Positive Indicators in the Warsaw Office Market After the III Quarter of 2024

The rate of increase in new office space in Warsaw’s office market continues to remain significantly below the average of the past five years. Stable demand in the third quarter translates into further reductions in the vacancy rate, which currently stands at 10.7%.

Office resources in the capital in the third quarter of 2024 amounted to 6.26 million sq. m. The biggest concentration of office space is in central zones – 45% of total resources – and in Sluzewiec – 17%.

In the first three quarters in Warsaw, 75,000 sq. m. of office space was put into use, which is almost four times the space finalized in the similar period in 2023. At the same time, it should be emphasized that this result is significantly below the five-year average for this period, which is 220,000 sq. m.

In the third quarter, 3 new office buildings with a total area of over 11,000 sq. m. were put into operation.

“We continue to observe limited developer activity. There is 274,000 sq. m. of office space under construction. According to the schedule, by the end of the current year, one building – The FORM (28,000 sq. m.) will hit the market. More space will be available in 2025 when the market will absorb 62% of the currently under-construction area,” – comments Michał Kusy, a junior consultant in the market research department at Knight Frank.

“The past quarters in terms of demand showed a similar result to the same period in 2023. From January to September, leasing agreements for 492,000 sq.m were signed on the Warsaw office market. In the third quarter, the amount of leased office space exceeded 176,000 sq.m,” – adds Izabela Dąbrowska, director in the tenant representation department at Knight Frank.

From January to September, new contracts formed the majority of the leases, accounting for 50% of the volume. A significant factor was a large deal involving Santander Bank in The Bridge building (24,500 sq. m.). Renegotiations still constitute a significant percentage, reaching a level of 42%, showing that many tenants are still mindful of the costs associated with moving and fitting out new premises. A positive signal is the increasing share of expansions, which nearly doubled their activity and accounted for 7.3% after three quarters of 2024.

“Issues of sustainability are essential for tenants, and sustainable offices are part of their strategies. From January to September, the percentage of leased space in certified buildings was 65%. The high result is also influenced by the increasing number of buildings with green certificates,” – explains Izabela Dąbrowska.

The growing interest of tenants in high-standard buildings is also reflected in the low vacancy rate in the newest buildings. Their level in office buildings commissioned within the last 5 years is only 5.2%, more than twice as small compared to the average for Warsaw.

“The limited supply of new buildings and stable demand for rental influence the decrease in the vacancy coefficient, which has been falling since the beginning of the year. At the end of September 2024, it was 10.7% and was 0.2 pp. lower compared to the second quarter. The diversity of the vacancy rate also has a reference to the location. In central zones, the vacancy level was 8.9%, showing a decrease of 0.2 pp. compared to the previous quarter, while in zones outside the center it was estimated at 12.2%, decreasing by 0.1 pp.,” – supplements Michał Kusy.

The asking rents for office space in Warsaw in the third quarter of 2024 underwent a slight correction. In the best office buildings in the city center, monthly rents ranged from 18.00 to 28.00 EUR/sq. m./month, but in the top office buildings, rents can exceed this level. In non-central areas, asking rents usually ranged from 10.00 to 17.00 EUR/sq. m/month. Service charges remained stable compared to the previous quarter and usually are from 18.00 to 38.00 PLN/sq. m./month.