Pandemic-related economic and social restrictions have given rise to multiple questions on the office market. Will the demand for office space remain unabated? Will office projects underway be delivered on time? Cresa has reviewed pre-let levels and the progress of office projects currently under construction in Warsaw.
There is currently 704,000 sqm of office space under construction in Warsaw across 21 office projects. Of that total, 264,000 sqm is expected to be delivered in 9 office buildings this year compared to 162,000 sqm across 17 completions in 2019. More than 88% of the development pipeline is concentrated in central locations, especially in the vicinity of Daszyńskiego Roundabout, the eastern part of the Wola district (Bliska Wola) and the Central Business District. The largest concentration of development activity in non-central locations is in the Lower Mokotów district.
“We have done some research to find out whether the last three months have had any major impact on the office development pipeline in Warsaw. According to our sources, most projects, including the largest such as Skyliner and Warsaw UNIT, will be delivered to the market as scheduled. Of all the surveyed developers, only one is planning to postpone the delivery of an office building until next year. The nightmare scenario of infection clusters in construction companies or a major disruption to supply chains has not materialized. In addition, banks have not stopped financing and tenants have begun to return to their offices,” says Iga Kraśniewska, Analyst, Research & Advisory, Cresa Poland.
The survey has revealed that 50 percent of office space under construction has been pre-let. Office buildings scheduled for delivery in 2020 are already 64 percent pre-let. As for buildings to be completed in 2021-2022, negotiations are at an advanced stage for most office space, with approximately 40 percent already pre-leased.
There is still more than 90,000 sqm of vacant office space available in seven projects scheduled for completion this year. Unoccupied office space in buildings under construction amounts to 352,000 sqm.
“Despite the temporary economic lockdown, occupier interest in office buildings underway remains stable, and in the optimistic scenario, we are likely to see growth bounce back to the pre-pandemic level. However, due to the heightened risk sensitivity among tenants and investors, plans for many future projects will most likely have to be revised. Developers will have to face the tightened financial policy of banks and the uncertainty whether the market will be able to absorb newly-constructed office space,” adds Iga Kraśniewska.