In Q1 2018, Warsaw’s vacancy rate fell to its lowest in five years while absorption amounted to 45,000 sqm, down by nearly 30% on the average observed over the last five years, according to Cresa.
“Despite healthy supply, robust occupier demand for office space in Warsaw has resulted in limited availability of large offices. Tenants will have to wait until new projects are delivered onto the market after 2019 to enjoy a wider choice of options and better leasing conditions. This trend should be taken account of in tailoring real estate strategies to individual occupier needs,” said Bartek Włodarski, Partner, Head of Office, Corporate Solutions at Cresa Poland.
In the first three months of 2018, Warsaw’s total office stock rose by more than 3% (3 p.p. below the annual average for the last five years) to 5.28 million sqm. The vacancy rate stood at 10.8%, the lowest in the last five years, and is expected to edge down gradually due to unwavering occupier demand for office space. Cresa’s analysts expect this trend to slow down in 2020, when approx. 470,000 sqm of new space will come onto the market, a substantial part of which will be delivered in high-rise office buildings.
The leasing volume hit more than 200,000 sqm, most of which or 70.6% was transacted under new leases, followed by renegotiations (20.8%) and expansions (8.6%). The largest lease transactions included a confidential tenant’s lease of 14,800 sqm at Piękna 2.0, Cambridge Innovation Center’s 13,500 sqm lease at Varso II and Ad Pilot’s 10,300 sqm lease at Wolf Marszałkowska.
Two office schemes were delivered to the Warsaw market in Q1 2018: Europejski (7,100 sqm, HESA) and Graffit (16,600 sqm, Hines).
Office rents remained flat at €10.5-13.5/sqm/month in Służewiec, €12.5-16.5/sqm/month in Jerozolimskie Avenue, €13-18/sqm/month in Nowa Wola, and €15-23/sqm/month in the Central Business District. The development pipeline stands at 890,000 sqm. Of that total, 25% will be completed in 2018.
“The current leasing activity is a confirmation of the Warsaw office market’s strong growth momentum and high liquidity resulting from division of tenants into segments of varying preferences. Tenants are attracted to new office projects in the city centre, but the more cost-sensitive prefer to remain or lease offices in non-central locations. This trend is expected to become more visible in coming years as the market continues to mature,” said Bolesław Kołodziejczyk, Head of Research & Advisory, Cresa Poland.
