5 positive trends according to Savills report – Warsaw office market 2024

Key data on the office market Q1-Q3 2024:

• 6,26 mln sq m – total supply of office space
• 277,100 sq m – Total area under construction (up 5% y/y)
• 75 000 sq m – New supply (up 270% y/y)
• 10.7% – vacancy rate (up 10 basis points y/y)
• 492,200 sq. ft. – Total demand (down 10 bps y/y)
• 51 000 sq m – Net absorption (down 43% y/y)

1. revival of pre-leases and strong supply

A Savills report shows that Q3 2024 saw a significant recovery in the pre-leasing market. At that time, leases were signed in central Warsaw locations for about 38,600 sqm of office space in projects under construction.

– The good performance of pre-leases in the third quarter of the year brought their share of total demand from the beginning of the year to the end of September to 9%. This is a positive sign for the market – tenants are more optimistic about the business future, their demand for modern workspace and are signing pre-leases more boldly, and developers are doing everything to ensure that office buildings are piling up as quickly as possible. New buildings will soon begin to fill the gap created by delayed investments in previous quarters. It’s worth noting that holding back projects in the past now results in limited availability of large spaces in prime locations, reducing choice for tenants looking for top-notch space –

says Jaroslaw Pilch, Director, Head Of Tenant Representation, Savills Poland.

Between the first and third quarters of 2024, 75,000 sqm of new space was delivered to the Warsaw office market, surpassing the result of all of 2023 (61,000 sqm). The largest completed projects were the third phase of Lixa (26,300 sqm), Saski Crescent (15,500 sqm) and Vibe A (15,000 sqm). More than 70% of the new supply went to the city’s central locations.

2. stable rents in prestigious locations

The Warsaw market is characterized by stable rents in the city’s key and central districts. Rates for prime office space in the Central Business District (CBD) remain at EUR 22.50-26.00/sqm per month, which is favorable news for investors and property owners. The best locations, attract both domestic and international companies that appreciate the high quality of the space on offer.

Despite more space in the pipeline and under construction, over the next two years, the increase in tenant interest in larger offices and large pre-leases signed may have a further impact on rising rents in prime, central locations. Outside the center, where competition will be greater, rents should remain stable, being an attractive alternative for tenants.

3. growing demand for flexible office space

Flexible office space, including coworking spaces, is becoming increasingly popular. Operators of such offices leased a total of 22,400 sqm of space in 2024. This trend is a response to the changing needs of companies, which are increasingly adopting a hybrid work model. Employers are looking for spaces that allow flexible adaptation of space to the needs of the team, which is driving the popularity of short-term leases. Warsaw is a leader in this segment, offering a wide selection of flexible spaces in modern office buildings.

The report’s authors also note that while flex office operators are focused on offices in central locations, building owners in other parts of the city are furnishing co-working spaces themselves. Such a move is meant to help manage vacancies, plus give tenants an option to rent additional space quickly if needed.

4. sustainability in the spotlight for investors

Sustainability and green building are now key aspects in the Warsaw office market. More and more developments are incorporating environmental certifications such as BREEAM and LEED, making buildings more attractive in the eyes of tenants. Owners of older office buildings are also taking steps to bring their buildings up to the new standards. Investments in modernization, improving energy efficiency and implementing environmentally friendly solutions are becoming more common. As a result, Warsaw is not only gaining prestige, but also attracting companies that focus on sustainability in their business strategies.

– In our experience, owners of older properties are able to effectively manage the leasing of their space, provided they make investments resulting in the introduction of modern and energy-efficient solutions -.

notes Daniel Czarnecki, Director, Head of Landlord Representation, Savills Poland.

5. continued high demand and stable vacancy rates

Demand for Warsaw offices remains stable. The total area of leased offices from January to September 2024 amounted to 492,200 sqm. The highest activity was shown by companies representing the financial, IT, business services and manufacturing sectors, which testifies to the dynamic development of these industries in the capital. As one of the main business centers in Central and Eastern Europe, Warsaw attracts tenants from all over the world, offering high-quality office space at competitive prices. The stability of demand and the development of key industries are positive signals for the future, which build optimistic forecasts for the market.

– A smaller supply of space in prime locations is encouraging developers to resume work on projects that were previously on hold. Such as in the case of Ghelamco and PKP’s cooperation on the development at Gdanski Station. On the other hand, however, we see investors considering repurposing their office projects in secondary locations, for example, into residential developments –

emphasizes Jaroslaw Pilch, Director, Head Of Tenant Representation, Savills Poland.

At the end of September, 670,700 sqm of office space was available in Warsaw, translating into a vacancy rate of 10.7% (down 20 basis points quarter-on-quarter). In central zones, the rate stood at 8.9% (down 20 basis points y/y), while in non-central zones it rose to 12.2% (up 40 basis points y/y).

Daniel Czarnecki points out that Sluzewiec and Centrum are the only office zones where the 100,000 sqm vacancy ceiling is exceeded – 208,500 sqm and 19.7% vacancy, and 152,800 sqm with 8.4%, respectively. In comparison, the CBD zone has about 98,000 sq. m. available. (9.7% vacancy). The zones with the least available office space are North (5,800 sq m, 4.6%) and Ursynów and Wilanów (7,600 sq m, 6.2%).

Warsaw still the leader

The Warsaw office market in 2024 is characterized by stability and growth potential. A recovery in the pre-leasing segment, stable rental rates, growing interest in flexible spaces and an emphasis on sustainability provide a solid foundation for the sector’s continued growth. The capital remains an attractive destination for investors and tenants, offering modern office space that responds to the changing needs of modern business. As a key center of Central and Eastern Europe, Warsaw maintains its leadership position.