In 2018, three times more office space has been leased than delivered in Warsaw. The demand for offices was even higher than in the record-breaking 2017.
Last year, interest in leasing office space on the Warsaw market was larger than in the record-breaking in this respect 2017. According to Walter Herz data, in 2018, over 850 thousand sq m of offices, over 50 thousand sq m more than a year earlier. Similarly to the previous year, the largest number of plots was contracted in the last quarter of the year. A significant contribution to the result was made by flexible space operators. For the first time in history, this rapidly growing sector in the recent years has shown 14 per cent participation in leasing office space on the capital market.
Last year has brought Warsaw over 230 thousand sq m of new offices, about 50 thousand sq m less than in 2017, when 280 thousand sq m of office space was commissioned. There is not much space left in the office buildings in Warsaw, and some buildings entering the market are already commercialized entirety. However, the supply will keep on growing, because the scale of implementation of new projects is not smaller than a year ago. According to Walter Herz analysts, the impressive amount of almost 750 thousand sq m of offices is currently under construction.
The largest number of investments is carried out in the city center and in the area surrounding it. Among the emerging complexes there are also those offering even over 100 thousand sq m of space. The largest facilities will be delivered in a year or two and then the Warsaw office market may be able to break the supply record of the office segment in 2016. Today, Warsaw’s resources exceed 5.6 million sq m.
Last year, such office buildings as, among others, Koneser (21 thousand sq m), Equator IV (24 thousand sq m), Proximo II (20 thousand sq m), Biura przy Bramie (15 thousand sq m), or Neopark B (11 thousand sq m) have been commissioned.
The continuing high demand for Warsaw offices means that in the most popular among tenants central office area, vacant space amounts to only over 5 per cent. That is 4 per cent less than at the end of 2017. The vacancy rate in the entire city of Warsaw is at an average level of less than 9 per cent, 3 per cent less than twelve months earlier. High interest in leasing space with poor availability of the offer means that rental rates are increasing. In the case of the most prestigious facilities, prices reach 24 euro / sq m / month.
Supply deficit results in tenants being forced to sign pre-let agreements to secure the most interesting locations. According to Bartłomiej Zagrodnik, Managing Partner at Walter Herz, in the current situation, in order to properly conduct the lease process, companies should start it earlier than before. However, the expert does not expect a sharp rise in rental rates. Nevertheless, he points out that the rising costs of conducting investments can cause the decrease between base rates and effective rates.
It is clear that Warsaw is enjoying the growing popularity among the global investors, also the largest global players, which has its impact on the volume of the lease. Among the last year's transactions there were many which concerned the lease of large spaces, even those exceeding 20 thousand sq m. The most popular among tenants were districts of Śródmieście, Wola and Mokotów.
Walter Herz specialists predict that Warsaw office segment will maintain its current growth dynamics in 2019. Rental rates for leasing space in the best office buildings will continue to grow. They have increased over the last year by about 2 per cent.