Warsaw, which has over a half of the national office resources, attracts business like no other city in Poland. According to the latest report by Walter Herz, investors are enticed by, among others, record-breaking demand for offices and high rate of return, reaching up to 9 per cent on the Warsaw market.
According to Walter Herz analysts calculations, since 2012, Warsaw office resources have been growing on average 6.5 per cent every year. Seven years ago, the city offered only 3.69 million sq m. of modern office space, and today it has 5.65 million sq m. of offices.Warsaw has five times more resources than Cracow or Wroclaw. Every year, a dozen or so new office buildings launch on the Warsaw market. The huge investment potential of Warsaw is confirmed by the number of projects that are currently being implemented in the city. In the agglomeration, almost 800 thousand sq m. of office space is under construction, while in Cracow 250 thousand sq m, and in Wroclaw about 200 thousand sq m is to be commissioned.
Three-quarters of offices in three districts
Business centers are developing primarily in three Warsaw districts: in Śródmieście, Wola and Mokotów. These three districts, combine a total of three-quarters of Warsaw offices (73 per cent). According to the Walter Herz report, Śródmieście district includes 26 per cent of all office buildings in Warsaw, Mokotów has 23 per cent, and in Wola, the fastest growing one – 17 per cent of office buildings.
The construction of the largest investments in the city, such as Warsaw Unit, Warsaw Hub, Skyliner, Generation Park and Mennica Legacy Tower takes place in the area of Daszyńskiego roundabout. After completion of their implementation, including several skyscrapers, this area will become one of the largest business centers in the country. Varso complex with the tallest building in the European Union will be built in the south-western part of the district, and will become the area’s trademark.
After completing the current constructions, Wola will reach a supply of 1.4 million sq m. of space, larger than today’s office resources of Cracow or Wroclaw. The district will offer a similar amount of space that is available today in Służewiec Przemysłowy, where the largest office area in Poland is located. This areas is now enticing tenants mainly with lower rent rates than in Śródmieście and Wola.
Facilities measuring 5-20 thousand sq m. are dominating
According to Walter Herz’s analysis, the average area of an office building in Warsaw is 11.4 thousand sq m. Over a half of Warsaw offices are located in facilities measuring from 5 thousand sq m. up to 20 thousand sq m. Office buildings with an area of 20 thousand sq m. up to 30 thousand sq m. are responsible for only 15 per cent of supply. However, over a quarter of space is provided by facilities exceeding 30 thousand sq m., which constitute only 7 per cent of the capital’s office buildings. One third of office buildings in the city offers less than 5 thousand sq m. and they include only 8 per cent of capital offices.
Diversification of the quality of office space offered in Warsaw translates into a large range of rental rates. – The most expensive space on the Warsaw market is nearly four times more expensive than the cheapest offered offices. The situation is similar with operating costs, the highest rates are over three times higher than the lowest ones – informs Bartłomiej Zagrodnik, Managing Partner at Walter Herz.
Expert notes that in recent years there have been visible changes in the amount of rent in the city. – After the drop in rates in 2012-2015, we can observe an increase in prices in central districts. The reason for the increases is the demand for space that is record-high and the supply is disproportionately low to demand. The situation may change in the next year, when 400 thousand sq m. of office space is planned to be handed over, half of which is now under construction in Warsaw. The investment boom we are witnessing is driven by attractive rates of return recorded in Warsaw, compared to the European markets. In the case of projects located in the city center, they remain at around 5 per cent, and in zones outside of it, they reach the level of up to 9 per cent. – admits Bartłomiej Zagrodnik.
On average, over EUR 15/sq m./month
According to the data included in the Walter Herz report, the average rent in Warsaw office buildings amounts to EUR 15.41/sq m./month. The cheapest office space offered in the city can be rented from EUR 7/sq m./month, but facilities with rates below EUR 10/sq m./month constitute only 2 per cent. In one-fourth of office buildings in Warsaw, the rent does not exceed EUR 12.5/sq m./month. In the most expensive office buildings, one has to pay almost EUR 27/sq m./month for office space.
The amount of operating costs is also very diverse, rates range from PLN 11/sq m./month up to PLN 29.5/sq m./month. In every fourth real estate, operating costs do not exceed PLN 17/sq m./month, and in almost 25 per cent of the buildings they amount to over PLN 21/sq m./month. The average cost in Warsaw is about PLN 19/sq m./month.
Increase in the use of technologies and pro-ecological solutions is affecting the costs associated with the operation of the facility. Buildings with certificates are characterized by operating costs lower than facilities that do not have them by nearly 4.5 per cent in the case of BREEAM and nearly 9 per cent in the case of LEED certification.
The largest amount of vacant offices is in Mokotów
In Warsaw, 27 per cent of office buildings has BREEAM certificates, and about 10 per cent has LEED certificates. Usually, the largest facilities have them, which means that more than half of the office space on the Warsaw market is certified.
The absorption of the capital market has reached a level that has not been recorded so far. Last year, over 850 thousand sq m. of office space was leased in Warsaw, while Cracow managed to lease over 200 thousand sq m., and Wrocław 150 thousand sq m. The interest in Warsaw offices translates into a drop in the vacancy rate. It has already dropped to an average of 8.7 per cent. The least vacant offices are in the center – 5.2 per cent, and in the vicinity of Aleje Jerozolimskie street – 6.7 per cent. In Mokotów, in the Służewiec region, 18.2 per cent is still available, whereas in the area surrounding Żwirki i Wigury street – nearly 17 per cent.
