Demand for Warsaw offices is higher than supply
11 December 2018
Warsaw office market sees record-breaking results
Warsaw is a European leader in terms of the economic development, which is clearly visible on the office market. In recent years, the city has made an immense leap in terms of the quality of the offered space. – The facilities built in the agglomeration are among the most modern on our continent. In two to three years, the implemented investments will provide the city not only with spectacular buildings, but will also allow to create a new, attractive urban space - says Bartłomiej Zagrodnik, Managing Partner and the CEO of Walter Herz.
The increasing variety of the offer on the Warsaw office market goes hand in hand with the exceptionally dynamic growth in supply. Warsaw already has 5.43 million sq m. of modern space, and according to Walter Herz data, currently around 790 thousand sq m. of offices are under construction in the agglomeration. This volume satisfies only the annual demand for office space in Warsaw, which in 2017 exceeded 800 thousand sq m.
During the first three quarters of this year, over 630 thousand sq m. of office space have already been delivered to tenants, that is 8 per cent more than in 2017, which was record- breaking in terms of absorption. According to Bartłomiej Zagrodnik, such a large and constantly growing demand for capital offices means that despite the unusual activity of developers, we can talk about a kind of supply gap on the Warsaw market today.
The latest, undisputed trend is the intense development of co-working space operators in Warsaw, whose activity is also visible in the structure of demand. Only in the first three quarters of 2018, the companies from this sector leased almost 90 thousand sq m. of office space in the city, generating about 14 per cent demand for Warsaw offices. Walter Herz's analysis indicates that, a quarter of space leased this year in the city center was rented by the co-working operators.
The growing skyscrapers are to change the business map of Warsaw
The unwavering interest in the location of the world's largest players encourages investors to take action. This year, the construction of ten office projects in Warsaw offering in total over 270 thousand sq m. of space has been launched.
Among others, the implementation of ArtN complex at Żelazna Street, based on the revitalization of the buildings of the former Norblin factory has begun. At the intersection of the two metro lines, the construction of Central Point office building is also on the way, whereas at Burakowska Street, Forest office campus, with 78 thousand sq m. of offices has started. Recently, at Daszyńskiego roundabout, the implementation of the 140 meter tower of Generation Park Y has also begun.
The construction of many spectacular venues is carried out in Warsaw, most of which will be completed by 2020. After completing them, the business map of Warsaw will change a lot. Mainly, thanks to the huge development of the area near Daszyńskiego roundabout in Wola, where a modern office district is under construction.
Glass towers and loft offices
The office towers which will be erected in the investments initiated in Warsaw, will allow to dethrone the 231-meter Palace of Culture and Science, which remains the highest building in the city. In 2020, the highest office building not only in Warsaw, but also in the European Union, will be the tower currently under construction in the Varso complex near the Central Railway Station, at the intersection of Aleja Jana Pawła II and Chmielna Street. The facility will offer a total of 145 thousand sq m. of space. The second largest office project to be commissioned in the same year will be the Warsaw Hub complex with 75 thousand sq m. of space, located at Daszyńskiego roundabout.
Next year, Mennica Legacy Tower investment with over 60 thousand sq m. will be completed in Wola’s City. The office topography of this part of the city will also include buildings such as 195-meter Skyliner (44 thousand sq m.), and further buildings of Generation Park and Spark investments (70 thousand sq m.). Ghelamco company depends on the pace of commercialization of The Warsaw Hub, for the starting date of the construction of Unit Warsaw skyscraper, located near the building, which together with the technical equipment on the roof will reach the height of 202 meters. Nearby, a 150-meter PHN Tower building is also to be built at ONZ roundabout.
According to Bartłomiej Zagrodnik, the most interesting Warsaw office projects are certainly those based on the revitalization of old industrial buildings. The almost finished Elektrownia Powiśle has already been leased by tenants. After almost a decade of waiting, the construction of the already mentioned ArtN project has begun, whereas Bohema investment, located on the site of the former Pollena factory in Warsaw's district of Praga has entered the next phase of preparations for the construction. The commercial part of Koneser, a multifunctional complex that was built on the site of the former Warszawska Wytwórnia Wódek, has also opened in this increasingly popular Warsaw district.
Warsaw's Służewiec is improving its quality
Służewiec, the largest business zone in Poland, is currently undergoing major changes. Despite its huge potential, in office buildings located in this area, the vacancy rate is twice as high as the average in the city and three times higher than in the center. Infrastructure investments carried out in this area are to improve the attractiveness of the district among the investors. It is mainly about improving road infrastructure and creating new transport connections.
At the same time, developers are taking the initiative to improve the work environment. Not only have they consistently changed the seamless office function of this area through residential, hotel and retail investments, but also introduced amenities to increase the popularity of Służewiec after working hours. This is to stop the outflow of tenants to the city's growing business center, which combined with the competitive rental rates, brings the expected result.
Less and less vacant space
During the 9 months of this year, Warsaw market gained almost 200 thousand sq m. of space. Developers commissioned 20 office buildings, located mostly in the central agglomeration zone. As Walter Herz's experts point out, their degree of commercialization after completion was reaching an average of 70 per cent.
The estimates indicate that in 2019, Warsaw will gain around 270 thousand sq m. of space. However, in order to have more choice, the companies looking for large areas in the central part of the capital will have to wait at least until 2020.
The vacancy rate in Warsaw is currently the lowest in 5 years and on average amounts to around 10 per cent. In the central regions of the city it exceeds only 6 per cent. In the last 12 months, the vacancy rate has dropped by around 3 per cent. The largest number of empty offices in Warsaw are in the area of Żwirki i Wigury Street and in Służewiec, around 17-19 per cent.
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