According to the latest Savills Warsaw Office Market report for the third quarter of 2024, Warsaw is characterized by stable rents, dynamically growing interest from tenants in flexible office space (flex offices), and an increase in investment in green building. The capital is strengthening its position in the Central and Eastern Europe region and the positive trends that dominate provide a solid foundation for further development of the sector. Here, we present five key aspects of this market, highlighting its potential and prospects for the future.
Key Office Market Data for Q1-Q3 2024
- 6.26 million sqm – total office supply
- 277,100 sqm – total under construction (an increase of 5% y/y)
- 75,000 sqm – new supply (increase by 270% y/y)
- 10.7% – vacancy rate (increase by 10 basis points y/y)
- 492,200 sqm – total demand (a decrease of 10 basis points y/y)
- 51,000 sqm – net absorption (decrease by 43% y/y)
Revival of Pre-Lease Agreements and Strong Supply
Savills’ report reveals a significant revival in the pre-leasing market in the third quarter of 2024. During this time, lease agreements for approximately 38,600 sqm of office space in projects under construction were concluded in central Warsaw locations.
According to Jarosław Pilch, Director, Head of Tenant Representation, Savills Poland, “The good result of pre-leases in the third quarter of the year meant that their share in total demand from the beginning of the year to the end of September was 9%. This is a positive signal for the market; tenants with greater optimism assess the business future and their need for modern workspaces and more boldly sign pre-lease agreements, and developers are doing everything to make office buildings rise as quickly as possible. Soon, new buildings will begin to fill the gap created by delaying investments in previous quarters. It should be noted that stopping projects in the past currently results in limited availability of large areas in the best locations, which reduces the choice for tenants looking for top-class spaces.”
From the first to the third quarter of 2024, 75,000 sqm of new space was delivered to the Warsaw office market, surpassing the entire 2023 result (61,000 sqm). The largest completed projects were the third phase of Lixa (26,300 sqm), Saski Crescent (15,500 sqm), and Vibe A (15,000 sqm). Over 70% of the new supply went to the city’s central locations.
Stable Rental Rates in Prestigious Locations
The Warsaw market is characterized by stable rents in key and central city districts. The rates for the best office spaces in the Central Business District (CBD) remain at 22.50-26.00 EUR/sqm monthly, which is good news for investors and property owners. The best locations attract both domestic and international companies, which appreciate the high quality of the space offered.
Despite the greater amount of space being prepared and under construction, in the next two years the growing interest of tenants in larger offices and signed large pre-lease contracts may further influence the increase in rents in the best, central locations. In zones outside the center, where competition will be greater, rents should remain stable, providing an alternative for tenants looking for competitively priced offices.
Growing Demand for Flexible Office Space
Flexible office spaces, including coworking, are becoming increasingly popular. Operators of such offices have already rented a total of 22,400 sqm in 2024. This trend is a response to the changing needs of companies, which are increasingly working on a hybrid work model. Employers are looking for spaces that allow for flexible adaptation of the area to team needs, which increases the popularity of short-term leases. Warsaw is a leader in this segment, offering a wide range of flexible spaces in modern office buildings.
The report’s authors note that while flex office operators are focused on offices in central locations, building owners in other parts of the city are setting up shared workspaces themselves. Such actions are intended to help manage vacancies and also give tenants the option to quickly rent additional space if needed.
Sustainable Development at the Heart of Investor Interest
Sustainable development and ecological construction are currently key aspects of the office market in Warsaw. More and more investments include environmental certificates, such as BREEAM and LEED, which increase the attractiveness of buildings in the eyes of tenants. Owners of older office buildings are also taking steps to adapt their buildings to new standards. Investment in modernization, improving energy efficiency, and implementing environmental-friendly solutions are becoming more common. As a result, Warsaw not only gains prestige but also attracts companies that focus on sustainable development in their business strategies.
Daniel Czarnecki, Director, Head of Landlord Representation, Savills Poland, notes, “From our experience, the owners of older properties are able to effectively manage the lease of their space, provided they invest in modern and energy-efficient solutions.”
Continued High Demand and Stable Vacancies
Demand for Warsaw offices remains stable. The total office space leased from January to September 2024 amounted to 492,200 sqm. Companies representing the financial, IT, business services and manufacturing sectors showed the greatest activity, indicating the dynamic development of these industries in the capital. Warsaw, as one of the main business centers in Central and Eastern Europe, attracts tenants from all over the world, offering high-quality office space at competitive prices. Stable demand and the development of sectors key to the economy are positive signals for the future, creating optimistic forecasts for the market.
According to Jarosław Pilch, Director, Head of Tenant Representation, Savills Poland, “The lower supply of space in the best locations encourages developers to resume work on projects that have been suspended so far. On the other hand, we see investors who are considering changing the purpose of their office projects in secondary locations, for example to residential investments.”
At the end of September, there were 670,700 sqm of office space available in Warsaw, which translated into a vacancy rate of 10.7% (a decrease of 20 basis points quarterly). In central zones, this rate was 8.9% (a decrease of 20 basis points y/y), while in zones outside the center, it rose to 12.2% (an increase of 40 basis points y/y).
Daniel Czarnecki points out that Służewiec and Centrum are the only office zones where the 100,000 sqm vacancy threshold has been exceeded – 208,500 sqm and 19.7% of vacancies, and 152,800 sqm and 8.4%, respectively. For comparison, in the CBD zone about 98,000 sqm is available (9.7% vacancies). The zones with the smallest available office space are North (5,800 sqm, 4.6%) and Ursynów and Wilanów (7,600 sqm, 6.2%).
Warsaw Still Leading
In 2024, the Warsaw office market is characterized by stability and growth potential. The revival in the pre-lease segment, stable rental rates, growing interest in flexible spaces, and emphasis on sustainable development provide solid foundations for the further development of this sector. The capital remains an attractive destination for investors and tenants, offering modern office spaces that meet the changing needs of contemporary business. Warsaw, being a key hub in Central and Eastern Europe, maintains its leading position.
Source: https://managerplus.pl/iii-kwartal-2024-r-na-warszawskim-rynku-biurowym-32872
