The report “At a Glance. Warsaw Office Market” prepared by BNP Paribas Real Estate Poland summarized the second quarter of 2024. In the analyzed period, the office market in the capital increased by only one new investment. With stable demand for modern office space, landlords have no choice – lease renewals have become a new trend in leasing structures.
Restrictions on Developer Activity
At the end of June 2024, the total office resources in Warsaw had not changed significantly compared to the previous quarter. In the second quarter of 2024, only 15,000 sqm of modern space was delivered to the Warsaw office market within the framework of one office project: Vibe A, located in the Central West zone. Since the beginning of 2024, Warsaw has only increased its office resources by 64 thousand sqm, within five projects. Four of them are new investments (Lixa D & E, Makro Cash and Carry, Vibe A), and one of them had been undergoing modernization and renovation over the past year (Saski Crescent).
Although the results of the new supply for the first half of 2024 are not spectacular, it is worth noting that they are almost 3.5 times higher compared to the same period in the previous year. For comparison, during the first six months of 2023, the lowest new supply result in 25 years was recorded on the Warsaw office market, reaching only 18.7 thousand sqm. In the first half of 2024, developers handed over just over 63 thousand sqm. A further 40 thousand sqm is planned to be handed over by the end of the year.
High Renewal Rates
In the second quarter of 2024, gross demand for modern office space reached 178 thousand sqm, which means an increase of about 8% compared to the previous year. Based on the structure of demand, the authors of the report observe a high proportion of lease renewals – this is currently the most important trend on the Warsaw office market. Between April and June, as much as 63% of all signed contracts were renegotiations of existing contracts.
“Despite stable demand, tenants cautiously approach relocations, often choosing to renew expiring leases. We predict that the share of renewals in the demand structure in the coming quarters will continue to grow, driven by rising rents and restrictions on tenants’ incentive packages,” emphasizes Małgorzata Fibakiewicz, Senior Director of the Office Space Rental Department, BNP Paribas Real Estate Poland.
The most popular zones among tenants in the second quarter of 2024 were: Służewiec, Central Business Area, and Centrum. Between January and the end of June, the trend of tenants choosing non-central locations where the price to standard ratio is favorable, continued. According to BNP Paribas Real Estate Poland analysts, 40% of the total leased space during this period was in the COB + Centrum zone, while the remaining 60% was in non-central zones.
The most important lease transactions for the period from April to the end of June 2024 were: 13 thousand sqm in Varso Place 2 by Bank Gospodarstwa Krajowego, 13 thousand sqm in T-Mobile Office Park, 7.3 thousand sqm in myhive Nimbus by Mercer, 6.8 thousand sqm in Gdański Business Center II, and 6 thousand sqm in D48 by Smyk. All of these transactions were lease renewals.
Rental Rates and Office Renovations
In the second quarter of 2024, the starting rental rates for office space in Warsaw remained stable. Starting rents in central zones ranged from 18 to 27 EUR/sqm/month, but in the best office buildings, rents could significantly exceed this level. In non-central zones, starting rents ranged from 10 to 17 EUR/sqm/month. Operating charges depending on the standard and location of the building ranged from 18 to 38 PLN/sqm/month.
However, as the report’s authors point out, maintaining properties is becoming increasingly expensive, prompting companies to seek more efficient solutions. Organizations aim to reduce the consumption of media and carbon footprint, often putting tenants in front of the choice of new or thoroughly modernized buildings. Rising construction costs mean that the level of contribution from landlords does not allow for the implementation of projects without additional financing, which does not favor relocation decisions.
“As a result, tenants renegotiate contracts and reorganize their current space. It is then worth remembering about the key aspects of flexible space planning enabling active management of the number of employees and a hybrid model through technology (e.g. IoT systems), adaptive office space planning, or the implementation of practical solutions that are friendly for a broad group of users.” – emphasizes Jan Pawlik, Workplace Management Director, ISS.
Office Buildings with Amenities
At the end of the second quarter of 2024, about 229,000 sqm of office space was under construction in the capital, which is to be delivered in 2024-2026. This included 80,000 sqm of older office building renovations, and the remaining 150,000 sqm was new space. Investors and developers are stepping up their efforts around Ronda Daszyńskiego and in central locations.
The largest office investments in Warsaw include The Bridge by Ghelamco (47 thousand sqm), Upper One by Strabag (35 thousand sqm), Office House by Echo Investment (31 thousand sqm), Warta Tower by Cornerstone (30 thousand sqm), and The Form by Lincoln Property (28 thousand sqm).
As BNP Paribas Real Estate Poland analysts point out, office buildings are evolving before our eyes, as a result of changes in the existing work models and tenant expectations.
“Landlords now offer numerous amenities that help employers attract and retain the most talented employees. Services available on the premises that make the daily life of tenants easier are now standard. The most popular include: a cafeteria or restaurant, a newspaper kiosk or small grocery store, or infrastructure conducive to the healthy lifestyle that many office employees currently prefer, e.g. bicycle parking lots, which come with special showers and changing rooms for cyclists, or fitness rooms” – emphasizes Klaudia Okoń, Senior Consultant, Business Intelligence Hub & Consultancy, BNP Paribas Real Estate Poland.
In addition to the quality of space offered to employees, special events organized on the premises of office buildings are also important. Examples that fit the global trend include the organization of summer cinemas, sports competitions and skills workshops.
Source: https://ceo.com.pl/nowym-trendem-w-strukturze-najmow-na-warszawskim-rynku-biurowym-staly-sie-odnowienia-umow-21142
