In the first half of 2024, the Warsaw office market saw an evolutionary development in supply and demand. Developer activity is gradually returning to pre-pandemic levels, with 280,000 sq.m under construction at the end of June. On the demand side, we see a continuation of the renegotiation trend. Total demand reached 320,000 sq.m, a result comparable to the first half of 2023. The largest Polish advisory company in the commercial real estate market presents the report “Warsaw Office Market in the First Half of 2024”.
In the first half of 2024, over 60,000 sq.m of new office space became available in Warsaw. throughout this year, approximately 110,000 sq.m should be delivered to the market. In the first quarter of 2024, Yareal completed the construction of objects Lixa D (9,300 sq.m) and Lixa E (16,900 sq.m), and after renovations Saski Crescent (15,500 sq.m) from the CA Immo portfolio returned to the market, while Makro Cash and Carry built a building for their own needs at Al. Jerozolimskich (6,900 sq.m.). In the second quarter of 2024, Ghelamco completed the construction of the first phase of the Vibe complex (15,000 sq.m.). The completion of new investments only increased the total office supply on the market by 0.03%. At the end of June, it was estimated at 6.26 million sq.m due to changes in the function of selected existing projects.
However, in the coming years, we can expect an increase in new supply. At the end of June, 280,000 sq.m was under construction. The largest projects under construction include The Bridge (47,000 sq.m., Ghelamco), Upper One (35,900 sq.m., Strabag), the modernized V Tower (33,700 sq.m., Cornerstone), and Skyliner II (24,000 sq.m., Karimpol).
Emilia Trofimiuk, Research Manager, Market Analysis and Research Department, AXI IMMO, says: “Developers adjust their investment strategies to the expectations of tenants and their employees. Therefore, over 80% of the buildings under construction are projects located in central office zones. A significant part of them will be put into operation in 2025, around 160,000 sq.m. It should also be noted that investments started this year are mostly concentrated in downtown Warsaw”.
At the end of the first half of 2024, the average vacancy rate in Warsaw was 10.9%, which represents a stabilization compared to the previous quarter (-0.1 percentage point) with a decrease on an annual basis (-0.5 percentage point). The vacancy rate in the central zones remains on a downward trend, amounting to 9.1% at the end of the first half of 2024. The largest share of vacant space is currently found in Służewiec area (19.6%) and Żwirki and Wigury (13.5%).
Jakub Potocki, Associate Director, Office Space Department, AXI IMMO, comments: “Generational changes and a new style of work influence tenants’ decisions regarding the organization of office space. On one hand, tenants are willing to pay more per square meter for offices in central locations with good transportation. On the other hand, the priority becomes optimization and effective use of space. Meeting environmental standards by potential offices also becomes more important, with new projects with certifications at the “Excellence” level or higher being chosen more often”.
In the first half of 2024, renovations accounted for the majority of demand (51%) compared to new contracts (38%) and expansions (7%). Compared to the same period last year, net demand (i.e. tenant activity excluding renegotiations) decreased by 26%. Total tenant activity amounted to 320,000 sq.m and was 2% lower year-on-year. The office zone with the highest share of contract extensions was Służewiec (66%). In terms of sectors, we noted the highest activity among tenants from the following sectors: banking, manufacturing, business services, and IT. The largest transactions in the first half of 2024, between 13,000 and 14,000 sq.m, were contract extensions.
Bartosz Oleksak, Associate Director, Office Space Department, AXI IMMO, comments: “Due to the ubiquity of hybrid work organization, we observe the domination of medium and small transactions on the market. The average size of transactions on the office market from January to June 2024 was just below 1,000 sq.m. The largest new lease agreement was just under 4,000 sq.m. This is a reversal of the trend observed a few years ago related to consolidation of space, led by the banking sector”.
In the first half of 2024, rental rates remained stable, ranging from 19.50 EUR/sq.m/month to 26.50 EUR/sq.m/month in the most prestigious office buildings in central locations in Warsaw. In the non-central zones, the rental rates start from approximately 10.00 EUR/sq.m/month. Until the end of the year, the rates should remain stable in most investments. In June 2024, service charges in most modern office buildings in Warsaw ranged from 17.00 PLN/sq.m/month to 43.50 PLN/sq.m/month depending on the standard of the area and the location. The rates of service charges remain on an upward trend.
Source: https://ceo.com.pl/mala-stabilizacja-na-warszawskim-rynku-biurowym-w-i-polowie-2024-r-29543
