From January to the end of September 2023, the total demand for modern office space in Warsaw amounted to nearly 0.5 million sqm. Tenants often choose two contract options, i.e., they relocate to a new space or decide to renegotiate existing terms. The vacancy rate is decreasing, standing at 10.6% at the end of September 2023. On the supply side, developers delivered just over 20,000 sqm to the capital’s office market in January-September 2023, indicating a supply gap period in Warsaw. Nevertheless, more than 240,000 sqm is under construction, most of which will be completed by the end of 2025. Poland’s largest consulting firm, AXI IMMO, analyzes the Warsaw office market in its report “Office Market in Warsaw Q3 2023.”
In Q3 2023, one new project was delivered to the Warsaw office market, i.e., building A2 ( 1,900 sqm), part of the S-Bridge Office Park complex. In the first nine months of 2023, developers delivered 20,250 sqm. The capital's total office stock now stands at 6.2 million sqm.
As of the end of September 2023, 240,000 sqm of office space remained under construction, mainly in the Center-West zone, close to Daszyńskiego Roundabout. Examples of future projects include The Bridge (47,000 sqm, Ghelamco), Office Building B within the Towarowa 22 complex (31,100 sqm, Echo Investment), The Form (28,000 sqm, Lincoln Property), Lixa D & E (26,300 sqm, Yareal), Studio B (17,900 sqm, Skanska) or Vibe (15,000 sqm, Ghelamco).
In Q3 2023, the vacancy rate on the capital's office market decreased to 10.6%. In the center it was 9.1%, and outside the center it was 11.8%. The Służewiec zone recorded the most vacant space (20.2%), while the Center-North zone had the least (3.7%).
Emilia Trofimiuk, Research Manager, AXI IMMO, explains: "As a result of the supply gap, the vacancy rate in the capital's central office zones is 2 pp. lower than in previous years compared to last year, and as much as 4.1 pp. lower than two years ago."
In Q3 2023, tenants signed 170,000 sqm office space. The result was similar to the first and second quarters (about 160,000 sqm and 170,000 sqm, respectively), which means that in the first nine months of 2023, total demand amounted to about 500,000 sqm (-19% y/y).
Bartosz Oleksak, Associate Director, Office Agency, AXI IMMO, said: "This year, we have seen a gentle increase in tenant activity every quarter. However, the high number of renegotiations highlights the fact that there is a lack of new supply and possible relocation to new space. We also see that many companies have redefined their needs for both office size and fit-out after the pandemic. Currently, averaged fit-out costs are closing in on around EUR 1,000 per sqm. On the other hand, the waiting time for a turnkey office is between 4 to 6 months. Arranging modern spaces to attract the best talent remains an ongoing trend. Many tenants use a hybrid mode as part of their benefits, with the most common model offering one or two days of work from home."
In Q3 2023, the highest tenant activity was recorded in the following office zones and subzones: Center-West (20% of Warsaw demand), Służewiec (19%), and Central Business District (14%). For the Warsaw market as a whole, the share of new contracts between July and the end of September 2023 was 53%, renegotiations accounted for 43%, while both expansions and space developed for own use each accounted for 2%.
Emilia Trofimiuk, notes, "In the area of the Center-West subzone and the CBD zone, new contracts dominated, i.e., 79% and 74% of the space leased in these locations in Q3 2023, respectively. In Służewiec, companies mainly renegotiated and extended existing contracts, translating into 60% of tenant activity in the analyzed quarter in this zone."
The largest deals in Q3 2023 include a 7,000 sqm pre-let by ING Hubs Poland at The Form, a nearly 5,500 sqm lease extension by Elavon at Europlex, a 4,800 sqm contract renegotiation at Cherry Business Park F, and a 4,700 sqm lease extension by Sii at Metron.
The starting rental rates in the most prestigious office buildings in central locations of the capital office market as of the end of September 2023 amounted to EUR 19.00-27.50/sqm/month, while in non-central areas rents started at around EUR 10/sqm/month. On the other hand, the rates for service charges in the analyzed period ranged from about PLN 12/sqm/month to PLN 39/sqm/month, with the standard and location of the office building being of great importance in their case.