Offices straining to meet the demand

Although it can certainly be said that the Warsaw office supply in 2019 failed to keep up with the demand, it should also be noted that there was a clear disparity between the City Centre zone and those outside it. While the vacancy in the city centre dropped to only 5.3 pct, other areas had an average of 9.4 pct. The situation outside the city centre was mainly impacted by the high level of supply and the still high vacancy rate of 13.4 pct in Mokotów district. This was particularly noticeable in buildings older than ten years, which saw vacancy rise to 25 pct and tenant interest flagging. “Buildings that have been in operation for a number years have now started to lose tenants, as they now move to new, beautiful, mainly high-rise buildings. The older buildings are in need of considerable refurbishment and modernisation, so their owners will have to take action if they want to retain tenants and attract new ones to fill their current vacancy,” advises Małgorzata Fibakiewicz, the managing director of office class sector and strategic projects at BNP
Paribas Real Estate Poland.

High demand and record renewals

Net demand (i.e. excluding lease renewals) came to around 583,000 sqm in 2019 – 10 pct lower than the figure for last year. However, the volume of renewals (for existing space) reached a record-breaking 295,000 sqm. Among those who decided to stay on in their current locations were two telecoms giants: Orange renewed its agreement for almost 45,000 sqm in the Orange City complex (designed for its own needs) in the Jerozolimskie Corridor office area, while T-Mobile will continue to operate from the office building at Marynarska 12 in Służewiec.

Large leases (of more than 10,000 sqm) accounted for almost a third of the demand. There were twelve agreements of this size, including four of over 20,000 sqm. The 45,600 sqm lease signed last July by MBank for space in the Mennica Legacy Tower was the largest ever on the Warsaw office market. Major deals were also concluded by: PKO BP, which chose the Chmielna 89 office building (currently under construction) for its new headquarters; Getin Noble Bank, which will soon move into building C of The Warsaw Hub; and Warta, one of the biggest Polish insurance firms, whose new head office will be in the Warsaw Unit skyscraper.

“Tenants were most active in looking for new locations in the central zone. Nearly half of the net demand was recorded in this part of the city,” points out Mikołaj Laskowski, the head of the office agency at BNP Paribas Real Estate Poland. Meanwhile, almost 40 pct of lease renewals were concluded for the Mokotów zone, the Służewiec subzone in particular, where tenants are offered very attractive terms.

Supply still to come

The largest of the 17 office buildings completed in 2019 in Warsaw was Wola Retro in the West zone with 24,500 sqm of office space. Other large buildings included Moje Miejsce A (18,700 sqm), Generation Park Z (17,300 sqm), Spark B (15,700 sqm) and Mennica Legacy West (14,900 sqm). But there’s more supply still to come, since at the end of 2019 there was more than 775,000 sqm of office space under construction. As much as 86 pct of this will be built in the City Centre zone. The City Centre-West sub-zone, which includes the area around Rondo Daszyńskiego, is worthy of a special mention, where 398,000 sqm is under construction, including a number of modern office high-rise towers such as The Warsaw
Hub, Warsaw Unit, Skyliner and Generation Park Y. Other office projects currently under construction in the same sub-zone include Mennica
Legacy Tower, Lixa, Fabryka Norblina, Browary Warszawskie and Chmielna 89. Warsaw’s Central Business District, neighbouring the city’s main railway station, now includes the construction site of the Varso Place complex, which will feature what is to be the highest tower in the EU. In addition to that, Widok Towers is nearing completion on Rondo Dmowskiego (on the site of a previously demolished 1970s building).

It’s good to remember that the Warsaw office market is still relatively young. In October 2019, thirty years had passed since the opening of the first building that offered modern office space – and still continues to do so. At the time of its opening, LIM Center was one of the very few buildings in Warsaw that could genuinely be called skyscrapers. Today it is just one of the many high-rises that make up the city’s skyline.