According to “Occupier Economics: Office Market in Warsaw in H1 2018”, a report prepared by global tenant-only real estate advisory firm Cresa, office take-up was 58 percent higher than the annual average for the last five years. Robust occupier activity was largely driven by professional services and IT.
“There is a growing number of larger tenants viewing lease renegotiations as a viable alternative to relocations. This is due to limited availability of vacant office space and the increasing financial demands of landlords, particularly owners of more centrally located office buildings. The current market dynamics will not change until late 2019, when another wave of new supply is expected to come onto the market. However, smaller tenants still have a chance of finding a new office in a prime location either on a traditional lease or co-working basis,” said Artur Sutor, Partner, Head of Office Department at Cresa Poland.
Warsaw’s total office stock rose by nearly 5 percent year-on-year to 5.41 million sqm. 15 office schemes were delivered to the market in the year to date, including Equator IV (19,200 sqm, Karimpol), CEDET (14,300 sqm, Immobel), Centrum Marszałkowska (13,100 sqm, BBI Development / WSS Społem), with the highest concentration of development activity in central zones. No large-scale office completions are expected in the second half of the year.
In H1 2018, office take-up hit more than 420,000 sqm, most of which was transacted under new leases (66.1 percent), followed by renegotiations (24.0 percent) and expansions (9.9 percent). Key lease transactions on the Warsaw market included a confidential tenant’s lease of 14,800 sqm at Piękna 2.0, Cambridge Innovation Center’s 13,500 sqm lease at Varso II and LOT’s 11,800 sqm renegotiation at PLL LOT’s office building.
Headline rents vary according to district and stand at EUR 10.5-14/sqm/month in Służewiec, EUR 13-19/sqm/month in Nowa Wola and EUR 16-23,5/sqm/month in the city centre.
At the end of June 2018, Warsaw’s vacancy rate stood at 11.1 percent, down by 2.7 p.p. compared to last year. The largest volumes of vacant office space were in the Mokotów district (213,900 sqm) and in the city fringe (102,400 sqm). Absorption amounted to 168,000 sqm in H1 2018, up by more than 25 percent on the same period last year.
“The vacancy rate will remain under downward pressure in the next two quarters due to the occupier demand and supply imbalance. Absorption is, however, likely to fall on account of substantially smaller volumes of office space scheduled for delivery in that period. Taking advantage of the current situation, some landlords are raising effective rents,” said Bolesław Kołodziejczyk, PhD, Head of Research & Advisory, Cresa Poland.
