According to Newmark Poland’s advisory firm report “Office Occupier – Warsaw office market, first half of 2024,” the Warsaw office market has entered a period of stabilization. Developers’ activity remains at a moderate but stable level. Meanwhile, the vacancy rate in the second quarter of this year has only slightly decreased compared to the previous quarter, and tenants are opting to renegotiate lease agreements more and more often. The increasing interest of tenants in sustainable and technologically advanced offices is leading to a growing number of older office buildings being modernized or having their functions changed.
The total resources of modern office space in Warsaw currently stand at almost 6.26 million sq. m. In the first half of 2024, the capital’s market expanded with five new office buildings totaling 63,700 sq.m., including Vibe A (15,000 sq.m.), which was made available in the Western Centre sub-zone in the second quarter.
“In total, the new supply in 2024 may slightly exceed 100,000 sq.m., but next year it may be twice as high. Interestingly, nearly 30% of this space will return to the market in modernized buildings such as V-Tower or G5 Prime Offices,” says Agnieszka Giermakowska, Director of Market Research and Advisory, ESG Leader, Newmark Poland.
Developers’ activity on the Warsaw market has been relatively moderate but stable for several quarters. At the end of June 2024, a little over 280,000 sq.m. were under construction, about the same as the previous quarter, of which nearly 60,000 sq. m. were in office buildings undergoing major renovation. Over 80% of current investments are located in central locations, mainly around Daszyński roundabout.
In the first half of 2024, tenants leased a total of almost 316,400 sq.m., of which just over 56% (178,400 sq.m.) in the second quarter. Demand on the Warsaw office market in the second quarter increased by over 29% compared to the first quarter, but throughout the first half of the year, it was slightly less than 2% lower than that recorded in the same period last year.
“In the second quarter of 2024, two lease agreements for over 10,000 sq.m. were recorded in the capital market. At the same time, most transactions during this period were concluded in non-central locations, with their share in the total volume of demand since the beginning of the year surpassing 60% (190,100 sq.m.). On the other hand, in central zones, leases totaling 126,300 sq.m. were signed,” says Anna Szymańska, Director of Office Space Department at Newmark Poland.
In the first half of the year, renegotiations and renewals (51%) and new agreements (37%) made up the largest share of demand. The remaining 12% consisted of expansions (7%), transactions for own use (4%), and pre-leases (1%). In the second quarter, the proportion of renegotiations and renewals of lease agreements increased to a record level of 63%, with the highest indicators recorded in non-central zones: Służewiec (nearly 83% of total demand in zone), Żwirki Wigury (83%), and Jerozolimskie (70%). The most active tenants on the Warsaw office market in the past half-year were companies from the financial sector (17.4%), manufacturing (12.5%), business services (12.1%) and IT (10.2%).
At the end of June 2024, the vacancy rate in Warsaw was 10.9%, indicating a slight decrease compared to the previous quarter (by 0.1 p.p.) and year-on-year (by 0.5 p.p.). During this period, tenants had at their disposal almost 680,450 sq. m. of free modern office space. In the following quarters, we can expect a slight decrease in the vacancy rate, especially in non-central zones, such as Służewiec, where old office buildings are being demolished for new investments. A good example of this trend is the purchase of three more office buildings (Sirius, Orion, and Saturn) of the former Empark Business Park complex by the developer Archicom, who plans to use the purchased land to expand the Modern Mokotów housing estate.
“At the end of the second quarter of 2024, monthly rent rates in the best office buildings remained at a similar level compared to the previous quarter, amounting to 22-27 euros per sq.m. in the center and 16-18 euros per sq.m. in non-central locations. The highest rents are invariably observed in buildings offering offices that meet high technical and environmental standards and enable tenants to care for their employees, their needs and well-being. At the same time, differences in rent rates between the best and less attractive locations are deepening,” adds Urszula Sobczyk, Director of the Valuation Department at Newmark Poland.
Source: https://ceo.com.pl/warszawski-rynek-biurowy-w-liczbach-podsumowanie-i-polrocza-2024-roku-96961
