Developers and tenants in Cracow didn’t waste time last year. Thanks to their activity, the city remains unsurpassed as the biggest regional office market, with the supply volume of 577 900 sqm at the end of 2013 at a very low vacancy rate. On the national level, the city is second only to Warsaw. Wroclaw, however, follows thick on Cracow’s heels – can Cracow lose the leadership in the nearest future?
According to Jones Lang LaSalle, 34 800 sqm of office space was delivered to the Cracow market last year. Only in the fourth quarter about 17 300 sqm was handed over, mainly due to two projects: Bonarka for Business complex, completed by TriGranit Development (the fourth building - D – was completed) and medical – office Nautilus. In the previous months of 2013 projects such as Dekerta 18, Quattro Business Park III and Wyczółkowskiego Business Center have been completed.
Competition at the top
Should Cracow be afraid of Wroclaw? The volume of new supply in the capital city of Lower Silesia shows that it should – in 2013 this factor was over twice as high as in Cracow. According to JLLS, 72 000 sqm of office space was delivered to the market. The last quarter in both cities was very similar: Wroclaw developers completed 17 800 sqm of office space.
However, it is worth to take into consideration two factors: the level of vacancy and the areas under construction. Right now, in the former capital of Poland there is 109 400 sqm under construction, in Wroclaw 1800 sqm less. It’s not a big difference, so the vacancy rate becomes even more important. Cracow has the least available space of all the regional cities: at the end of the last year the vacancy rate amounted to just 5%. In Wroclaw it is twice as high – 10,8%
How does the tenants demand look like in the context of such a fierce competition? In both cities, BPO and SSC companies dominate the demand. Both are also in the forefront when it comes to the volume of transactions. Last year in Cracow one of the biggest transactions was a pre-let agreement signed by RWE in the building E in Bonarka for Business (3150 sqm), now under construction, and renting 2570 sqm of office space in the Kapelanka 42 complex by Tesco. In Wroclaw in turn, one of the major transactions were pre-let agreement to rent 11 700 sqm in Sky Tower signed by Getin Holding and renting 2100 sqm by Objectivity Bespoke Software Specialists in West Forum.
In Wroclaw you have to pay more than in Cracow for the best areas: between 14,5 and 15,5 euro for a square meter per month. In the capital of Lesser Poland, the prices are stable, oscillating maximum between 13,5 and 14,5 euro for a square meter per month. A high level of vacancy rate will probably result in a slight price reduction. Despite that, Cracow will remain more competitively priced, what is particularly important for the tenants from BPO sector.
Will Cracow stay on top of the regional cities in the office sector? In the upcoming years most probably it will, because the tenants are still interested in the new spaces which are well absorbed by the market. Attractive rent prices, as well as a considerable number of qualified employees and an improving infrastructure encourage investments in the Lesser Poland market. Wroclaw, however, certainly won’t give up – the city has a big potential, recognized and used by the developers.