In 2022, the Warsaw office market recorded one of the highest levels of demand in history at over 860,000 sqm, with its structure including a preponderance of new leases and relocations, as well as expansions over renegotiations. According to the consulting firm Savills, despite the fact that nominal rents are stable and rising mainly due to indexation, service charges, which represent an increasing proportion of the total rental costs.
According to the latest report by Savills, a consulting firm, net absorption – or change in the total amount of leased space – in Warsaw in 2022 amounted to approximately 286,700 sqm, almost three times more than in 2021. (102,000 sqm). Since the outbreak of the pandemic, the values of this indicator have been significantly higher for the central zones, which accounted for 84% of the total result. Demand in 2022 reached one of the highest levels in history, matching the last record years before the pandemic (850,000 – 870,000 sqm). This was partly due to the impact of the pandemic, with tenants extending their leases for short periods, or delays in signing lease agreements. In the last 12 months, however, they had to make decisions about relocating or signing a long-term agreement with the owner.
The Warsaw office market has seen a number of large transactions, including 25 leases for office space over 5,000 sqm and eight transactions over 10,000 sqm. Representatives of the IT industry are among the main office tenants in Warsaw. Between 2018 and 2022, tenants from this sector leased nearly 561,000 sqm, representing 14.6% of the capital’s gross demand for office space.
The share of renegotiations in 2022 was 39%. New leases and relocations accounted for 42% of total demand. In turn, expansions by tenants who decided to upsize their current office accounted for 9% of the demand.
“2022 proved to be the time of the long-awaited rebound in the office real estate market. Tenant activity has returned to pre-pandemic levels. Companies are already accustomed to hybrid work and increasingly have a clear vision of what their office should look like to optimize costs and meet the new needs of employees. Agreements up to 500 sqm have a relatively high share in the number of transactions. New opportunities are opening up for companies interested in this type of space, especially since the share of subleased office space offers on the market is growing. On the other hand, we also see clients who, at the expense of a smaller space or a longer agreement, want to guarantee their employees the best location, in a new building and in the highest standard,” comments Jarosław Pilch, Office Agency, Head of Tenant Representation, Savills.
According to data from Savills, in 2022 Warsaw gained 236,800 sqm of new office space, and the total inventory is 6.27 million sqm. The new supply consisted of 12 projects, eight of which are located in the central zones and represent 80% of the new supply volume. The largest of them are two projects developed by HB Reavis: Varso Tower (63,800 sqm) and Forest Tower (51,500 sqm). Another significant investment completed last year was the 31,300 sqm Skysawa complex developed by PHN. At the end of 2022, 185,600 sqm were under construction in projects scheduled for completion in 2023-2025. However, there are still a few projects that have not yet started construction, but if the developers fulfil their announcements, the new supply in 2023-2024 could amount to approximately 187,000 sqm. On the other hand, if the economic situation normalizes and developers decide to move forward with the projects in the pipeline, more than 314,000 sqm might be delivered in 2025.
Nominal rents for prime office properties in Warsaw have remained stable for quite some time. Monthly rents in the most prestigious locations of the City Centre zone remained in the range of €21-25.5 per sqm per month. Tenants interested in the top floors of centrally located high-rise buildings must be prepared to pay higher rates for vacant modules, deviating from the average market rates. In Służewiec, rents are still in the range of €13-15 per sqm per month. According to Savills, the vacancy rate in Warsaw at the end of 2022 was 11.6%, down 1.1 percentage points from 2021. It stood at 10.5% in the city’s central zones and 12.5% in non-central zones.
Warsaw City Hall, one of the partners in the Savills report, highlights the fact that the capital is one of the most vibrant economic, academic, and cultural centres in Poland. It is also the second city in the fDi Intelligence European Cities & Regions of the Future 2022/2023 ranking in the category of business-friendly centres. According to the Polish Investment and Trade Agency (PAIH), 2022 was a record year in terms of the number of supported investments. The organization supported 126 investors who decided to locate their investments in Poland. As many as 71 of these projects are investments in modern business services (IT/SSC/BPO/R&D). The strong presence of the IT sector is also noted by the employment agency HAYS, whose experts emphasize that Warsaw has the most mature labour market in this sector in Central and Eastern Europe. The strength of the local market is evidenced by a rich portfolio of successful investment projects and the growth of not only large global brands such as Google, Netflix, and Samsung, but also start-ups.
“In the coming months, tenants will face rent indexation and further increases in service charges, the first of which we saw last year. The trend that has intensified recently is the extension of lease periods, which makes it possible to obtain an adequate level of coverage for the fit-out costs from the property owner,” comments Daniel Czarnecki, Office Agency, Head of Owner Representation, Savills.
