In 2022, the demand for offices in Warsaw exceeded 860,000 sqm. The highest tenant activity could be seen in Q1 and Q4 of the previous year. Traditionally, most Warsaw offices were contracted by companies from the financial sector, business services and the IT industry.
In 2022, the demand for offices on the Warsaw market remained at a very high level. Tenants leased a similar amount of space as in the years of the market boom before the pandemic. Lease volume was about a third higher than in 2021. On the other hand, the very low new supply means that the availability of offices in Warsaw is getting increasingly smaller. In the central area of the city, it is not possible to rent a large, several thousand sqm office space in one location. The reinforcement of the hybrid working model means that companies present on the Warsaw market often reduce the space they occupy. However, the high demand for offices from new companies coming to the city means that the absorptive capacity of the market is record high. Thus, the level of office vacancy in Warsaw is constantly decreasing, and the availability of space from quarter to quarter is getting smaller.
Mateusz Strzelecki, Partner, Head of Tenant Representation at Walter Herz
Walter Herz analysts also note that the demand for flexible offices is growing. Co-working attracts not only companies in the initial phase of operation, but also large enterprises and corporations. The demand for flexible offices is compounded by market uncertainty. Tenants appreciate that flex spaces do not require investment outlays and allow for flexible lease terms. The sector is constantly increasing its resources. Warsaw currently has more than half of this type of space available in the country, with approximately 180,000 sqm of flexible spaces. Still, it constitutes for only a small percentage of the capital's office stock.
However, if we look at the implementation of new investments, the Warsaw market has slowed down significantly. According to Walter Herz analysts, in 2022 only about 230,000 sqm of new offices was completed in Warsaw. The stock of modern office space in the capital has increased to nearly 6.3 mln sqm. Only 180,000 sqm of space remains under construction.
Developers have announced the implementation of several new projects. Properties such as: Upper One, T22, The Form, Fort 7, and the new office building of Adgar Poland are being prepared for construction. The Vibe and Drucianka Campus projects are still under construction. However, if the current demand in the capital is maintained, it is merely a drop in the ocean of needs. Marynarska Business Park complex and Marynarska Point I located in Służewiec remain under reconstruction. Antares building is also to undergo modernization in the Służewiec office district.
Walter Herz analysts estimate that only tens of thousands of sqm of new offices will be delivered in Warsaw this year. Every month, the Warsaw market is approaching a situation where we will be dealing with a shortage of free space to let.
The office market is also facing new challenges this year. Like other sectors, it must consider the growing costs of maintaining real estate, which will entail increases in service charges and indexation of rates. Hence, both building owners and tenants have been taking several actions aimed at reducing energy consumption for quite some time.
