This year, tenants are very active in all office markets in the country. However, companies are increasingly striving to optimize the workspace. At the same time, according to Walter Herz analysts, the process of making decisions about renegotiating contracts and relocating offices is taking longer. Flex offices are also being leased for longer periods.

This year, the largest number of lease agreements since 2019 was concluded on the Warsaw office market. However, the transaction volume was lower. During the first 9 months of 2023, almost 500 thousand sqm of office space was contracted in Warsaw. Quarter by quarter, the demand for Warsaw offices is increasing. The upward trend was also clearly visible in the third quarter of this year when over 170 thousand sqm of space was leased.

Central locations continue to be particularly popular among tenants. Słuzewiec is also coming back into favour, offering cheaper offices. This year from July to September, one-fifth of the space in Warsaw was leased in that area. The growing share of the Słuzewiec business area in the lease volume is the result of companies adapting office space to the hybrid work system.

Similar levels of market absorption in Warsaw and the regions

"The limited selection of offers on the Warsaw office market, caused by the small amount of space delivered and the persistently high demand, results in many companies deciding to renegotiate contracts and extend the lease of the occupied space, often for another 2-3 years. This is mainly due to the high costs of arranging workplaces. These trends are reflected in the high share of renegotiations recorded in Warsaw. Tenants try to optimize the terms of the lease and save money at the same time. Companies that decide to change their offices most often look for better quality offices closer to the centre. The trend of reducing space by tenants is becoming more and more visible", says Michał Porzycki, director of the Tenant Representation Department at Walter Herz.  

"On the eight largest office markets outside Warsaw during the three quarters of this year, demand for offices increased by approximately 20 per cent compared to last year. The total lease volume exceeded 530 thousand sqm We expect that this year's result in the regions may be close to the record demand from 2019", says Mateusz Strzelecki, Partner and Head of Tenant Representation at Walter Herz.

Similarly to Warsaw, in the largest regional markets in the country, the third quarter was the best this year in terms of the volume of office space leases. From July to September, contracts were signed for almost 200 thousand sqm of offices. About 20 per cent more space was leased than in the second quarter of this year. Compared to 2022, quarterly demand went up by 80 per cent. Most offices were contracted in the Tri-City, Kraków and Wrocław.

There are the fewest new offices in Warsaw in a quarter of a century

We have been observing a decline in the volume of new supply in the office sector in Poland for three years now. The trend is visible in all office markets in the country. Few office projects are being implemented. The slowdown in the pace of implementation of new investments is caused by the high costs of construction and finishing, as well as project financing and the deterioration of economic conditions on a global scale.

This year, Warsaw recorded the lowest increase in office supply in a quarter of a century. The first three quarters of the year brought several new properties, with a total of just over 20 thousand sqm of completed offices, including, among others, The Park with 11 thousand sqm of space.

According to Walter Herz, projects scheduled for completion in the last quarter of this year will bring over 50 thousand sqm of office space.

This year, developers decided to start the construction of several projects in Warsaw, which will deliver new offices in the next 2-3 years. Among the started projects there are The Bridge with 47 thousand sqm of space, Upper One with 35 thousand sqm and Office House building in Towarowa 22 property, which will deliver 31 thousand sqm of modern space.

Office buildings in Lixa complex with 28 thousand sqm of space are also under construction on the Warsaw market. As well as The Form office building with 26 thousand sqm, Vibe project with 15 thousand sqm Approximately 260 thousand sqm of office space is still under construction on the Warsaw market, while before the pandemic there were approximately 800 thousand sqm of offices under construction. New projects are initiated mainly in the city center, where office vacancies have dropped to only a few per cent. On average, Warsaw currently has about 10 per cent of vacant offices.

Regions with a much larger selection of offices than Warsaw

A total of almost 240 thousand sqm of office space was delivered to the main regional markets in Poland from the beginning of the year to the end of September. Half of the amount was delivered in the third quarter. Among the commissions there were, Ocean Office Park B and Kreo office building in Kraków, Craft in Katowice, Nowy Rynek E in Poznań, and in Wroclaw, the expansion of Nowa Renoma has been completed. In the fourth quarter of this year in regional cities, developers announced the completion of approximately 150 thousand sqm of offices.

According to Walter Herz's calculations, over 480 thousand sqm of space remains under construction in the regions. Most new offices are being built in Wrocław, Kraków and Katowice. The amount of space under construction has been gradually decreasing over the last year.

The new supply has been contributing to a regular increase in the office vacancy rate in the main regional markets in Poland for a year and a half now. On average, more than 17 per cent of offices are waiting for tenants outside Warsaw. The amount of vacancies has recently decreased only in the Tri-City and Lublin. The most vacancies are in Katowice and Lodz, with approximately 23 per cent in each city.