Only 60,900 sqm of office space was completed in the Polish capital in 2023. It's the lowest total in the history of the Warsaw office market. Savills also notes that development activity picked up in the H2 of last year, in response to a prolonged period of undersupply.
In the most optimistic scenario, approximately 445,000 sqm of new office space will be delivered onto the Warsaw market in 2024-2026. According to Savills latest report, at the end of December 2023, the total stock of modern office space in Warsaw was 6.23 mln sqm. The development pipeline stood at nearly 265,000 sqm, representing an increase of 43 pct year-on-year. Last year, developers broke ground on nearly 140,000 sqm in six new office projects, including one in a non-central location. The largest projects scheduled for completion over the next two years include The Bridge (Ghelamco Poland, 47,000 sqm), Studio A (Skanska, 24,000 sqm) and Office House, the first building of Towarowa 22 (Echo Investment, 31,100 sqm).
Savills notes that large corporates looking for high quality offices in central locations may find it challenging to find vacant space to lease. Of all centrally located buildings completed post-2020, only two offer larger offices in excess of 5,000 sqm. It is similar with projects scheduled for delivery by the end of 2024 – they have already been around 40 pct pre-let and only three have vacant offices with an area of more than 5,000 sqm.
Larger tenants who can delay relocation until 2025 or 2026 will have more choice then and will probably be able to secure attractive lease conditions thanks to lower commercialisation levels of office projects expected to come to fruition in those years. There is a risk, however, that the anticipated rebound in new supply will plateau due to elevated financing costs in conjunction with more stringent requirements of financing institutions. In this scenario, tenants are likely to experience a long period of undersupply in the coming years.
Daniel Czarnecki, head of office agency, landlord representation, Savills
Flexible offices continued to increase in importance in Warsaw throughout 2023. At the end of last year, the Polish capital had 88 serviced and coworking offices with a combined area of more than 196,000 sqm. In 2023, six new locations opened, adding over 18,700 sqm to Warsaw’s flex office stock. The largest – Mindspace in Skyliner – offers 4,400 sqm of flexible office space. The H1 of 2024 is expected to see another 4,200 sqm opened in two locations: Business Link in Studio B and Brain Embassy in Adgar Wave.
In 2023 as a whole, Warsaw’s office take-up totalled 748,800 sqm, representing a year-on-year decrease of 13 pct, with renegotiations accounting for 43 pct of the leasing volume. New leases made up 44 pct, followed by pre-lets and expansions contributing 9 pct and 4 pct respectively. Take-up predominantly came from business services (19 pct), manufacturing (14 pct) and IT (11 pct). According to Savills, at the end of Q4 2023, office availability in Warsaw amounted to just under 650,000 sqm, equating to a vacancy rate of 10.4 pct. This represents a decrease of 1.2 pp compared to the end of 2022.
Although rental rates remained flat in most office zones in 2023, prime office rents edged up during the H2 of the year. Average prime rents stood at EUR 22.5-26/sqm per month in the most prestigious locations of the Central Business District and held firm at EUR 13-15/sqm in Służewiec, the largest non-central office zone.
The largest tenants can expect favourable rental rates as a result of competition between developers of new office projects and investment funds owning older buildings. With pre-let rates in buildings under construction remaining low, developers are more willing to offer lower rents to companies leasing larger spaces. However, as more space is pre-let, developers are likely to gradually tighten pricing policies, with well-maintained older buildings in prime locations becoming more competitive.
Jarosław Pilch, head of office agency, tenant representation, Savills; head of Workthere Poland
2024 is shaping up to be a year of green leases which are becoming increasingly popular in Western European office markets.
Green provisions will enable tenants to manage their offices in a more sustainable way to achieve climate neutrality at the corporate level. Office landlords will in turn be able to secure better financing conditions while potentially higher rents under green leases will translate into more efficient management of a building and its standard.
Daniel Czarnecki
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