The economic downturn has had a strong negative influence on the condition of the real estate market. The demand for modern office space in Warsaw has significantly fallen with total take up in the first quarter amounting to 45,500 m². This indicates almost a 60% drop in comparison to the respective period of 2008.
Also the average letting size has significantly decreased to 473 m² whilst in 2008 it was around 1,167 m². At the same time, about 86,700 m² of modern office space was delivered to the market, bringing the total stock to 3.07 million m².
"Further development of the office market in Warsaw to a large extent will depend on demand, which may be lower this year. The construction of many pipeline projects is conditioned by pre-lease agreements. On the other hand the trend for subleasing office space has become more common. We estimate that around 40,000 m² is available by current tenants to sublease," said Joanna Mroczek, Director of Research and Consultancy department at CB Richard Ellis.
The total vacancy rate for Warsaw office space increased in the first quarter by 160 bps and reached 4.5%. This increase was particularly noticeable in Non - Central locations where the vacancy rate stood at 4.0% compared to the end of Q1 2008 at 1.7%.
Prime headline rents in the City Center decreased to 25 28 /m²/month. In Non-Central locations for the best projects, headline rents are oscillating at around 15 16.50 /m²/month. Effective rates are around 20% lower.
The investment market is still restrained by the global financial crisis. Prime yields vary at around 6.75%, which we expect to stabilize at around 7.0% for the near future.