combined existing office stock in the Tri-City amounted to 518,000 sqm at the end of the first quarter of this year, making the market the fourth largest in Poland – after Warsaw, Kraków and Wrocław. Gdańsk, Gdynia and Sopot respectively boasted 343,000 sqm, almost 140,000 sqm and 35,000 sqm of office area. “The size of the market has doubled since 2008,” said Magdalena Reńska, associate director, office agency and tenant representation at JLL.
The volume of completions will stand at 97,000 sqm this year, compared with the five-year average of 46,600 sqm, said a recent report by JLL. A number of major schemes are in he pipeline, with projects accounting for a total of 86,000 sqm already having building permits. A combined 19,800 sqm of space was leased in the Tri-City in the first three months of this year. The vacancy rate on the market stood at 10.1 percent at the end of Q1 2015, down from the peak of 14.2 percent in Q2 2014, the JLL report said.
“The situation in the Tri-City real estate market has changed a lot over the last half a year,” said Mariusz Wiśniewski, senior associate director at the office space department of CBRE, adding that recently signed lease deals have helped absorb a sizable portion of the new space. At the moment, there is approximately 90,000 sqm of office area under construction in the Tri-City, part of which has already been leased or reserved by large tenants.
Much of the demand for office space on the market is generated by BPO/SSC sector occupiers. The companies usually already have a presence in Poland, most often in Kraków and Wrocław. While those markets remain attractive, they have, in a sense, become saturated, which has created new opportunities for other locations including the Tri-City, Wiśniewski said. “The tendency to go beyond the south started at the beginning of 2014 and is going to continue for at least four more years,” he added. According to Wiśniewski, the demand for class-A office space in the Tri-City has recently exceeded the supply for the first time since 2008.
Referring to the growth dynamics in the Tri-City, Reńska described the market as a rolling snowball. She pointed out that both developers and tenants remain very active, with the latter often deciding to expand in the region as they see their businesses grow. The agglomeration has already attracted a considerable number of stable international companies – among them Bayer, Sony Pictures Entertainment, Amazon, WNS and Wipro – and their success is now encouraging others to enter the market.
Crucially, the outsourcing firms which have chosen the Tri-City usually increase the amount of office space that they occupy as they open new business lines and employ more people, Reńska said. Wiśniewski said that developers have responded by developing larger projects. To date, most of the new office space in the Tri-City has been coming from local developers. However, according to Wiśniewski, the growing demand and stable rents will attract such companies as Skanska, Ghelamco and AIG Lincoln, which have not been active in the market.
Value for money
The growing development and leasing activity in the Tri-City has already translated into a burgeoning demand for office fit-out services in the agglomeration. Warsaw-based fit-out company Xplan has found itself increasingly busy in the Tri-City market in recent months. “From month to month, we have been witnessing an incredible growth of the Tri-City market,” said Wojciech Kaczmarczyk, a partner at Xplan. He added that the market has accounted for a half of the turnover that the firm has recorded since the beginning of this year.