At the end of the first quarter of 2023, Warsaw’s total office stock remained unchanged at 6.26 million sqm. The past quarter was the first in over 15 years (since Q2 2005) with no new office project delivered to the market as development activity decelerated since the second quarter of 2020. At the end of the first quarter of 2023, Warsaw’s space volume under construction comprised over 200,000 sqm, almost four times less than in the record years of 2017-2019, when close to 800,000 sqm was under construction every year. The new office supply scheduled for completion in the whole of 2023 is expected to reach around 80,000 sqm, of which almost 15,000 sqm will be returned to the market through the refurbishment of Saski Crescent.

“The coming years will see a growing focus on major refurbishments, repurposing and replacing obsolete buildings with modern projects. This trend will largely be driven by changing occupier requirements regarding the quality of office space, further intensified by EU legislation on energy efficiency and alternative energy sources which help reduce environmental impact and lower operating costs, including service charges paid by tenants,” says Agnieszka Giermakowska, Research & Advisory Director, ESG Lead, Newmark Polska.

In the first three months of 2023, gross office take-up in Warsaw reached close to 159,000 sqm, down by over 40% from the same time in 2022 and by 37% compared to the fourth quarter. There were no leases for over 10,000 sqm signed in the surveyed period.

“The subdued leasing activity was due, among other things, to the shrinking availability of office space meeting occupiers’ requirements for technology and ESG solutions. Occupier demand in the first quarter continued to focus on central locations which accounted for 55% of total office take-up (87,400 sqm), while non-central zones saw 71,500 sqm transacted,” says Anna Szymańska, Head of the Office Department at Newmark Polska.

The structure of demand was dominated by new contracts which accounted for 63% of all deals, with the remaining 37% spread across renegotiations and renewals (25%), expansions and owner-occupier transactions (5% each) and pre-lets (2%). The most active occupier sectors on the Warsaw office market in the past quarter were business services (19.5%), manufacturing (9.5%) and financial services (9.3%).

Warsaw’s vacancy rate remained unchanged at 11.6% between January and March 2023 but edged down by 0.6 pp year-on-year. Interestingly enough, office availability in projects completed in the last five years was just over 103,000 sqm, equating to a vacancy rate of around 8.1% for such office buildings. Of that total, close to 45,000 sqm was in two buildings.

Prime office rents remain under upward pressure - especially in locations and buildings which are largely ESG-compliant. At the end of the first quarter of 2023, prime office rents were in the range of €22-26/sqm/month in the city centre and €14-16/sqm/month in non-central locations.