Despite an increase in developer activity in the Warsaw office property market in 2023, there are increasing signs that this segment is undergoing significant change. Over the past few months, only three new construction permits were issued and not a single decision regarding the conditions for development, according to the “Warsaw Crane Survey 2024” report prepared by Deloitte. In the meantime, the volume of rental space in Warsaw decreased, which was the result of both demolitions and major modernisations reducing the supply of office space.
The fifth edition of the Deloitte report dedicated to the Warsaw office real estate market indicates that last year, developers focused on previously started projects. The total number of 300,000 sq m of office space under construction is testament to this. Although it’s higher than the previously analysed period, the volume is still significantly lower than in 2021.
The authors of the publication also point to an upcoming slowdown in new investments. In 2023, 61,000 sq m of office space was put into use, the lowest figure since 2010. The reasons for this are varied, including increasing caution among developers when it comes to starting new investments, the spread of the hybrid work model, a shrinking land bank, and a decreasing number of construction permits since 2015. Last year, only three such consents were issued, four fewer than the previous year. Moreover, not a single decision on development conditions (WZ) has been recorded, though four applications have been submitted regarding this.
– “The Warsaw office market has certainly reached a turning point in its development. On the one hand, this is a natural slowdown in activity after two decades of very dynamic growth. On the other hand, global economic trends, such as the spread of remote and hybrid working or increasing tenant expectations regarding ESG issues, are impacting its condition. As a result, through slower increases in new space and the withdrawal of older office buildings from the market, we are seeing a reduction in supply. Some existing buildings will return to the market after thorough modernisation. The rest will either be demolished or their use or function will be changed, which will permanently reduce the office resources in the capital.” – says Dominik Stojek, partner and leader of the real estate sector in Poland, Deloitte.
Wola leads the capital
As in previous years, Wola has proved to be the leader in Warsaw office spaces. The district, which has completed projects totalling 760,000 sq m in the last five years, has a total of 1.9 million sq m of available office space. According to estimates cited in the report, this stock will exceed 2 million sq m by the end of 2026. Mokotów came in second place with 1.6 million sq m, and Śródmieście (Downtown) completed the podium with 1.34 million sq m.
While construction projects in most districts of Warsaw are at various stages of implementation, new construction permits have been issued for only three areas of the capital. In addition to Wola (the second stage of the Skyliner complex), these are: Żoliborz (Żoliborz Business Concept) and Włochy (stages 11 and 12 of The Park Warsaw complex).
Warsaw office building standard
One of the key factors influencing the rate of development of the Warsaw office market is administrative decisions. According to Marlena Happach, chief architect of the city of Warsaw, quoted in the report, new regulations on planning and spatial development had to be taken into account last year while working on the spatial study of Warsaw. The expert points out that a number of introduced legal instruments have been appreciated by city authorities. On the other hand, she points out that the 2025 deadline imposed by the regulations may turn out to be too soon to prepare general spatial development plans that consider the expectations and needs of all sides.
One of the most important aspects from the point of view of office space developers is the height of the building, which directly translates into maximising the space offered by a given property. The chief architect of Warsaw emphasised that this issue was one of the longest-analysed elements of the new study. In her opinion, the draft provisions take into account the necessity of protecting the historic city panoramas while striving to create a symbolic dome over the central part of the capital. The 180-meter height limit for skyscrapers provided for in the draft, colloquially referred to as the “Warsaw height”, allows for both visual and historical aspects to be taken into account while also meeting the needs of investors due to its cost-effectiveness in implementation.
Modernisation as a new trend
The report highlights that an increasing phenomenon is the growing efficiency of property development and replacing existing properties with new buildings. The reasons for this are not only changes in the work model, but also both national and European legal regulations. According to experts, the inefficient use of space, combined with the rising costs of adapting structures to new requirements (including ESG), leads many investors to demolish existing buildings. An example is the demolition work at Rozbrat 44A, where a new office building is planned. Construction has also begun on a 130-meter tower on the site of the former Atrium International. An application has also been submitted for the demolition of the building at Redutowa 9/23.
– ” The decline in land supply, combined with rising energy retrofitting costs and the need to implement ESG requirements, is forcing a change in developers’ investment policy. As a result, more and more buildings that were constructed at the beginning of the 21st century are making way for new projects that replace them. This new trend represents an opportunity to popularise more efficient construction in terms of space utilisation, but this requires the implementation of regulations that clearly regulate the increase in new skyscrapers” – emphasises Dominik Stojek.
