Warsaw’s office market on the road to recovery

The Warsaw office market is showing signs of a long-awaited recovery, says real estate advisory firm Savills. Office take-up hit 273,200 sqm in the first three months of the year, which were one the best-performing quarters in the history of the capital. Savills forecasts that with office availability continuously shrinking in the city centre, the market is set for further rental growth next year.

According to Savills latest report, Warsaw’s total office stock amounted to 6.23 million sqm in Q1 2022, of which 2.77 million sqm was in central locations. Six new office buildings with a combined area of 93,400 sqm were delivered to the market in the year to date. The largest completions included the Forest Tower (51,500 sqm), Lixa C (19,400 sqm), Skysawa (8,500 sqm) and Fabryka PZO II (5,000 sqm).

The office development pipeline in Warsaw currently stands at 323,800 sqm, of which 201,800 sqm is under construction in central zones. The largest projects underway include the Varso Tower (66,300 sqm), The Bridge (47,000 sqm) and Skyliner II (38,000 sqm), with the first of the three to be delivered this year.

The office market is experiencing a significant influx of Ukrainian companies looking to relocate to Poland. Newcomers to Poland particularly favour flexible offices which can be easily customized to current staff requirements.

According to Savills, Warsaw’s vacancy rate stood at 12.2 percent at the end of March 2022, down by 0.5 pp quarter-on-quarter. In Q1 2022, prime office rents were in the range of €21-25.5/sqm/month in the most prestigious zones in the Centre and €13-15/sqm/month in Służewiec, the largest non-central business district of the capital.

“Due to shrinking office availability limiting relocation options and the increasingly unpredictable growth in fit-out costs, some tenants favouring central locations are likely to renew their leases in the near future. Availability in the very heart of the city is expected to fall further and to translate into significant rental growth next year, albeit currently mainly headline rents are being affected and there is still room for negotiating lease incentives,” says Daniel Czarnecki, Head of Landlord Representation, Office Agency, Savills Poland.