According to experts from the international consultancy agency Cushman & Wakefield in their report “Trends Radar. Real Estate Market: From Stabilization to Optimism”, demand across all office markets in Poland is expected to remain at levels similar to 2022-2023. Additionally, gradual stabilization and a decrease in vacant office space are anticipated, both in Warsaw and the regions. The office development market is expected to operate at a slower pace in the coming years, opening opportunities for modernization work on existing office stock. Notably, the quality of office space in Poland ranks among the best in Europe.
For instance, Cushman & Wakefield’s global report “REThinking European Offices 2030 – Risks and Opportunities from Obsolescence” indicates that the percentage of office buildings in Warsaw that will be considered obsolete by 2030 is relatively low, at 40%. In comparison, the average for the seven main office markets in Western Europe (Amsterdam, Barcelona, London, Madrid, Milan, Paris, and Stockholm) is twice as high, at 80%.
2024 Projections for the Office Market
Cushman & Wakefield estimates that Warsaw’s office market will expand by approximately 105,000 square meters in 2024. Although this figure is 40,000 square meters higher than in the previous year, it remains about 60% lower compared to the 2010-2022 period. In regional cities, where the market lags about a year behind the capital, the first significant decline in new office supply is being observed this year. By the end of 2024, the supply will reach 120,000 square meters, marking a 65% reduction compared to the 2010-2022 period.
According to Vitalii Arkhypenko, Market Analyst at Cushman & Wakefield, “The decline in new investments may last until the end of 2026 for the Warsaw market and a few quarters longer for regional cities.”
Falling Vacancy Rates and Stable Demand
Stable demand and reduced development activity have led to a downward trend in Warsaw’s office vacancy rate since the second half of 2021. By mid-2023, the rate stabilized between 10-11%, with further compression expected in the coming quarters.
In regional cities, the vacancy rate is higher, averaging 17-18%. Nonetheless, reduced supply and stabilizing demand point to a gradual improvement in these markets.
Michał Galimski, Partner and Head of Regional Markets at Cushman & Wakefield, notes, “In regional cities, the absorption of vacant space is influenced by market specifics. Unlike in the capital, IT and business services sectors dominate the tenant profile, and post-pandemic office attendance remains lower compared to headquarters.”
More Tenants, Smaller Offices
In 2024, demand in both Warsaw and regional office markets is stabilizing at levels similar to 2020-2021.
“We expect tenant activity to increase in the coming years. However, the average leased office space has decreased to around 900 square meters. Between 2017 and 2019, tenants in Warsaw typically leased 1,000-1,200 square meters, and in regional cities, 1,300-1,400 square meters,” explains Michał Galimski.
Since the pandemic, lease renewals have remained higher, accounting for about 40% of total demand, compared to 30% before the pandemic. Renegotiations dominate larger leases exceeding 3,000 square meters.
In Warsaw, the most significant transactions, including pre-leases, occur in central locations, reflecting continued interest in new offices and a potential rise in relocations. At the same time, markets within the same city are moving at different paces. Central areas experience low vacancy rates, rising rents, and high investor motivation for new projects. Conversely, office markets outside the city center remain stagnant.
Jan Szulborski, Business Development & Insight Manager at Cushman & Wakefield, comments, “This aligns with findings from the report ‘REThinking European Offices 2030,’ which shows a trend across Europe where tenants focus on securing prime office spaces in city centers with modern amenities and sustainability standards.”
How Quickly Do Office Assets Age?
Increased demand in Poland’s largest city centers will continue to attract developers. What does this mean for non-central areas? Greater space availability, a significant drop in investments, and stagnating rent levels. Over time, these areas may experience faster obsolescence of office assets.
Obsolete office buildings are those that lose value due to rising structural vacancies, changing employee needs, shifts in space design, and tenant space optimization. Economic challenges and ESG (Environmental, Social, and Governance) regulations also play a crucial role. Notably, Warsaw performs better than more mature Western markets in this regard.
As per the “REThinking European Offices 2030” report, only 40% of Warsaw’s office spaces are projected to become obsolete by 2030. In comparison, Milan’s rate is 86%, Barcelona and Stockholm are at 81%, and Paris at 80%. London, Amsterdam, and Madrid follow closely with 80%.
The Future of Office Space
Regardless of building age, long-term office assets will face increasingly stringent EU ESG directives, focusing on zero-emission solutions and improving workplace comfort. As the market matures and new office supply and investment land become limited, modernizations, partial redevelopments, and conversions of older office buildings into residential, hotel, or retail purposes are expected to rise.
Source: CEO.com.pl
