Development activity on the Warsaw office market gradually recovers amid falling vacancies

Daniel Czarnecki Savills
Daniel Czarnecki, Head of Landlord Representation, Office Agency, Savills Poland

Office availability on the Warsaw office market is shrinking, with the vacancy rate for the whole city down to 10.6% and to just over 9% in the centre, says real estate advisory firm Savills. Tenants are, however, likely to enjoy a wider choice of options once more office projects are restarted. This process is already slowly getting underway, as is clear from the growing development pipeline.

According to Savills latest report, Warsaw’s total office stock reached 6.2 million sq m at the end September 2023 following the completion of 20,300 sq m of new office space across four projects, the largest being The Park (White Star Real Estate, 11,000 sq m).

The office development pipeline currently stands at nearly 263,000 sq m, of which 82% is in the city centre. Of that total, 143,000 sq m is scheduled for completion by the end of 2024.

Development activity which steadily slowed down since the onset of the Covid-19 pandemic in 2020 is gradually gathering pace, with five new office projects breaking ground in Warsaw in 2023. Some developers have, however, put projects on hold until more space is pre-let in those currently under construction,” comments Daniel Czarnecki, Head of Office Agency, Landlord Representation, Savills.

The largest office projects scheduled for delivery in 2025-2026 include The Bridge (Ghelamco, 47,000 sq m), Upper One (Strabag Real Estate, 35,500 sqm) and Towarowa 22B (Echo Investment, 31,100 sqm).

In January-September 2023, total office take-up in Warsaw reached 496,600 sq m, down by around 18% from the same time last year. Despite this, leasing activity continued to pick up pace from quarter to quarter (157,400 sq m in Q1, 165,200 sq m in Q2 and 174,000 sq m in Q3), notes Savills.

New leases accounted for 52% of the total office take-up, while pre-lets made up nearly 7% and expansions just under 4%. Renegotiations totalled almost 189,000 sq m, accounting for 38% of all deals. By comparison, renegotiations made up 39% in the whole of 2022, with new leases, expansions and pre-lets contributing 43%, 8% and 10% respectively.

Flexible office operators leased 10,600 sq m in Warsaw through six transactions, including three in new locations: OmniOffice in the Warsaw UNIT (3,200 sq m), Grzybowska Park (1,400 sq m) and Business Link in Studio B (3,000 sq m).

According to data from Savills, Warsaw’s vacancy rate stood at 10.6% at the end of September 2023, down by 1.5 pp year-on-year. Prime office rents remained unchanged at EUR 22.5-26/sq m/month in the most prestigious locations in the Centre and EUR 13.00-15.00/sq m/month in Służewiec. Office tenants are, however, facing high service charges.