The Warsaw office market has had its best quarterly performance ever, says real estate advisory firm Savills in its latest report. The city’s total leasing volume reached nearly 285,000m² of modern office space between July and September 2019, largely boosted by two record-breaking transactions: mBank’s pre-let for 45,600m² in Mennica Legacy Tower and the renegotiation by Orange Polska of its lease agreement for 44,850m² in Miasteczko Orange.
Occupier activity remained slightly subdued in the first quarter of 2019 but picked up significantly in the next two quarters. Leasing volume hit almost 690,000m² in the first nine months of the year, Poland’s all-time high for the first three quarters of a year.
Daniel Czarnecki, Head of Landlord Representation, Office Agency, Savills Poland, said: “This year is clearly being marked by large deals. Rather than slow down, the market accelerated in the holiday season and office take-up is therefore likely to beat last year’s record. Even if this does not happen, office take-up will definitely be very high; such a robust level of occupier activity for the second year in a row is confirmation of the very good health of the Warsaw office market.”
According to Savills, 61,700m² of new space was added to Warsaw’s office stock in the third quarter of 2019. The largest office completion was Wola Retro (Develia; 24,500m²). More than 142,000m² has been built in Warsaw in the year to date, bringing the capital’s total stock up to 5.6 million m².
As much as 120,000m² is expected to be completed in the fourth quarter of the year, but some projects may be delayed until 2020. According to Savills data, the development pipeline comprises 760,000m², more than half of which has already been secured under pre-lets or letters of intent. The largest concentration of construction activity is in Wola district, near Daszynskiego roundabout, where nearly 415,000m² is currently underway.
Warsaw’s average vacancy rate fell to 8.2% at the end of September and is likely to continue its downward trend by the end of this year.
Prime headline rents stand at €22.50–25.50/m²/month for office space on top floors of high-rise buildings in the Central Business District and the city centre, and range between €13.00–15.00/m²/month in the Sluzewiec district.
“Due to record-breaking demand, landlords hold the upper hand in central locations. There is a growing occupier interest in Mokotow district, which is likely to witness increased leasing activity in the coming quarters. Following a period of stagnation, Sluzewiec is seeing a wave of upgrades of office buildings acquired by opportunistic investors. Refurbished buildings stand a good chance of attracting tenants,” commented Daniel Czarnecki.
