Poland Warsaw offices buoyant in 2022

According to the latest report by Savills, net absorption – or change in the total amount of leased space – in Warsaw in 2022 amounted to approx. 286,700 sqm, almost three times more than in 2021. Since the outbreak of the pandemic, the values of this indicator have been significantly higher for the central zones, which accounted for 84 pct of the total result. Demand in 2022 reached one of the highest levels in history, matching the last record years before the pandemic (850,000 – 870,000 sqm). This was partly due to the impact of the pandemic, with tenants extending their leases for short periods, or delays in signing lease agreements.

The Warsaw office market has seen several large transactions, including 25 leases for office space over 5,000 sqm and eight transactions over 10,000 sqm. Representatives of the IT industry are among the main office tenants in Warsaw. Between 2018 and 2022, tenants from this sector leased nearly 561,000 sqm, representing 14.6 pct of the capital’s gross demand for office space.

The share of renegotiations in 2022 was 39 pct. New leases and relocations accounted for 42 pct of total demand. In turn, expansions by tenants who decided to upsize their current office accounted for 9 pct of the demand.

2022 proved to be the time of the long-awaited rebound in the office real estate market. Tenant activity has returned to pre-pandemic levels. Companies are already accustomed to hybrid work and increasingly have a clear vision of what their office should look like to optimize costs and meet the new needs of employees. Agreements up to 500 sqm have a relatively high share in the number of transactions. New opportunities are opening up for companies interested in this type of space, especially since the share of subleased office space offers on the market is growing. On the other hand, we also see clients who, at the expense of a smaller space or a longer agreement, want to guarantee their employees the best location, in a new building and in the highest standard.
Jarosław Pilch, Office Agency, Head of Tenant Representation, Savills

According to data from Savills, in 2022 Warsaw gained 236,800 sqm of new office space, and the total inventory is 6.27 mln sqm. The new supply consisted of 12 projects, eight of which are in the central zones and represent 80 pct of the new supply volume. The largest of them are two projects developed by HB Reavis: Varso Tower (63,800 sqm) and Forest Tower (51,500 sqm). Another significant investment completed last year was the 31,300 sqm Skysawa complex developed by PHN. At the end of 2022, 185,600 sqm were under construction in projects scheduled for completion in 2023-2025. However, there are still a few projects that have not yet started construction, but if the developers fulfil their announcements, the new supply in 2023-2024 could amount to approx. 187,000 sqm. On the other hand, if the economic situation normalizes and developers decide to move forward with the projects in the pipeline, more than 314,000 sqm might be delivered in 2025.

Nominal rents for prime office properties in Warsaw have remained stable for quite some time. Monthly rents in the most prestigious locations of the City Centre zone remained in the range of EUR 21-25.5 sqm/month. Tenants interested in the top floors of centrally located high-rise buildings must be prepared to pay higher rates for vacant modules, deviating from the average market rates. In Służewiec, rents are still in the range of EUR 13-15 sqm/month. According to Savills, the vacancy rate in Warsaw at the end of 2022 was 11.6 pct, down 1.1 percentage points from 2021. It stood at 10.5 pct in the city’s central zones and 12.5 pct in non-central zones.

In the coming months, tenants will face rent indexation and further increases in service charges, the first of which we saw last year. The trend that has intensified recently is the extension of lease periods, which makes it possible to obtain an adequate level of coverage for the fit-out costs from the property owner.
Daniel Czarnecki, Office Agency, Head of Owner Representation, Savills