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Consolidations drive the Warsaw office market forward

The supply of newly-constructed large-scale projects has led companies to revise their office leasing strategies, which resulted in more than 400,000 sqm transacted in the first half of the year. Among the most notable deals are the consolidations of head offices by such companies as mBank, Getin Noble Bank and Warta. 2019 is therefore a year of consolidations and records on the Warsaw office market.

According to “Occupier Economics: Office Market in Warsaw in H1 2019”, a report published by real estate advisory firm Cresa Poland, office take-up came to 265,800 sqm in Q2 2019, the highest quarterly level on record. In the first half of 2019, total office supply amounted to more than 80,000 sqm, less than half the volume posted a year ago. The limited supply and robust occupier demand pushed Warsaw’s vacancy rate down to 8.5 percent, its lowest in about six years. This is likely to change in the coming years, with several large office projects expected to be completed in the centre of Warsaw.

“Following last year’s coworking boom, the largest tenants are stepping up activity and transforming the capital’s office market. Given the large number of leases under negotiations, we expect this year’s total take-up to hit approximately 800,000 sqm, matching last year’s level,” says Artur Sutor, Partner, Head of Office Department, Cresa Poland.

In H1 2019, leasing activity topped 400,000 sqm, accounting for 54.3 percent of the total average take-up for 2013-2018. The largest transaction of the first half of the year was the lease for 18,500 sqm by Getin Noble Bank at The Warsaw Hub C, followed by Warta’s 17,600 sqm letting at The Warsaw Unit. July 2019 witnessed a record deal on the Polish office market for 45,600 sqm at Mennica Legacy Tower done by mBank.

Warsaw’s office stock has risen by approximately 2.5 percent over the year to the current 5.54 million sqm. The city’s vacancy rate stood at 8.5 percent at the end of H1 2019, down by 2.6 pp compared to the end of June 2018, its lowest in about six years.

Ten new office projects with a total area of 80,544 sqm were completed in the first half of this year, including Vector+ (13,700 sqm, Profbud), Spark B (15,700 sqm, Skanska), The Park 6 (11,200 sqm, White Star Real Estate), and My Place B1 (18,700 sqm, Echo Investment). In the first half of 2019, office absorption hit 86,455 sqm, half of the volume recorded a year earlier.

“Despite the weaker absorption in the first half of the year, the market will still evolve in a growing pace in the coming quarters. The market will, however, be put to the test in 2020–2021, when approximately 800,000 sqm of new office space will come on stream in Warsaw,” says Bolesław Kołodziejczyk, PhD, Head of Research & Advisory, Cresa Poland.

Asking rents currently stand at €13-14.5/sqm/month in Służewiec, €13.5-15.5 in Jerozolimskie Avenue, €15.5-19.5 in Nowa Wola, and at €16-23.5/sqm/month in the Central Business District.

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