Demand for Office Space in Poland Shifts to Regional Cities

(Bloomberg) -- Poland’s regional cities are emerging as early winners from the pandemic with companies looking to return their workers to offices.

Cities outside the capital of Warsaw had 800,000 square meter (8.6 million square feet) of office space under construction at the end of the first quarter, even as the overall market recorded its lowest activity in eight years, according to broker Jones Lang LaSalle Inc.

Office investment transactions reached 605 million euros ($736 million) in the first three months of 2021 with deals in regional cities such as Krakow, Wroclaw and Gdansk accounting for almost 360 million euros -- their best ever start of the year.

Poland has been one of the hubs for back office services even before the pandemic, attracting investors such as UBS AG, Royal Dutch Shell Plc and International Business Machines Corp. 86 of Fortune Global 500 companies had their business service centers in the country, according to a 2019 report from Warsaw-based Association of Business Service Leaders.

The demand for new office space is driven mainly by IT companies that accounted for 36% of transaction volumes outside Warsaw, followed by business services and the financial industry, according to JLL.

Despite some early sign of recovery, the appetite is still down 41% from a year earlier and many companies opt to sublet their space due to uncertainty about post-pandemic work arrangements.

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