According to real estate advisory firm Savills, development activity has cooled dramatically in the Warsaw office market. There is currently close to 230,000 sqm under construction, of which just over 115,000 sqm is scheduled for completion in 2023–2024.
At the end of September 2022, Warsaw’s office stock amounted to 6.34 million sqm, having expanded by 3 percent in the first three quarters compared to the same period last year, says Savills. Key market highlights of the past three months include the completion of the Varso Tower, Poland’s tallest office building, offering 63,800 sqm of office space in the very heart of the Polish capital.
The office development pipeline in Warsaw comprises several projects at an advanced planning stage which are expected to break ground soon subject to favourable market conditions. Savills forecasts that some will be completed in 2024, helping to fill the growing supply gap. According to reports from developers, office availability is unlikely to improve substantially until 2025, which is expected to see over 300,000 sqm of new office space built across Warsaw.
At the end of September 2022, the year-to-date office take-up in Warsaw reached 608,100 sqm, representing a 55 percent increase at the same time in 2021 and accounting for 95 percent of last year’s total leasing volume. Occupier activity focused on central zones which saw 413,800 sqm transacted, or 68 percent of the total take-up, compared to 194,300 sqm leased in non-central locations. Of the central zones, Śródmieście (the central district) reported the strongest demand with 272,500 sqm of office deals, making up 45 percent of the total Warsaw take-up, while Mokotów topped the league table of non-central locations with 89,400 sqm.
“High inflation and rising fit-out costs, coupled with shrinking office availability in the central areas of the city, are likely to push rental rates up, both in new leases and as a result of rent indexation in existing agreements. In addition, tenants may also face rising service charges. When searching for savings, particularly in new buildings, landlords are increasingly favouring longer seven-year leases to make up for rising fit-out costs and to be able to offer tenants offices built to a high standard,” comments Daniel Czarnecki, Head of Office Agency, Landlord Representation, Savills.
Prime headline office rents have held firm in Warsaw for an extended period of time. Rental rates in prime office buildings are in the range of €21-25.5/sqm/month in the most prestigious locations in the Centre, with an upward trend recorded in some buildings, and €13-€15/sqm/month in Służewiec. According to Savills, at the end of September 2022, Warsaw’s vacancy rates stood at 11.1 percent in the city centre and at 13% in non-central locations.