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By MOTIFE Insights, 28 November 2024
In 2017, Krakow became the first regional market in Poland with modern office space exceeding 1 million square meters. In just 7 years, this number has increased to 1.8 million square meters.
In addition to the modern, A-class office space that is available, there is also a supply of office space in old, often historic, buildings. Some firms look for space with unique character and choose office space in the Old City or in the post-industrial areas of town.
Check out also: Krakow IT Market Report 2024
The map below illustrates the office locations of almost 40 000 IT specialists employed by the 100 largest IT employers in Krakow. The IT headcount at these companies ranges from 70 to 2 500 IT specialists. The density is represented by the heatmap colors.
A distinctive feature of Krakow’s office market is the geographic dispersion of complexes across the city, rather than a single, large business district. A large popular central area is clearly visible from Old Town, through the Main Train Station area to the Fabryczna complex.
Some of the dense points represent the new office complexes built in the past five years, which account to ca. 600 000 m² surface added. Their central locations and modern amenities have enticed companies to move from older buildings, leading to increased vacancy rates in some of the more remote locations, such as the former Krakow Business Park (now Eximius Park) in Zabierzów.
Krakow’s central office locations are the most willingly chosen by tenants. This puts pressure on rental values, which reach over 17 EUR in existing buildings in prime locations. On the other hand, less popular locations struggle with vacancies of over 20%, which gives tenants an advantage when negotiating their leases in these locations.
What is unique about Krakow office space is that 60% of the space was built in the last 10 years. As tenants have a strong preference for new projects, the older buildings see a shrinking demand. At the same time, most of companies can benefit from brand-new, sustainability-certified spaces.
The usual lease period for an A-class office space is 5 years. For B-class office space, the lease period is 3-5 years, with a cost of 11-13 EUR per 1 m² per month. Long-term lease arrangements are beneficial for established businesses that anticipate consistent growth and can accurately project their spatial and locational needs over the upcoming years.
The widespread adoption of hybrid work models has reshaped the office market landscape within the last few years. Coupled with economic uncertainties, these shifts have propelled tenants toward embracing flexible workspace solutions. A prime example is the opening last year in Krakow of Fabryczna Flex, Poland’s largest flexible office center.
These flexible offerings provide fully furnished and equipped office environments shared among multiple companies, along with comprehensive administrative and maintenance services. A key advantage is their immediate availability, and scalability within the flexible ecosystem – distinct benefits over traditional long-term lease agreements.
As cost optimization and workplace agility take center stage, the demand for flexible office spaces continues gaining momentum across Krakow’s thriving business community. Providers of these solutions are well-positioned to cater to evolving occupier needs.
Check out also: Krakow IT Market Report 2024
Rafał Oprocha: In 2024, the office market in Krakow is expected to experience a stable but not overly dynamic inflow of investments. The city continues to be recognized as one of the main potential locations for the development of business processes in the Central and Eastern European (CEE) region. The presence of skilled employees and the development of local labor market high competencies contribute to its attractiveness for investors.
For companies in the IT and R&D sectors, the work environment plays a crucial role. They require an inspiring and collaborative atmosphere that fosters creativity and the exchange of ideas. These companies have unique needs that must be considered when choosing an office space. Along with the flexibility and hybrid nature of work, IT companies expect access to advanced technological infrastructure, fast and reliable internet connectivity, and energy security within the building. They often operate in a dynamic environment where rapid scalability is necessary.
While smaller companies or those opening new branches may opt for coworking spaces that offer flexible workplace management, a significant portion of IT and R&D companies, especially larger ones, still prefer traditional offices. This allows them to have greater control over their work environment, tailor the space to their specific needs, and maintain a greater level of privacy or security. Regardless of the size of the company, flexibility and the ability to adapt to changing market conditions and employee preferences are key considerations.
The office market in Krakow is experiencing a shift due to reduced developers’ activity and the popularity of the hybrid work model. While vacancies are relatively high in non-central areas, centrally-located properties continue to be in high demand. The focus on sustainability, well-being, and technology infrastructure will shape the office market in 2024 as companies prioritize creating spaces that promote employee well-being and align with ESG principles.
Krakow maintains its status as Poland’s preeminent and most mature regional office market, offering a diverse array of leasing opportunities tailored to desired location, workplace environment, and spatial requirements. The city caters to organizations across industries and sizes, solidifying its reputation as a pivotal commercial hub.
Office space stock
2023 marked a successful year for Krakow’s real estate sector, with the total office market size approaching the 2 million square meter milestone. Over 97 000 sq m of new office space was delivered,accounting for one-third of the total supply across Poland’s regional cities,excluding the capital market. This remarkable growth underscores Krakow’s significance as a prime business destination.
Demand for office space
Despite the challenges posed by hybrid work models and frequent office space reductions, demand for office space in Krakow remains robust and on an upward trajectory since the pandemic. Renegotiations accounted for a substantial 48% share of total leasing activity in 2023, although this figure was influenced by the exceptionally large requirements of a single tenant.
While various companies are downsizing their office size, this trend is often driven by a pursuit of quality and innovative workplace design, priorities shared by many international corporations. The IT sector has emerged as the primary contributor to Krakow’s leasing activity over the past decade, accounting for 35% of the average annual leasing volume in the last seven years. Although recent years have witnessed a noticeable shift toward business and financial services, the IT industry remains the most active sector in the local office market.
Availability of office space
We have observed reduced activity of developers in the central area of the city, which will translate into limited availability of office space in this area in the next 2 years. Due to the popularity of the hybrid work model and frequent reductions in the occupied office space, the market has experienced a significant increase in the vacancy rate and is currently close to 20% for the entire city, with this indicator significantly diversifying for central and non-central locations. While outside the city center, this rate was relatively high, central locations boast a very low vacancy rate.
Learn more about what international companies have achieved with their Krakow tech labs by downloading our Krakow IT Market Report 2024
If you are interested in setting up your own engineering hub in Poland, contact us at MOTIFE to learn more.
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