According to “Office Occupier – Warsaw Office Market”, a report published by real estate advisory firm Newmark Polska, new office supply reached 237,000 sqm in 2022, bringing Warsaw’s total prime office stock to close to 6.27 million sqm at the end of the year. The gross office take-up hit 860,000 sqm.
“In 2022, occupier activity on the Warsaw office market returned to pre-pandemic levels despite a slowdown in construction activity. Lease renegotiations and renewals continued to account for a relatively high proportion of total take-up, while vacancy rate decreased,” says Agnieszka Giermakowska, Research & Advisory Director, Newmark Polska. “2023 is shaping up to be a year of green leases and ESG solutions helping both tenants and landlords to bring costs down,” added the expert of Newmark Polska.
The fourth quarter witnessed the weakest quarterly growth with just 8,700 sqm delivered for DPD’s new headquarters. Last year’s key office completions in the city include the Varso Tower of Varso Place (64,000 sqm, the Central Business District, Q3), Forest Tower (51,500 sqm, Centre North, Q1), P180 (32,000 sqm, Mokotów, Q3) and SKYSAWA I&II (a total of 31,300 sqm, the Central Business District, Q1 and Q2).
Development activity remains relatively low. At the end of 2022, Warsaw’s development under construction amounted to 180,000 sqm, up by 12.5 percent in the third quarter and down by almost 50 percent year-on-year. Onsite works already commenced on VIBE (Ghelamco) and Drucianka Campus (Liebrecht&wooD) while such projects as Upper One (Strabag), The Form (Lincoln Property), T22 (Echo Investment/AFI Europe) or Fort 7 (Atenor) are currently at an advanced preparation stage. However, the annual development pipeline as scheduled for delivery in 2023-2024 will be below 100,000 sqm. This is the lowest volume the Warsaw office market has seen since 2000.
2022’s gross office take-up hit 860,000 sqm, up by over 33 percent on the previous year, with occupier activity returning to pre-pandemic levels. The highest leasing volumes were recorded in the first and fourth quarters: 266,600 sqm and 253,300 sqm, respectively. Occupier activity continued to focus on Warsaw’s central locations, where total take-up climbed to 505,500 sqm, accounting for close to 59 percent of all deals. However, during the fourth quarter, it was non-central locations that were targeted by tenants (160,300 sqm vs 93,000 sqm in the city centre).
“Lease renegotiations and renewals continued to account for a substantial proportion of leasing activity throughout 2022, making up 39,2 percent of last year’s total take-up and peaking in the second quarter (48%). Six out of the ten largest leases were renegotiations, including one renegotiation combined with expansion,” says Joanna Bartosiewicz, Senior Associate, Office Tenant Representation at Newmark Polska.
The remaining 60.8 percent was spread across new deals (39.5 percent), pre-lets (9.8 percent), expansions (8.5 percent) and owner-occupier deals (3.0 percent). Office demand in the Warsaw office market came predominantly from the financial sector (22.0 percent), business services (15.1 percent) and IT (14.5 percent).
At the end of December 2022, Warsaw’s vacancy rate stood at 11.6 percent, down by 0.5 pp over the quarter and 1.1 pp year-on-year. The highest year-on-year downward movements were recorded in the City Centre (3.8 pp), in the City Centre South (5.2 pp) in particular, while the biggest growth was in the North office zone (2.0 pp).
Rent indexation and a revision of service charges scheduled for Q1 2023 will push rental burdens up. Upward rental pressure is expected to continue, especially in most sought-after buildings and locations. Tenants looking for large offices are already facing a limited choice, especially in central locations.
