According to the report by consulting firm Newmark Poland “Office Occupier – Warsaw Office Market, I-III quarter 2024”, the third quarter of 2024 on the Warsaw office market did not differ significantly from the previous one in terms of activity of both tenants and developers. In the demand structure, previously dominated by renegotiations, pre-lease agreements strongly marked their presence, their share in the total leasing volume increased to 22%. The vacancy rate continued the downward trend observed since the start of the present year.
The total resources of modern office space in Warsaw currently stand at 6.26 million square meters, with new supply remaining low since the fourth quarter of 2022. From January to September 2024, developers put into use just under 75,000 square meters, of which nearly 65% in the first quarter. In the third quarter, the Warsaw office market expanded by just over 11,000 square meters.
“In 2024, the total supply will slightly exceed 100,000 square meters and it will be the second lowest result in Warsaw’s history, after 2023. According to developers’ announcements, over 170,000 square meters of new offices will be created in Warsaw in 2025. Developers are still closely monitoring and analyzing the current market situation, especially the demand reported by tenants, as well as the European Union regulations on energy efficiency requirements and the impact of real estate on the natural environment. This, in turn, translates into a still relatively moderate level of developers’ activity on the Warsaw office market. Further interest rate cuts will provide an incentive to start new investments, making it easier to sell properties in developers’ portfolios,” says Karol Wyka, Managing Director of the Office Space Department at Newmark Poland.
At the end of September 2024, just over 273,000 square meters was still under construction – that’s almost 3% less than in the second quarter, but almost 8% more than in the corresponding period last year. In the third quarter of 2024, developers did not start any significant office investment.
Since the beginning of 2024, tenant activity has remained at a relatively stable level. This applies especially to the last two quarters, in which demand was 178,100 square meters and 176,100 square meters, respectively. From January to the end of September, tenants rented almost 492,200 square meters, which is a volume slightly lower than in the corresponding period in 2023 (492,900 square meters). Since the beginning of this year, tenants have been most interested in locations outside the center, which accounted for almost 57% of the total demand recorded in the first three quarters. However, the largest share in the volume of transactions was occupied by the office zones in the Center (almost 26.5%), closely followed by Służewiec (21%).
“The third quarter of 2024 was characterized by an unusually large share of pre-lease agreements in total demand – almost 22%. The remaining 78% was made up of new contracts (34%), renegotiations (26%), transactions for own purposes (11%) and expansions (7%). Nevertheless, renegotiations continued to dominate the structure of transactions concluded in the first three quarters of 2024, accounting for over 42% of all agreements. The most active tenants on the Warsaw office market from January to the end of September 2024 were companies from the financial sector (17%), business services and IT (both 12%)”, adds Karol Wyka.
At the end of September 2024, the vacancy rate in Warsaw was 10.7%, which represents a decline of 0.2 percentage points compared to the previous quarter, but an increase of 0.1 percentage points year on year. In the following quarters, we expect the downward trend of the coefficient of vacant space to continue due to moderate developer activity and growing interest in modernizing or changing the purpose of existing office buildings, which means their temporary or permanent withdrawal from the office market.
The monthly rents in the best office buildings in the third quarter of 2024 remained unchanged compared to the previous quarter and amount to 22-27 euros per square meter in the center and 16-18 euros per square meter in locations outside the center.
“We still observe a great interest of companies in renting offices offering advanced technological and environmental solutions, which enable energy efficiency and cost optimization and support the implementation of ESG goals. This, in turn, means that the owners of such office buildings have a better negotiating position,” says Agnieszka Giermakowska, Director of the Market Research and Advisory Department, ESG Leader, Newmark Poland.
Source: https://ceo.com.pl/warszawski-rynek-biurowy-z-rosnacym-udzialem-umow-przednajmu-i-spadajacym-wskaznikiem-pustostanow-92377
