Warsaw Office Market in H1 2024: Stable Demand Met with Renegotiation Focus

The total area of office space rented in Warsaw in the first half of the year amounted to over 316,000 square meters. Despite steady demand, tenants approach relocations cautiously, more often choosing to renegotiate ending contracts.

At the end of June 2024, the total office resources in Warsaw stood at 6.26 million square meters and changed slightly compared to the previous quarter. From April to June, only one object – VIBE A with an area of 15,000 square meters, was put into service.

“In the first half of 2024, the total new supply is almost 64,000 square meters, which is 3.5 times larger compared to the same period in the previous year. We expect another 36,800 square meters to be handed over in three projects by the end of the year,” – comments Michał Kusy, a junior consultant in the market research department at Knight Frank.

The central zones dominate in terms of resources, where 45% of all office space is located. Meanwhile, in Służewiec, which recently has been undergoing significant spatial transformations, nearly 17% (1.1 million square meters) of Warsaw’s office resources is located. The popularity of the Rondo Daszyńskiego area and central locations is also evident in the significant share of this part of the city in the space under construction. Almost 89% of the currently implemented area is being built in this area.

The first half of the year saw stable demand compared to the same period in 2023, amounting to over 316,000 square meters.

“We observe a continued trend of tenants choosing locations outside the central ones, where a favourable price to standard ratio exists. Our analysis shows that over 57% of office space was mainly rented in Służewiec and along Aleje Jerozolimskie. This correlates with the analysis of lease agreements, as tenants place greater emphasis on cost reduction and more often opt for renegotiations. In the first half of the year, they made up over 51% of the transaction volume,” – explains Piotr Kalisz, director of the tenant representation department at Knight Frank.

New contracts came second with a 41% share, and expansions made up just under 8% of the volume.

The proportion of office space rented in certified buildings is growing, reaching 75% in the first half of 2024 (up from 54% in 2023). This indicates a growing attachment of tenants to eco-friendly and sustainable office buildings on one hand, and a growing number of buildings with green certificates on the other.

A significant demand surplus over the new supply affected the vacancy rate, decreasing it by 0.1 percentage points compared to the previous quarter to 10.9% at the end of June. Compared to the same period in the previous year, the drop was even bigger – 0.5 pp. As always, the largest number of vacancies is in Służewiec (19.6%), and the least along Puławska Street (5.3%). In the central zones, the vacancy rate is estimated at 12.3%.

In the second quarter of 2024, the asking rental rates for office space in Warsaw remained stable. Initial rents in central zones were generally ranging from 18.00 to 27.00 EUR/square meter/month, however, in the best office buildings, rents may significantly exceed this level. Outside the central zones, asking rents were typically ranging from 10.00 to 17.00 EUR/square meter/month. The rates of service charges also remained stable compared to the previous quarter and in the second quarter of 2024, they amounted to 18.00 to 38.00 PLN/square meter/month.