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Strong demand drives occupier activity on the Warsaw office market

According to the latest “Occupier Economics” report prepared by Cresa Poland, gross take-up hit an all-time high in the Warsaw office market in 2019. Leasing volume came to almost 880,000 sqm, up by nearly 42,000 sqm on the previous peak year 2015. The market reported an approximately 7 percent increase in total office take-up in the four quarters of 2019 compared to the annual average for 2015-2019.

“Notwithstanding healthy supply levels, tenants are being driven by robust demand for new offices to sign pre-lets for office space scheduled for delivery not only in 2020, but in 2021,” says Artur Sutor, Partner, Head of Office Department, Cresa Poland.

Warsaw’s office market expanded by approximately 2.3 percent year-on-year to the current 5.59 million sqm. 17 new office projects with a combined area of approx. 162,200 sqm were delivered to the Warsaw market in January-December 2019. The key completions in Q4 2019 included White Star Real Estate’s EC Powiśle B1 (5,000 sqm) and Golub GetHouse’s Mennica Legacy West (14,900 sqm), both delivered in locations attracting strong occupier interest.

The largest transactions in 2019 were: the lease of 45,600 sqm at Mennica Legacy Tower by mBank, and renegotiations by Orange at Miasteczko Orange (44,850 sqm) and by T-Mobile at Marynarska 12 complex (27,400 sqm). Another significant deal was a lease of 24,000 sqm by PKO BP at Chmielna 89.

Office absorption amounted to 195,800 sqm in the four quarters of 2019, down by 48 percent compared to the end of 2018.

“At the end of Q4 2019, the Polish capital’s vacancy rate stood at 7.7 percent, down by 1 pp year-on-year. Driven by both healthy occupier demand and the growing base effect, it has continued its downward trend ever since mid-2016, when the vacancy rate reached a seven-year high of 15.1 percent,” says Bolesław Kołodziejczyk, PhD, Head of Research & Advisory, Cresa Poland.

Asking rents stand at EUR 12.5-14.5/sqm/month in Służewiec, EUR 12.5-14.5 in Jerozolimskie Avenue, EUR 16.5-19.5 in Nowa Wola, and at EUR 17-23/sqm/month in the Central Business District.

“Despite considerably lower rental rates compared to central locations and a relatively high vacancy rate, Industrial Służewiec continues to beckon tenants with road improvements and other placemaking projects. Office rents hold firm in Warsaw, but rising service charges continue to have a major impact on occupancy costs,” comments Artur Sutor.

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