New office deliveries exceeded 228,100 sqm in 2022 YTD, bringing Warsaw’s total office stock to more than 6.34 million sqm at the end of Q3 2022. The third quarter witnessed a total of 99,100 sqm come on stream, including close to 64,000 sqm in the Varso Tower within the Varso Place office complex. Other major office completions of the first three quarters of 2022 included Forest Tower (51,500 sqm, City Centre North, Q1), P180 (32,000 sqm, Mokotów, Q3), SKYSAWA I&II (a total of 31,300 sqm, the Central Business District, Q1 and Q2) and LIXA C (19,400 sqm, City Centre West, Q1).

“Due to rising utility costs, tenants are increasingly seeing the value in modern technological and ESG solutions which can have a real impact on future levels of service charges. That’s why offices and office buildings featuring such solutions are favoured by occupiers,” says Agnieszka Giermakowska, Research & Advisory Director, Newmark Polska.

The capital’s office development space under construction currently stands at around 200,000 sqm, but larger office buildings will not be delivered until late 2023 or 2024/2025. According to reports from developers, several new office projects are expected to break ground later this year or in the early months of next year, including VIBE (Ghelamco), The Form (Lincoln Property) and T22 (Echo Investment/AFI Europe). Nevertheless, the first phases of these developments will not be completed until late 2024. As a result, the availability of offices for lease in the next two years, particularly in central locations, has already become fairly limited.

“Prime office rents remain under upward pressure, particularly in office buildings and locations attracting the strongest occupier interest. Another contributor to the upward rental pressure, especially in central locations, is the office undersupply forecasted for 2023-2024” says Anna Osiecka, Associate Director, Office Tenant Representation at Newmark Polska.

In the first three quarters of 2022, gross office take-up in Warsaw amounted to almost 608,000 sqm, of which almost 80%, or 479,200 sqm, was transacted in the first six months. Total take-up in the third quarter amounted to just under 128,700 sqm, indicating a weakened leasing activity during that period. Occupier activity continued to focus on central locations where the leasing volume surpassed 413,800 sqm (Q1-Q3), accounting for over 68% of all deals.

In January-September 2022, office demand in the Warsaw office market continued to come predominantly from two sectors: financial (28.1%) and IT (16.9%). The largest lease agreements in the first three quarters included two pre-lets – by PKO BP (34,500 sqm in SKYSAWA) and by Pekao SA (30,000 sqm in Forest Tower).

Due to high office fit-out costs and the uncertainty surrounding future levels of service charges, tenants are showing increased caution with regard to lease decisions and, consequently, renewals continue to account for a large proportion of office take-up. In total, lease renewals made up 45% of the leasing volume in the third quarter of 2022 compared to the average of 38% for the first three quarters. The remaining 62% was spread across new deals (36%), pre-lets (12%), expansions (10%) and owner-occupier deals (4%).

At the end of September 2022, Warsaw’s vacancy rate hit 12.1%, up by 0.2 pp over the quarter but down by 0.4 pp year-on-year. Office availability in the last three quarters shrank by close to 39,000 sqm in central locations but increased by over 41,000 sqm in non-central zones.