By the end of 2023, Warsaw remains the leader in the office space market in Poland, even though 61,000 sqm delivered in the last 12 months (-74% y/y) was one of the lowest results in its history. The slowdown in developer activity seems to have come to an end as by 2026, about 150,000 sqm of new supply should be delivered annually. After a very good 2022, 2023 turned out to be not much worse. From January to December 2023, tenants signed contracts for about 750,000 sqm, which meant that the total transaction volume was only 13% lower than last year. The low supply remaining in 2023, along with stabilizing demand, led to a decrease in readily available space to 647,000 sqm (-11% y/y). Poland’s leading consulting company, AXI IMMO, presents the latest analysis of the Warsaw office market in the report: “Warsaw Office Market 2023”.
2023 as the year of supply gap
In 2023, Warsaw’s office market entered the long-anticipated period of the so-called supply gap. Developers’ activity last year was 61,000 sqm. The sector’s total resources now amount to about 6.23 million sqm. The largest office buildings delivered include Lakeside (22,700 sqm, Atenor Group) and Studio B (17,900 sqm, Skanska), while White Star decided to expand The Park complex with building B9 (11,000 sqm).
At the end of 2023, about 290,000 sqm of office space was under construction in the capital. Investors and developers are intensifying their activities around Rama Daszyński, where about 70% of new supply is being built. Among the largest ongoing projects are The Bridge (47,000 sqm, Ghelamco), Office House in the multifunctional complex Towarowa 22 (31,100 sqm, Echo Investment), and The Form (28,000 sqm, Lincoln Property).
Bartosz Oleksak, Associate Director, Office Space Department, AXI IMMO, explains: “In terms of new supply in Warsaw, we have long observed great difficulties in obtaining attractive plots in central locations. Therefore, developers’ plans have begun to include proposals to demolish older and inefficient buildings and replace them with new projects. An example could be the Upper One office building, which is being built in place of Atrium International.”
Vacancies below 10% outside Służewiec
At the end of 2023, the average vacancy rate in Warsaw was 10.4% (-0.2 pp. q/q and -1.2 pp. y/y), representing approximately 647,000 sqm of available space. Except for Służewiec, which at 20.1% overstates the statistic, in other office zones in the capital there are less than 10% vacant offices.
Emilia Trofimiuk, Research Manager, Analysis and Market Research Department, AXI IMMO, adds: “In the fourth quarter of 2023, the vacancy rate in central zones continued a downward trend observed since the third quarter of 2021. Compared to the previous quarter, the share of vacant space at the end of 2023 decreased by 0.6 pp. Meanwhile, in office zones outside the center, a slight quarterly increase in the vacancy rate was observed from 11.8% in the third quarter of 2023 to 11.9% at the end of the year.”
Demand lower, but better than during the pandemic
The total volume of leases on the Warsaw office market in 2023 amounted to almost 750,000 sqm (-13% y/y). In terms of so-called net demand, which includes new contracts and expansions, about 430,000 sqm were signed (-9% y/y). Compared to the nearly 750,000 sqm achieved in 2023, this is higher by 16% and 24% respectively than the volumes obtained in 2021 and 2020. In terms of structural demand, new contracts were most often signed (50.5%), ahead of renegotiations (42.7%) and expansions (3.9%). The space occupied for their own use represented about 2.9%. In 2023, the largest lease transactions included a renegotiation of 12,900 sqm by GDDIK in Green Corner B, a new contract by Lux Med for 12,000 sqm in Lakeside, and a renegotiation of 8,800 sqm by Accenture in the Proximo II building.
Jakub Potocki, Associate Director, Office Space Department, AXI IMMO, comments: “Throughout 2023, we saw a positive trend, with tenants maintaining their high activity levels following the pandemic and related office optimisation period. The result of 750,000 sqm of leased space signifies a certain form of stabilisation, which could have been even higher if attractive new office buildings had emerged in the capital. The high level of renegotiations may also suggest that some companies have decided to give themselves more time and wait to choose a better office location of a higher standard for the next three to five years.”
Both in central locations and outside city center areas, rent rates remained stable. In the most prestigious office buildings in the CBD (Central Business District), offers ranged from 19.00 to 27.50 EUR/ sqm/ month, while in some non-central locations, starting rents began from about 10.00 EUR/ sqm/ month. Depending on the building’s standard and location, service charges ranged from about PLN 14.00/ sqm/ month to PLN 39.00/ sqm/ month.
Forecasts
Bartosz Oleksak, points out: “The Warsaw office market is undergoing a period of change, which is reflected by the limitation of new supply and entering the period of supply gap. However, after the COVID-19 pandemic, developers remain active and have started several interesting projects in the capital. We observe a high interest in developing the office fabric in the Centre-West zone, especially around Rama Daszyński, which is becoming a key point attracting the attention of companies and investors. Additionally, we expect that the limited new supply up to the turn of 2024/2025 will result in a decrease in the volume of available space, which may in turn contribute to an increase in rents, especially in “prime” buildings.”
Jakub Potocki, adds: “Investors and developers are increasingly focusing on modernizing older buildings to adapt to changing tenant needs and increase their attractiveness in the market. At the same time, the importance of sustainable development (ESG) is growing, becoming an increasingly important criterion for companies looking for new office space. In light of these changes, there is also a possibility that inefficient and unused office buildings may be demolished or transformed to adapt to new market trends.”
