The Tri-City agglomeration in northern Poland – comprised of the cities of Gdańsk, Gdynia and Sopot – saw the biggest annual supply of new office space in years in 2018 (amounting to approximately 93,500 sqm, according to JLL’s preliminary data – see graph). Numerous new office projects are currently under construction and in the pipeline in the location, which is the third-biggest regional office market in the country and benefits from, among other things, its reputation as a very good place to live and work.

The total existing office stock in the Tri-City is expected to reach one million sqm at the beginning of 2021. At the moment, only two regional office markets in Poland – Kraków and Wrocław – have more than one million sqm of modern office space each. At the end of last year, the Tri-City stock stood at almost 800,000 sqm, while a further 132,000 sqm was under construction. Strong local developers are a distinctive feature of the market, with some of the biggest Polish and international players also expanding there.

Companies that have completed office projects in Gdańsk in recent years include Hines and Echo Investment (the schemes were subsequently bought by investors GTC and Globalworth Poland). Last year, Skanska launched its first development in the city. Called Wave, the investment will consist of two 14-floor buildings comprising a total of approximately 48,000 sqm of leasable space. The first phase of the project, which will offer around 24,700 sqm of GLA, is scheduled to be completed in late 2019 or early 2020.

Oliwa remains the most popular office location in Gdańsk, with the city’s Młode Miasto neighborhood set to gain in significance in the coming years. More development activity is also forecast to soon take place on sites located in the vicinity of Gdańsk airport. In Gdynia, the area of ul. Łużycka in the Redłowo district is an important office location. Experts from JLL expect that the investment attractiveness of the part of the city’s downtown that is located close to the waterfront will grow in the near future.

Torus's Alchemia in Gdańsk

ABSORPTIVE MARKET

The Tri-City office boom has been reflected in high demand and net absorption levels – at the end of the third quarter of last year, the vacancy rate in the agglomeration decreased to 6.7 percent (compared to 11.1 percent at the end of 2016) and was the lowest in Poland, according to JLL data. “The Tri-City office market is getting more and more attractive. New players are coming, while the companies already present here keep expanding, which translates into steadily growing demand for office space,” said Marcin Faleńczyk, head of the Tri-City office of JLL.

Around 90,000 sqm was leased in the Tri-City office property market in 2018. Compared to Kraków, Wrocław, Poznań and Katowice, the agglomeration offers competitive rents which range from €12.75 to €14 per sqm per month. Just like in the other major regional office markets across Poland, much of the demand for office space in the Tri-City market is generated by BPO/SSC companies. JLL estimates that the sector accounts for as much as 33 percent of occupied office area in the agglomeration.

Kornelia Łukaszewska, a leasing manager at Echo Investment, maintained that the market stands out on the office property map of Poland due to its access to well-qualified experts and the growth of the IT sector.

She pointed out that her company decided to launch its Tryton Business House project in downtown Gdańsk as early as in 2014. The already completed 23,000-sqm scheme houses such prestigious tenants as Intel (one of the biggest lease transactions of 2016) and EY.
Indeed, the Tri-City’s pool of qualified employees is repeatedly mentioned as one of its main assets as an office location. Unlike some other big cities in Poland, Gdańsk and Gdynia do not have difficulty in keeping young people and attracting talent from elsewhere in the country. The agglomeration is known for its high quality of life, clean air and numerous recreation opportunities. Interestingly, it is attracting people from crisis-stricken countries such as Spain and Greece, noted Bolesław Kołodziejczyk, head of research and advisory at Cresa Poland.

Skanska's Wave in Gdańsk

BULGING PIPELINE

Ongoing urban planning processes will support the further growth of the market. New zoning plans that are now being worked on will enable the construction of more office developments in the Tri-City and potentially also draw more developers to the agglomeration. In Kołodziejczyk’s opinion, one can see that the municipal authorities are paying attention to ensuring the right balance between office and residential space in the urban fabric. “It shows that the Tri-City is learning from Warsaw’s mistakes,” he claimed.

Admittedly, some things still need improvement. City officials are cooperating with developers on providing additional roads and railway infrastructure to make moving between and around Gdańsk, Gdynia and Sopot easier. Other, more universal, problems confront developers active in the Tri-City market, too. According to Kołodziejczyk, securing a good general contractor with a sufficient number of construction workers is a major challenge there today.

Similar to other real estate markets in Poland, the rising costs of construction materials and services that negatively impact the profitability of new investments are a major threat to office developers, agreed Marcin Piątkowski, the commercialization director at Torus. All of this is not putting developers off planning new projects in the Tri-City. Companies which have already secured plots of land for future schemes in the agglomeration include Cavatina, Echo Investment, Polski Holding Nieruchomości (PHN) and Vastint.

Torus – a local developer that has to date completed more than 120,000 sqm of office space in the market (which translates into over one-eighth of the total existing stock) – will later this year launch construction work on the second phase of its Officyna development in Gdańsk.
“We have also secured sites for further tens of thousands of sqm of office space in several locations in Gdańsk and Gdynia. We are constantly looking for new investment opportunities in the Tri-City,” Piątkowski revealed.

Torus's Oficyna in Gdańsk