Development activity slows down
At the end of June 2024, Warsaw’s total office stock remained largely unchanged over the previous quarter. In the second quarter of 2024, only 15,000 sqm of modern office space was delivered onto the Warsaw market through a single completion: Vibe A, located in the City Centre West. Since the beginning of 2024, Warsaw’s office stock has expanded by only 64,000 sqm through five projects: four new office buildings (Lixa D & E, Makro Cash and Carry, and Vibe A) and Saski Crescent, which was refurbished and revamped last year.
Although the new supply for the first half of 2024 is far from spectacular, it is almost three-and-a-half times higher than in the same period last year. By comparison, the first six months of 2023 saw only 18,700 sqm of office completions, marking the lowest new supply level in Warsaw in 25 years. Just over 63,000 sqm of office space was added to the Warsaw market in the first half of 2024, with another 40,000 sqm scheduled for delivery by the end of this year.
Renewals account for a large share of take-up
In the second quarter of 2024, gross office take-up reached 178,000 sqm, up by around 8% year-on-year. Report authors note that lease regearing is currently the key trend on the Warsaw office markets, accounting for much of leasing activity in the Polish capital. As a matter of fact, renegotiations made up 63% of all deals signed in the April-June period.
“Despite stable demand, tenants remain cautious about relocating, increasingly opting for lease renewals. The share of renewals in office take-up is expected to continue to rise in the coming quarters, driven by rental growth and less generous incentive packages,” comments Małgorzata Fibakiewicz, Senior Director, Head of Office Agency, BNP Paribas Real Estate Poland.
In the second quarter of 2024, occupier demand focused on Służewiec, the Central Business District and the City Centre. Between January and end-June 2024, tenants continued to favour non-central locations that offer the best value for money. BNP Paribas Real Estate Poland notes that the CBD and the City Centre accounted for 40% of the leasing volume in the six months to the end of June, while the remaining 60% was transacted in non-central office zones.
Headline deals transacted between April and the end of June 2024 were for 13,000 sqm taken by Bank Gospodarstwa Krajowego in Varso Place 2, 13,000 sqm in T-Mobile Office Park, 7,300 sqm leased by Mercer in myhive Nimbus, 6,800 sqm in Gdański Business Center II and 6,000 sqm secured by Smyk in D48. All these transactions were lease renewals.
Rental rates and office refurbishments
Asking office rents remained static in Warsaw during the second quarter of 2024. Headline rental rates were in the range of EUR 18-27 per sqm per month in central locations, with some prime office buildings commanding significantly higher rents. Asking rents for office space in non-central locations stood at EUR 10-17 per sqm per month. Service charges were PLN 18-38 per sqm per month and varied by building standard and location.
However, the report authors also say that with property maintenance costs remaining on an upward trajectory, companies are increasingly looking for more efficient solutions. Organisations looking to reduce utilities consumption and their carbon footprint frequently consider new or fully refurbished office buildings. However, as construction costs continue to rise, landlords’ contributions are not enough to support new projects without having to rely on additional funding - such market conditions are far from favourable for relocations.
“As a result, tenants are renegotiating their leases and rearranging their offices. This requires awareness of key aspects of flexible space planning to enable active management of staff numbers and the hybrid work model using new technologies such as IoT systems, office space adaptations or the adoption of useful and user-friendly solutions,” says Jan Pawlik, Workplace Management Director, ISS.
Office buildings with amenities
At the end of the second quarter of 2024, the office development pipeline in the Polish capital stood at approximately 229,000 sqm scheduled for delivery in 2024-2026. Of that total, 80,000 sqm was in office buildings undergoing refurbishments and the remaining 150,000 sqm was in new projects. It is worth noting that investors and developers are stepping up their activity in the vicinity of Daszyńskiego Roundabout and in central locations.
The largest office projects underway in Warsaw include Ghelamco’s The Bridge (47,000 sqm), Strabag’s Upper One (35,000 sqm), Echo Investment’s Office House (31,000 sqm), Cornerstone’s Warta Tower (30,000 sqm) and Lincoln Property’s The Form (28,000 sqm).
According to BNP Paribas Real Estate Poland, office buildings are transforming right before our eyes, with their metamorphosis being driven by changing work patterns and occupier expectations.
“Landlords offer multiple amenities to help employers attract and retain top talent. On-site amenities facilitating daily life are provided for tenants as standard and typically include a canteen or a restaurant,
a newsagent or a small grocery store, as well as facilities supporting a healthy lifestyle favoured by many office employees such as bicycle parking spaces, showers and changing rooms for cyclists or fitness rooms,” says Klaudia Okoń, Senior Consultant, Business Intelligence Hub & Consultancy, BNP Paribas Real Estate Poland.
In addition to the quality of workspace, special events held in office buildings are also important. These may include a summer cinema, sports competitions and activities or skills workshops - all in line with
a global trend.
