Warsaw office market – Q3 2022

Construction activity stands at a record low level.

October 27, 2022
  • Mateusz Polkowski
  • Ewa Grudzień
  • Piotr Kamiński

Q3 2022 saw delivery of approx. 100,000 m2 of new office space, including a flagship project, Varso Tower (63,800 m2) by HB Reavis, as well as P180 (32,000 m2) by Skanska. Consequently, the office development pipeline stood at a record low level of 160,000 m2. We expect that the year-end will see the start of new investments – such as Drucianka Campus (42,000 m2) and The Form (29,000 m2), which will translate into a gradual increase in the volume of space under construction. Despite this, the volumes under development will not return to pre-pandemic levels for some considerable time.

The ramping down of development activity over the last two years has resulted in a considerable decrease in planned completion levels. In 2023, office stock is forecast to grow by only 60,000 m2. After nearly three years of a tenant market, the class A office segment is transitioning towards landlord favourable conditions. The waning availability of prime office space is driving an increase in rental rates and less generous incentive packages.

After spectacular H1 results, occupier activity slowed down in Q3 with total take-up coming in at 129,000 m2. A lack of suitable office units has meant that office tenants have renewed their current leases to secure space and wait out the disadvantageous market conditions. This is illustrated by the relatively high share of lease renegotiations / renewals in total take-up, which in Q1-Q3 was 38% of the total.

Q3 2022 recorded another increase in rents for prime office properties located in the central zones. At the end of September, these rents ranged from € 18 to € 26/m²/month. Rents outside the city centre remained relatively stable at € 11-17/m²/month.

In Q3, the vacancy rate stood at 12.1% (11.1% in the central zones and 13,0% outside the centre), a decrease of 0.3 p.p. y-o-y and a 0.2 p.p. increase on the previous quarter.

As of the end of September, office investments in Poland totalled €1.8 billion, exceeding the full-year volume of the previous year. Warsaw transactions accounted for 55% of the turnover. As of the end of Q3, the yield for prime Warsaw assets, with five-year lease agreements, was expected to be approx. 5.00%.

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