The international advisory agency Cushman & Wakefield has summarized the situation in the Warsaw office market for the first half of 2024. The capital’s office sector continues to experience stagnation when it comes to launching new development projects, potentially leading to a decrease in available space. Demand remains similar to the first half of the 2023.
SUPPLY: The stagnation will last until 2026
By the end of the second quarter of 2024, the total inventory of office space in Warsaw amounted to 6.26 million sq.m. According to Cushman & Wakefield, the Warsaw office market will expand by about 98,000 sq.m. within seven office buildings this year. However, most activity in finalizing office projects has already passed, with 65% or 63,700 sq.m. of new supply being commissioned in the first half of the year. Currently, approx. 215,000 sq.m is under construction in eight investments, significantly lower than the average provision size in preparation for the years 2012-2023, explains Ewa Derlatka-Chilewicz, Head of Research, Cushman & Wakefield.
Lower developer activity is dictated by high financing acquisition costs and relatively low liquidity in the investment market. According to forecasts by Cushman & Wakefield, stagnation may last until the end of 2026, with most projects capable of beginning in the next 12-24 months located in the most attractive areas for developers to maximize investment returns.
DEMAND: The number of transactions remains high, demand size – without significant changes.
Office market demand in Warsaw for the first half of 2024 was 316,400 sq.m, a modest 2% decrease compared to the same period in 2023. The similar activity in the rental market signals a gradual stabilization of the office sector and a visible trend for optimization of tenant space. Tenants finalized 362 transactions between January and June, similar to the first half of 2023. The relatively high number of contracts indicates high liquidity in the office rental market, and reducing occupied space is a broader strategy for tenants adapting to the challenges of the new work model, comments Jan Szulborski, Business Development & Insight Manager, Cushman & Wakefield.
The largest transactions in this period include the renegotiation of the Bank Gospodarstwa Krajowego contract in the Varso II building (13,600 sq.m.), a financial industry company’s contract renegotiation in the T-Mobile Office Park building (13,100 sq.m.), and the Mercer company’s contract renegotiation in the Nimbus building (7300 sq.m.). Renegotiations constituted about 51% of all signed contracts in the first half of 2024; new contracts accounted for 42%, with expansions around 7%.
VACANCY RATES: gradual reduction of available office space
The vacancy rate after the first half of 2024 in Warsaw was 10.9%, which was 0.1 pp. lower compared to the first quarter of 2024 and 0.4 pp. lower than in the same period in 2023. This translates into 680,400 sq.m of space available, a decrease of 9400 sq.m compared to the first quarter of 2024 and 26,000 sq.m against the first half of 2023.
RENT RATES: Location and building quality priced in
The noticeable pressure to increase rent rates over the past 24 months was driven by the record high revaluation of lease agreements by the goods and services price index (HICP in 2022 for the eurozone was 8.4% y/y and 6.2% y/y in 2023). In the second quarter of 2024, prime office rates in Warsaw were 22.00-26.00 EUR/ sq.m per month in the Center zone and 13.50-16.50 EUR/ sq.m per month in non-central locations, unchanged from the end of 2023.
Source: https://ceo.com.pl/warszawski-rynek-biurowy-ograniczona-podaz-stabilny-popyt-w-i-polowie-2024-r-72982
