Optimism in palpable in Warsaw office market

Despite a supply gap and a low level of new completions, there is a lot of optimism in the Polish capital’s office market. Considering the relatively high occupier demand, it is good news that the over 230,000 sqm scheduled to be delivered in the next three years will significantly increasing the amount of office space, AXI IMMO reports.

Developers completed 18,700 sqm of space in H1 2023, according to tha latest report released by AXI IMMO. Total modern office stock in Warsaw amounts to over 6.25m sqm. The largest of the schemes completed in the first half of the year is building B9 (11,000 sqm) within The Park Warsaw complex. The central zones (City Centre and the Central Business District – CBD – 2,78 million sqm) account for 44% of total office stock in Warsaw, while non-central zones account for the remaining 56%. The largest non-central zone is Służewiec (1,08 million sqm, 17% of stock).

As at the end of June 2023, approx. 230,000 sqm of office space was under construction. In addition, there is the Saski Crescent which is currently in renovation and will add another 15,500 sqm when delivered. Among the most awaited projects in the pipeline for 2024-2025 are The Bridge (Ghelamco, 47,000 sqm), Building B within the mixed-use Towarowa 22 scheme (Echo Investment, 31,100 sqm) and The Form (Lincoln Property & Enern, 28,000 sqm).

New completions have not translated into an increase in vacancy

The average vacancy rate stood at 11.4% as at the end of June 2023 (-20 bps q/q and -50 bps y/y). It continues to remain higher outside of the centre (12.7%) compared to the central zones (9.9%). The largest amount of vacant space is available in Służewiec (approx. 220,000 sqm; 20.6%). On the other hand the amount of vacant space in the Centre and the CBD stood at approx. 150,000 sqm (8.5%) and approx. 120,000 sqm (12.4%), respectively.

Despite a relatively large amount of space available in the central zones, we can see from the number of letters of intent signed and the space they concern that the office offer is becoming limited for many occupiers. We often observe that an occupier is able to realistically choose from just two to three offers that match their needs. Due to high demand, especially for modern office space located in the centre, landlords have a relatively high degree of bargaining power. As a result, it has become difficult to negotiate the rent and other costs down or obtaining attractive incentives such as rent-free periods or increased fit-out contributions. In this landlord market, an attractive office space will be secured by a firm that decides to sign the lease first.” – Jakub Potocki, Associate Director, Office Leasing Department, AXI IMMO

Rents remained stable?

Take-up in the Warsaw office market reached nearly 326,000 sqm (-33% y/y) in H1 2023, with 167,000 sqm leased in Q2 (+5% q/q). New leases (including pre-lets) accounted for 60.2% of take-up, followed by renewals (35.4%) and expansions (4.4%). The Centre and the CBD zones attracted approx. 58% of total leasing activity in H1. The most important examples of occupier activity are: a lease renewal by Accenture (8,800 sqm at Proximo II) and a lease renewal by Lionbridge Poland (7,100 sqm at the Taifun building). In addition, DPD moved into their new HQs with 8,700 sqm of office space.

At the end of Q2 2023 asking rents on the Warsaw office market remained stable compared to the previous quarter. Asking rents stood at EUR 18.00 to EUR 27.50/ sqm/ month in prime office buildings in the central zones and started from EUR 10.00/ sqm/ month outside of the centre. Service charges ranged from PLN 12.00 to PLN 39.00/ sqm/ month.


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