In Q3 2017, the stock of modern office space in Warsaw has increased by more than 76,000 sqm and thus exceeded the 5.3 million sqm threshold. By the end of the year, another 80,000 sqm may appear on the largest office market of Poland, which would mean a total of 5.4 million sqm. The key market development trends, according to the report by BNP Paribas Real Estate Poland, are the consistently improving position of the Wola district on the local office market and the growing popularity of co-working projects located in the best schemes.
In Q3, asking rents for prime properties in the city centre have not changed and remained between €20-22/sqm/month. Interestingly, there has been a slight upward correction – by approx. €0.5-1/sqm/month – of average rents as compared to previous quarters, which was due to lower vacancy rates.
Dynamic growth of the central zone
Warsaw – considered by investors to be a dynamically developing capital of the region – is also the largest construction site. A large proportion of the 770,000 sqm of office space currently under construction will be delivered in the city’s central zone. There are large schemes in the form of office towers being developed at the moment (such as e.g. Varso Place, The Warsaw Hub, Mennica Legacy Tower, Spinnaker and Skyliner) to be completed within the next three years.
“This year, Warsaw will not be approaching the record volume of new supply from 2016. We will have to wait for new high results until 2019 and 2020 when some truly spectacular schemes will be completed. The schemes will not only change the situation on the business and office map of the city, but also permanently alter its landscape,” said Patrycja Dzikowska, Head of Research and Consultancy, CEE at BNP Paribas Real Estate Poland.
It seems reasonable to put forward the question whether such a high future supply of modern and prestigious office space will meet with correspondingly strong market demand and how the future will shape rents in the central zone and the areas outside it.
Stable high demand
In Q3, net demand - including new transactions, pre-let agreements and expansions - amounted to approx. 150,000 sqm. Renegotiations generated another 45,000 sqm. The report stresses that in Q3, tenants’ attention was focused on the city centre, with particular focus on its western fringes. This is a natural direction in which the business and office capital is developing. The comprehensive revitalisation of the Wola district centred round the construction and the ongoing extension of Warsaw’s second metro line is also of significance.
The high demand and moderate volume of new supply is positively affecting the vacancy rate, which at the end of September fell to approx. 13.3%. The area most distressed by vacant space is the Służewiec district, which results not only from the general condition of Warsaw’s office market, but also from the infrastructure issues that are becoming apparent in this particular part of the city.
Co-working – a new lease trend
The co-working office model initiated over a decade ago in the USA has become a fixed feature of Warsaw’s office market. Those already to be found there, such as Office Hub, The Brain Embassy, The Heart, Mindspace, BusinessLink, TechHub and Campus Warsaw, are being joined by new players, e.g. the most recent HubHub.
“Changes in the area of new technologies, as well as in culture and social media, entail changes in the way we work. This applies not only to freelancers and start-ups, but also to medium-sized companies, and sometimes even corporations. Flexible workplaces are the answer to market needs, and the co-working offensive is ongoing and will continue. Particularly as we are witnessing increased interest from global players in this segment,” added Małgorzata Fibakiewicz, Director of Office Agency at BNP Paribas Real Estate Poland.
Co-working space is appearing within the largest and most modern office schemes and is met with increasingly high demand from occupiers who, due to being in their growth stage, are not able to accurately predict their long-term needs. Meanwhile, to co-working solution gives them access to high quality office space, they are able to use professional office equipment and schedule meetings with clients in modern conference rooms. Co-working office operators are noticing the market’s ever increasing potential, and those with experience are expanding their space and opening new locations.
In the shadow of IFRS 16
Co-working space is appearing within the largest and most modern office schemes and is met with increasingly high demand from occupiers who, due to being in their growth stage, are not able to accurately predict their long-term needs. Meanwhile, to co-working solution gives them access to high quality office space, they are able to use professional office equipment and schedule meetings with clients in modern conference rooms. Co-working office operators are noticing the market’s ever increasing potential, and those with experience are expanding their space and opening new locations.
