According to the latest Savills report, the total stock of modern office space in Warsaw reached 6.23 million sq m at the end of December 2023. Nearly 265,000 sq m is currently under construction, representing a year-on-year increase of 43%. Last year, developers launched six new projects with a combined area of almost 140,000 sq m, only one of which is located outside the central zones. Among the largest projects scheduled for completion within the next two years are The Bridge (Ghelamco Poland, 47,000 sq m), Studio A (Skanska, 24,000 sq m), and Office House—the first building within the Towarowa 22 complex (Echo Investment, 31,100 sq m).
Savills experts note that large companies seeking office space in central locations and of a high standard may face difficulties finding available space. There are currently only two projects completed after 2020 in central zones that offer more than 5,000 sq m of vacant office space for lease. A similar situation applies to buildings scheduled for completion by the end of 2024, where the pre-let level is already around 40%, and only three projects have available space exceeding 5,000 sq m.
“Larger tenants, who may hold off until 2025 or 2026, will have more choice, and the lower level of commercialization of these buildings could potentially create an opportunity for attractive lease terms. However, there is a risk that the anticipated rebound in new supply could be flattened due to higher financing costs, combined with more stringent requirements from financing institutions. In this scenario, tenants may experience a prolonged supply shortage in the years ahead.”
comments Daniel Czarnecki, head of office space, landlord representation, Savills.
In 2023, we saw an increase in the importance of flexible office space in Warsaw. At the end of the year, there were 88 serviced and coworking offices in the capital, offering more than 196,000 sq. m. of space. Six new locations opened in the last year, adding more than 18,700 sqm to the flex space stock. The largest of these, Mindspace in the Skyliner building, offers 4,400 sqm of flex space. Plans for the first half of 2024 include the opening of another 4,200 sqm in two locations: Business Link in Studio B and Brain Embassy in Adgar Wave.
Demand for office space in the capital in 2023 reached 748,800 sqm, a 13% year-on-year decline, and the share of renegotiations was 43%. New leases accounted for 44% of total demand, pre-leases for 9% and expansions for 4%. Tenants from the business services (19%), manufacturing (14%) and IT (11%) sectors accounted for the largest share of demand.
According to Savills data, at the end of Q4 2023, less than 650,000 sqm of space was available in Warsaw. The vacancy rate of 10.4% represents a decrease of 1.2 percentage points compared to the end of 2022.
The level of rents in 2023 in most zones of the city remained stable, but the second half of the year saw an increase in rents in projects in prime locations and the highest standard. Average rental rates in prime locations in the central business zone range between 22.5-26 euros per sqm per month. In the largest non-central zone, Sluzewiec, they remain at 13-15 euros per sq m per month.
“The largest tenants can count on attractive rent levels. This is due to competition between developers of new projects and funds that own older buildings. The low occupancy level of a project under development prompts developers to offer more attractive rates to companies that will occupy the largest space in the project. As occupancy levels rise, we can expect a slow tightening of rental policies on the part of the developer, resulting in increased competitiveness of well-maintained and located older buildings.”
comments Jaroslaw Pilch, head of office space, tenant representation at Savills, who also heads Workthere in Poland.
The year 2024 in the office real estate market promises to be a time when the so-called green leases, which are increasingly being introduced in the markets of Western European countries, will play an important role.
“As a result of the clauses, tenants will be able to manage their offices in a more informed manner, making it easier for them to strive for climate neutrality at the corporate level. In turn, property owners will be able to obtain better financing terms, and the potentially higher rents resulting from the clause will translate into more efficient management of the building and its standards.” –
Daniel Czarnecki adds.
The report , Market in Minutes: Warsaw Office Market 2023, is available at the following link: https://pdf.euro.savills.co.uk/poland/offices-and-warehouses/mim-warsaw-office-market-2023.pdf
