Key findings:

• In Q1 2020, gross take-up amounted to 138,900 sqm, down by 0.5% on the same period in 2019.
• Only one office building with an area of 6,700 sqm was delivered to the market.
• The office investment volume in Warsaw climbed to €438.6 million, representing a 44% increase on the same period last year.
• Warsaw’s vacancy rate stood at 7.5%.
• Prime headline rents remained flat at €24/sqm/month.
• As most transactions had been closed before the pandemic restrictions were introduced, the impact of the current situation on occupier demand will not be known until later quarters.

Take-up

In Q1 2020, gross take-up amounted to 139,800 sqm, down by 0.5% on the same period in 2019. New leases accounted for 55% of all deals while expansions and renegotiations made up 14% and 31%, respectively. Net take-up hit 95,200 sqm, down by 5% on the same period in 2019. In addition, 28% of all the new deals struck in the first three months of this year were pre-lets.

“The current situation has had a limited impact on the number of leases in the first quarter as the first measures to contain the spread of the COVID-19 pandemic were not introduced until 18 March and a substantial majority of transactions scheduled for the first quarter had been finalized or were in their final stages. The real impact on demand will not be known until later quarters as the real estate market takes quite some time to respond to all economic developments. However, the strong fundamentals of Warsaw’s office sector, coupled with no risk of oversupply and low vacancy rates, should enable the market to regain equilibrium relatively quickly after the slowdown,” says Jan Szulborski, Senior Consultant, Cushman & Wakefield.

Supply

6,700 sqm came on stream in Q1 2020, bringing Warsaw’s total office stock to 5.59 million sqm. The only office completion was the first building of the Varso Place complex. In addition to office space, it will house the four-star NYX hotel of Leonardo Hotels. The entire complex will offer a total of approximately 116,000 sqm of leasable office space.

Cushman & Wakefield estimates that at the end of March 2020 there was more than 765,000 sqm of office space under construction; of that total, 343,700 sqm is scheduled for delivery in 2020.

“As much as 73% of the total office space scheduled for delivery in 2020 has already been pre-let. In addition, 12 out of 16 projects have secured pre-lets, meaning that most of them are likely to be completed. In the long term, the current situation will, however, lead developers to delay their decisions to commence projects planned for 2022-2023, which may result in a supply gap in these years,” says Katarzyna Lipka-Nawrocka, Head of Consulting & Research, Cushman & Wakefield.

Vacancies

As leasing activity hit a record high in 2019, Warsaw’s vacancy rate continued its downward trend in Q1 2020 – it stood at 7.5%, down by 0.3 pp quarter-on-quarter and 1.7% year-on-year. Net absorption hit 22,800 sqm, more than three times the new supply in Q1 2020.

Rents

Prime headline office rents remained unchanged in Warsaw compared to the previous quarter and stood at €24/sqm/month in the central zone and at €15/sqm/month in non-central locations.

Outlook

According to the experts of Cushman & Wakefield, as the current situation is developing rapidly, it is difficult to exactly predict the impact the COVID-19 pandemic will have on the property market in Poland.

“At the moment there is no legislation limiting construction works in Poland. Nevertheless, due to protracted administrative procedures, limited labour availability, potential disruptions to supply chains and consequently rising construction costs, completion of some office projects underway is likely to be delayed in the near term,” adds Jan Szulborski.