Warsaw Office Market Is Not Slowing Down

Warsaw office market has had another very successful year. Walter Herz analysts calculate that in 2017, the demand for office space in Warsaw exceeded 800 thousand sq m. In the first half of last year, about 390 thousand sq m of offices found its tenants. The second half of the year turned out to be a bit better. The most space - 230 thousand sq m was leased in the last quarter of 2017.

Last year, the volume of contracted office space was slightly lower than in the record year of 2015, but more offices were leased than a year earlier. According to Walter Herz specialists, the most popular among the investors is invariably office space in the facilities located in the districts of Śródmieście, Wola and Mokotów. Similarly to a year before, last year’s new contracts had the biggest share in the demand structure.

New supply lower than the year before

2017 was a year of intense activity of developers on a scale that we have not seen yet in the history of the industry. It results in a record amount of office space that is currently emerging in the agglomeration. Warsaw market currently offers over 5.2 million sq m of modern office space. According to Walter Herz experts, last year almost 280 thousand sq m of space was commissioned in over twenty facilities. The experts note that the new supply was definitely lower than in the record year of 2016, when over 400 thousand sq m of space was introduced on the Warsaw market.

The advisers inform that around 780 thousand sq m of office space remain under construction in Warsaw. The construction of most of the projects was initiated in 2017 and will be finished in two or three years. There are many large investments among them, including high-rise buildings, which require a longer construction time than the average office buildings. The largest number of office towers will soon grow around the Daszyńskiego roundabout, which is becoming the new business center of Warsaw.

At the same time, as the experts point out that residential real estate are also being developed in the emerging office center in Warsaw's district of Wola. Over the last decade, the number of completed apartments in this part of Warsaw has increased tenfold. The biggest number of apartments currently under construction in the city are in the district of Wola.

High absorption of the market

The volume of office space available in Warsaw is increasing, but the market's absorption is so high that it does not affect the vacancy rate. It’s quite the opposite. The vacancy rate has been dropping throughout the entire last year. The interest in the Warsaw offices was so large that despite the increase in supply, the amount of vacant space available on the market decreased.

By the end of 2017, the vacancy rate dropped to 11.6 per cent in Warsaw, which was over 2 per cent lower than a year earlier. Walter Herz experts point out that this is the lowest indication in four years. According to the experts, in office buildings located in the central parts of the city, the vacancy rate amounted to over 9 per cent, and outside the center it reached the value of over 13 per cent.

Last year was marked by several large transactions, which were related to the lease of several thousand sq m of space. Millennium Bank renewed the contract for over 18 thousand sq m of space at the Harmony Office Centre. Citi Service Center Poland decided to expand and sign a pre lease agreement for over 18 thousand sq m in Generation Park X. Moreover, J.P. Morgan Poland signed a new contract at Atrium Garden for around 15 thousand sq m, whereas Alior Bank in Łopuszańska Business Park and AstraZeneca pharmaceutical concern in Postępu 14 have renewed their contracts, which included expansion of over 13 thousand sq m of office space.

According to Walter Herz experts, the office segment will keep its momentum in the near future, and Warsaw will continue to make good use of the changes taking place in the global markets. New investors, including the world's largest players, will keep on coming to the capital and the demand for offices, may increase even further partially due to brexit. Analysts predict that due to the unsubstantial new supply of offices this year and the persistently high demand for space, the office vacancy rate in Warsaw will continue to decline.

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Warsaw Office Market Is Not Slowing Down

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