The office market was nourished with only 61,000 sq.m. of space in 2023, the lowest value recorded since 2010, as investments were put off during the pandemic and the impact of the lack of economic stability in the future years. However, the forecast for 2024 is expected to be slightly higher.
By the end of 2023, the total resources of modern office space in Warsaw amounted to about 6.2 million sq.m.
“Last year, developers completed projects of about 61,000 sq.m., which was the lowest result recorded since 2010. The limited number of new supplies last year resulted from decisions made two years ago, during the pandemic, when in the face of market and economic unambiguity, few developers were choosing to start new investments,” explains Dorota Lachowska, director of research & consultancy at Knight Frank.
Developer activity in the current year will not greatly deviate from the results of 2023. At the end of the fourth quarter of 2023, only 234,000 sq.m. of office space was under construction, of which only 75,000 sq.m. Is anticipated to be finished this year.
Developers continue to be interested in central locations, primarily in the vicinity of Rondo Daszyńskiego, where currently 90% of the space is being worked on.
“After an active year from tenants in 2022, when transactions closely approach the results attained before the pandemic, last year brought a slight drop. In 2023, Warsaw tenants signed contracts for 750,000 sq.m., which was a result of 13% lower than compared to 2022. From our observations, numbers also confirm that companies deciding to relocate or expand their business in a new location are choosing prestigious locations in the best buildings. Last year, 51% of the total volume was rented in central areas,” adds Izabela Dąbrowska, director at Knight Frank tenant representation department.
New contracts dominated in the transactions volume, making up 51%. Next came renegotiations (43%), which rose by 4 pp compared to 2022, resulting from the fact that for tenants, it is still vital to reduce costs associated with moving and adjusting space to their needs. Expansions, which concerned 4% of the volume of signed contracts in 2023, also recorded a drop compared to 2022 by 4 pp. The remaining 3% were areas rented for personal use.
“Tenants are increasingly focusing on ecological, sustainable real estate. Despite that the percentage of space with green certificates in Warsaw is just 33%, the number of leased areas in certified buildings accounted for as much as 54% of the total leased area in 2023. We forecast that this trend will continue in the coming years and the rush towards quality and ecology will intensify,” explains Dorota Lachowska.
Due to the relatively high activity of tenants and limited new supply, the vacancy rate at the end of the fourth quarter of 2023 fell. Its value at the end of December was 10.4%, which was a decrease by 0.2 pp compared to the previous quarter, and as much as 1.2 pp compared to the same period in 2022. In the central area, the vacancy rate was 8.5% and fell by 0.6 pp compared to the previous quarter. Outside the center, small growth (by 0.1 pp) was noticed, achieving a level of 11.9%. The lowest level of vacancies was registered in the northern zone (4.6%), while the highest is still noticed at Służewiec (20.1%).
In the last quarter of 2023, the asking rents for office space in the capital remained steady. In the most prestigious office buildings in the Central Business District, the rent ranged from 18.00 to 27.00 EUR/sq.m/month, while in other central locations it ranged from 15.00 to 23.00 EUR/sq.m/month. Outside the center, the rent in the best buildings fluctuated between 10.00 and 16.00 EUR/sq.m/month, providing an attractive alternative for companies looking for more accessible office solutions. Service charges in the fourth quarter of 2023 continued to rise, typically ranging from 18.00 to 38.00 PLN/sq.m/month.
