The Warsaw office market is seeing signs of upcoming renewed development activity, says real estate advisory firm Savills. Three new office buildings were delivered in the first half of 2023, but a significant increase in new supply is not expected until 2025.
According to Savills latest report, Warsaw’s office stock was 6.25 million sq m in the first half of 2023, with that total slowly becoming evenly distributed between the central zone and non-central locations.
The first six months of the year saw three new office completions, the largest being The Park 9 (White Star Real Estate, 11,000 sq m). The development pipeline comprises close to 250,000 sq m of office space. New starts reported in 2023 include the first phase of a mixed-use complex Towarowa 22 (Echo Investment, 31,100 sq m) and The Form (Lincoln Property, 28,000 sq m).
Projects scheduled for delivery beyond 2023 include The Bridge (Ghelamco, 45,000 sq m), the next phase of Studio (Skanska Property Poland, 24,000 sq m) and Upper One (Strabag Real Estate, 35,900 sq m), which will replace Atrium International, whose demolition is nearing completion. Renewed development activity is likely to result in more than 300,000 sq m of new office rental stock coming to the market in 2025.
Office take-up for the first half of the year surpassed 325,000 sq m, down by 32% compared to the same time last year. New leases accounted for 57% of that total (43% in 2022). Renegotiations made up 35% (39% in 2022), with expansions and pre-lets contributing 4% each (8% and 10% in 2022, respectively).
“After development activity slowed in the last two years, there are first signs of a recovery on the way. However, before tenants are able again to choose from new office completions, we will continue to see many renegotiations or relocations to existing buildings having suitable vacant stock,” comments Daniel Czarnecki, Head of Office Agency, Landlord Representation, Savills.
According to data from Savills, Warsaw’s vacancy rate stood at 11.4% at the end of June 2023, down by 0.5 pp year-on-year. Prime office rents were in the range of EUR 22.5-25.5/sq m/month in the most prestigious locations in the Centre and EUR 13.00-15.00/sq m/month in Służewiec. Tenants are, however, facing rising service charges.
“Service charges which last year were widely expected to start increasing have risen above PLN 30.00 per square metre per month in modern offices in Warsaw, exceeding PLN 35.00 for some buildings. Tenants are, therefore, increasingly opting for a rigorous audit of such costs in the offices they occupy or are planning to relocate to in order to make savings,” adds Krzysztof Sakierski, Head of Strategic Advisory, Savills.
