Warsaw office market – Q1 2023

After a full year of Russian aggression in Ukraine, constantly rising energy costs and increasing inflation, 2023 has started off relatively slowly in the capital's office market. Vacancy rates remained stable, and with the new remote working law coming into force, by the end of Q1, companies had to determine which working model they would choose. The rather conservative approach of tenants to leasing office space in the first three months of 2023 was linked both to the aforementioned decision-making process and to the widely discussed new supply gap forecast for the year.

In Q1 2023, not a single office development was delivered in the Warsaw office market. In recent years we have become accustomed to record supply increases of 200,000 - 300,000 m² per year. This trend will be reversed in the coming two/three years. According to forecasts, new buildings planned for 2023 will deliver a total of 75,000 m² and another 115,000 m² in 2024.

In Q1 2023, tenants were cautious about signing leases in Warsaw and total demand for modern office space during this period was almost 159,000 m². Comparing this result to Q1 2022, the transaction volume dropped by 40%, while according to preliminary forecasts, the total tenant activity for the year will be comparable to the result in 2021. The next few years, with an increased amount of new supply being delivered to the market, will bring tenants a wider choice of the most modern office developments.

The beginning of the year has seen a gentle increase in rates for prime office properties in the Centre, and rents in top-end buildings in this zone are now between €18 and €23.5/m²/month. At the end of March 2023, rates in Warsaw ranged from €18 to €26/m²/month in the central zones and between €11 and €17/m²/month in non-central zones. Upward pressure on prime office rents as well as service charges will continue in the coming quarters, particularly in the city centre.