Prime office stock in Warsaw stands at 6.25 million sqm. This total includes three new office buildings which contributed a combined 18,700 sqm in the first half of 2023 – the lowest new supply in the capital for the first six months of a year in more than 10 years. All the new projects were completed in the second quarter and are located in non-central office zones. The largest completion was another office building (no. 9) of The Park office complex (11,000 sqm, Jerozolimskie).

At the end of the second quarter of 2023, Warsaw’s office development pipeline comprised 270,000 sqm, up by almost 25% on the first quarter of 2023 but down by nearly 8% from the same time last year. Almost 80% of the office stock under construction is being developed in central office zones, especially close to public transport hubs enabling convenient commutes by metro, SKM (Fast Municipal Railway) or tram. Locations easily accessible by bicycle or scooter are also increasing in importance, subsequently leading to the construction of suitable infrastructure in their vicinity.

Total office take-up for the first half of 2023 reached nearly 326,000 sqm, of which just over 51% (167,100 sqm) was transacted in the second quarter. Leasing activity on the Warsaw office market for the three months to the end of June 2023 increased by approximately 5,4% compared to the first quarter of the year, but for the first half of 2023 was down by more than 32% year-on-year. This level of transactional activity shows that tenants are reassessing their needs very carefully and, having embraced hybrid working, are increasingly shifting their focus to making optimal use of occupied space. As a result, some companies are choosing to downsize their offices or take advantage of flexible leasing solutions, e.g. leasing desks in co-working centres.

“The first quarter of 2023 on the Warsaw office market was dominated by leases for between 500-2,000 sqm, with no transaction for more than 10,000 sqm recorded in the surveyed period. Almost 58% of the office take-up for the first half of the year was in central locations, especially in the Central Business District and the City Center West”, says Agnieszka Giermakowska, Research & Advisory Director, ESG Lead, Newmark Polska.

The structure of demand was dominated by new contracts and renegotiations/renewals which accounted for 54% and 35% of all deals, respectively. The remaining 11% was spread across expansions and pre-lets (4% each), and owner-occupier transactions (3%).

“The high proportion of both new leases and regearing points to two key trends in the office market. One is the growing occupier demand for offices featuring solutions that improve energy efficiency or cost optimisation and support ESG goals”, says Anna Szymańska, Head of the Office Department at Newmark Polska. “The other is that due to high relocation and office fit-out costs and a paucity of large ready-to-occupy office units, some tenants are choosing to renegotiate their leases and wait for offices meeting their expectations to be delivered to the market”, added an expert.

Warsaw’s vacancy rate was 11.4% at the end of June 2023, down by 0.2 pp over the quarter and by 0.5 pp year-on-year. The availability ratio in office buildings delivered since 2016 was below the capital’s average and stood at 7.6% compared to 15.7% for projects completed in 2010 and earlier years. Looking ahead, the volume of vacant office space is expected to shrink further, especially in buildings completed in the last five years.

At the end of the second quarter of 2023, prime office rents remained unchanged over the quarter at €22-26/sqm/month in the city centre and €16-18/sqm/month in non-central locations. The highest rental rates were in office buildings built to high technical and environmental standards and enabling tenants to take care of employees, their needs and wellbeing.