Reviving fortunes

The Expert Eye
The Warsaw office market is seeing signs of renewed development activity. Three new office buildings were delivered in H1 2023, but a significant increase in new supply is not expected until 2025

According to Savills’ latest report, Warsaw’s office stock reached 6.25 mln sqm in the first half of 2023, with the total eventually becoming evenly distributed between the central zone and non-central locations. The first six months of the year saw three new office completions, the largest being The Park 9 (White Star Real Estate, 11,000 sqm). The development pipeline now comprises close to 250,000 sqm of office space. New starts in 2023 included the first phase of the Towarowa 22 mixed-use complex (Echo Investment, 31,100 sqm) and The Form (Lincoln Property, 28,000 sqm).

Coming up soon

Projects scheduled for delivery beyond 2023 include The Bridge (Ghelamco, 45,000 sqm), the next phase of Studio (Skanska Property Poland, 24,000 sqm) and Upper One (Strabag Real Estate, 35,900 sqm), which will replace Atrium International, whose demolition is nearing completion. The renewed development activity is likely to result in more than 300,000 sqm of new office rental stock coming onto the market in 2025.

Office take-up for the first half of the year surpassed 325,000 sqm, down by 32 pct compared to the same period last year. New leases accounted for 57 pct of that total (43 pct in 2022), while renegotiations made up 35 pct (39 pct in 2022), with expansions and pre-leases contributing 4 pct each (8 pct and 10 pct in 2022, respectively).

“After the development activity slowed in the last two years, there are first signs of a recovery on the way. However, before tenants are again able to choose from new office completions, we will continue to see many renegotiations or relocations to existing buildings with suitable vacant stock,” comments Daniel Czarnecki, the head of landlord representation of Savills’ office agency.

A deeper look at the numbers

According to Savills’ data, Warsaw’s vacancy rate stood at 11.4 pct at the end of June 2023, down by 0.5 pp year-on-year. Prime office rents were in the range of EUR 22.5–25.5 per sqm monthly in the most prestigious locations in the city centre and at EUR 13–15 in the Służewiec (Mokotów) office district. Tenants are, however, facing rising service charges.

“Monthly service charges, which last year were widely expected to start increasing, have risen above PLN 30 per sqm in modern offices in Warsaw – and even now exceed PLN 35 for some buildings. Tenants are, therefore, increasingly opting for a rigorous audit of such costs in the offices they occupy or are planning to relocate to in order to make savings,” adds Krzysztof Sakierski, the head of strategic advisory at Savills.

About Savills

Savills, which was founded in the UK in 1855, is one of the world’s leading property agents with 600 offices across the Americas, Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services.