PL

POLAND Warsaw office vacancy continues to slide – C&W

Office & mixed-use development
Warsaw’s total office stock reached app. 6.27 mln sqm at the end of H1 2022, with occupier activity accelerating while vacancy continued its downward trend – according to Cushman & Wakefield.

The consultancy, in its MarketBeat H1 2022 report, reveals that 129,000 sqm of new office space was delivered to the Warsaw market in the first half of the year, with the largest completions being the Forest Tower, Skysawa and Lixa C. The remainder of the year will see another 105,300 sqm completed in three office buildings.

At the end of Q2 2022, Warsaw’s development pipeline scheduled for completion in 2022–2025 amounted to app. 234,000 sqm. The vacancy rate, meanwhile, fell for the second quarter in a row to 11.9 pct (down 0.3 pp q-o-q and 0.5 pp y-o-y), representing 747,700 sqm of vacant space (down by almost 2 pct y-o-y).

The growing leasing activity also translated into net absorption, which came to 157,900 sqm in mid-2022, surpassing 2021’s total. Net absorption exceeded new supply in January-June 2022. Looking ahead, we expect the vacancy rate to continue its downward trend in the coming quarters given the recovery in occupier activity, the limited new supply and the relatively high level of pre-leases in office buildings scheduled for completion in 2022.
Jan Szulborski, a senior consultant in consulting and research at Cushman & Wakefield in Warsaw

Total leasing activity in Warsaw amounted to 479,400 sqm in H1, up by 94 pct on the same period in 2021 and up by 19 pct compared to 2019. The largest deals in Q1 included PKO BP’s pre-lease in Skysawa I and II, Bank Pekao’s pre-lease in the Forest Tower, ING Group’s renegotiation and expansion of its lease in Plac Unii, Generali relocating to the Jabłonowski Palace, Samsung Electronics renegotiating its lease in the Warsaw Spire and KOWR’s renegotiation its deal in the Karolkowa Business Park. In total, 392 transactions were finalised in H1, a y-o-y increase of close to 58 pct. Renewals and new leases accounted for 48 pct and 45 pct of these respectively, followed by expansions, which made up the remaining 7 pct.

Looking ahead, we expect costs to continue to put upward pressure on headline rents, further fuelled by the gradually shrinking availability of office space in prime locations and buildings.
Jan Szulborski of C&W

According to Cushman & Wakefield, the current geopolitical uncertainty as well as rising construction and fit-out costs have pushed office rental rates up, bringing them up to EUR 22–26 per sqm a month in Warsaw city centre and to EUR 13.50-16.50 in non-central locations at the end of H1. As a result of the rent rises, landlords are showing increased flexibility in negotiating financial terms, such as over lease lengths, while offering rent-free periods and fit-out contributions.

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