Poland Office pre-leases make a comeback in Warsaw

Office take-up, previously dominated by renewals, saw a notable increase in pre-lets which accounted for 22 pct of the total leasing volume. Meanwhile, Warsaw’s vacancy rate continued its downward trend observed since the beginning of the year. Warsaw’s total office stock currently stands at 6.26 mln sqm, with new supply remaining constrained since the Q4 of 2022. Just under 75,000 sqm was delivered in the period January-September 2024, nearly 65 pct of which was completed in the Q1. In the Q3 of 2024, the Warsaw office market expanded by just over 11,000 sqm.

The annual supply in 2024 is expected to surpass 100,000 sqm, marking the second-lowest volume recorded in Warsaw after 2023. According to developers’ announcements, more than 170,000 sqm of new office space will be built in Warsaw in 2025. Developers continue to closely monitor and analyse market statistics, particularly tenant office requirements, and EU regulations regarding energy efficiency and the environmental impact of the built environment. As a result, development activity on the Warsaw office market remains relatively restrained. New construction will be driven by further interest rate cuts, making it easier for developers to sell their properties.
Karol Wyka, executive board director, head of Office Department, Newmark Polska.

At the end of September 2024, Warsaw’s development pipeline stood at just over 273,000 sqm, down by nearly 3 pct from the previous quarter but up by almost 8 pct year-on-year. No major office project broke ground in the third quarter of 2024. Leasing activity has remained relatively stable in the year to date, particularly in the last two quarters, which saw 178,100 sqm and 176,100 sqm transacted respectively. Total take-up for the period January-September 2024 reached nearly 492,200 sqm, a volume slightly lower than in the same period in 2023 (492,900 sqm). Non-central locations attracted the strongest occupier interest in the nine months to September, accounting for almost 57 pct of take-up. However the office zones with the largest shares of the leasing volume were the City Centre (nearly 26.5 pct) followed by Służewiec (21 pct).

In the Q3 of 2024, pre-lets accounted for an exceptionally large share of total take-up at nearly 22 pct. The remaining 78 pct was spread across new leases (34 pct), renewals (26 pct), owner-occupier transactions (11 pct) and expansions (7 pct). However, office take-up for the first three quarters of 2024 continued to be dominated by renegotiations which made up more than 42 pct of all deals. The most active tenants on the Warsaw office market from January to the end of September 2024 were financial services (17 pct), followed by professional services and IT (12 pct each).
Karol Wyka, Newmark Polska

At the end of September 2024, Warsaw’s vacancy rate stood at 10.7 pct, down by 0.2 pp from the previous quarter but up by 0.1 pp year-on-year. The vacancy rate is expected to continue its downward trajectory over the coming quarters due to moderate development activity and an increasing focus on the refurbishment or repurposing of existing office buildings, leading to their temporary or permanent withdrawal from the office market. In the third quarter of 2024, prime office rents remained unchanged over the quarter at EUR 22-27/sqm/month in the city centre and at EUR 16-18/sqm/month in non-central locations.

There continues to be strong occupier demand for offices featuring advanced technological and environmental solutions that improve energy efficiency, help optimise costs and support the ESG agenda. Consequently, owners of such office buildings have the upper hand in lease negotiations.
Agnieszka Giermakowska, Research & Advisory director, ESG lead, Newmark Polska