As revealed in the latest periodic report by BNP Paribas Real Estate Poland, titled "At a Glance - third quarter in Warsaw's office market," the analyzed period has witnessed only marginal growth in office space. The constrained supply presents a formidable challenge to tenants, who, with progressively limited options, are increasingly resorting to lease extensions. Simultaneously, the vacancy rate in the capital has decreased, and rental rates have remained relatively stable compared to the previous quarter. A surge in demand for flexible and recycled office spaces is also notable.
Reduced availability and a decline in vacancy rates
The dwindling supply poses a considerable challenge for tenants seeking office space until 2026, as their choices continue to narrow. Available office space might shrink further, particularly as there are currently 256,000 sqm under construction, a stark contrast to the years 2017-2019 when an average of 800,000 sqm were being developed. Nevertheless, demand remains robust. Since the year's commencement, nearly 500,000 sqm of office space have been leased in the Warsaw market, a promising outcome, considering the record year of 2019 when 688,500 sqm were leased. The supply gap has also led to a decrease in the vacancy rate to 10.6%, dropping to 9% in central areas. The majority of office zones have experienced a vacancy rate decline compared to the previous quarter, which may exacerbate the issue of limited available office space in the future.
says Małgorzata Fibakiewicz, Head of Office Agency
Demand and rental rates
Lease renegotiations for cost savings
The limited choice in Warsaw's office market, coupled with significantly reduced levels of newly supplied office space, means that many companies and organizations face a challenging decision regarding their office location. Tenants seeking centrally located facilities may encounter challenges. There are more location choices available when looking beyond the city center or nearby Wola. In this context, some tenants opt for renegotiations, which not only allow them to extend their leases for shorter periods (e.g., 2-3 years) but also to optimize rental conditions and save on rental rates.
Ewa Nicewicz, Cousultant, BNP Paribas Real Estate Poland
Flexible offices still on the rise
Short lease agreements and the availability of fully equipped offices tailored for work continue to be highly attractive, especially in Poland's challenging and dynamic economic climate. Operators are responding to the growing demand for flexible spaces by offering new hybrid concepts. Issues related to ESG (Environmental, Social, and Governance) are also playing an increasingly prominent role in this sector. Many flexible offices are now located in buildings that promote and implement environmentally friendly solutions certified by international green or sustainable construction standards.
Klaudia Okoń, Senior Consultant, Business Intelligence Hub & Consultancy