Last year was characterised by a good economic situation of the Warsaw office market. According to a report by BNP Paribas Real Estate Poland, for another year in a row, the volume of lease agreements signed was record high, and the supply of new space did not keep up with the tenants' demand. As a result, at the end of the year the vacancy rate dropped to the lowest level since 2012, and it took a lot of effort to find vacant space, especially in the central zone of the city. Even the expected higher supply this year will not remedy this problem, as a large part of the new space has already been secured by leases.
In 2019, as many as 12 lease agreements for office premises exceeding 10,000 sqm were signed in Warsaw. What is more, as many as four of them were concluded for spaces exceeding 20,000 sqm. These 12 leases alone accounted for almost 30% of the total demand. BNP Paribas Real Estate Poland experts point out that the record-breaking agreement was also the largest one in the entire history of the Polish office market. In July last year, mBank finalized a contract under which it will occupy 45,600 sqm, which is nearly the entire office space offered by the Mennica Legacy Tower. In fact, the entire banking and insurance sector was very active in this market. Apart from the aforementioned mBank, major deals were concluded by companies such as PKO BP, which chose the Chmielna 89 office building (currently under construction) for its new headquarters; Getin Noble Bank, which will soon move into Building C of The Warsaw Hub complex, and one of the biggest Polish insurance companies – Warta, whose new seat will be in the Warsaw Unit skyscraper.
The huge appetites for new office spaces meant that developers did not keep up with the interest of tenants. Last year, the total demand reached 878,000 sqm, which was higher than the record-breaking result of 2018. Net demand, excluding renewals, amounted to 583,000 sqm and clearly exceeded the volume of new supply. Throughout the twelve months of 2019, 17 schemes witha combined total of 162,200 sqm were delivered. The high level of net absorption resulted in a further decrease in vacancy rates.
As of the end of December 2018 the average for the whole city of Warsaw was 7.8%. This result is 0.9 p.p. lower than in the corresponding period in the previous year, and the lowest in seven years. Tenants were most active looking for new locations in the central zone, which brought the vacancies in this area down to 5.3%. Finding in the centre of Warsaw more than 5000 sqm of leasable space this year is now almost impossible. Only the next two or three years will provide tenants with more options
Mikołaj Laskowski, Head of Office Agency at BNP Paribas Real Estate Poland
Older office buildings, especially those situated in destinations that are no longer attractive to tenants due to the evolution of the office map of Warsaw and the emergence of new, more modern and better connected office centres, require special attention. We expect that in the coming years some office functions will be replaced by other uses. However, a large part of older office buildings still have considerable potential – they are attractively located, well-connected, and there are residential buildings being developed in their vicinity, while some tenants simply prefer certain locations for various reasons. Taking appropriate measures in order to improve the quality of the offer and its ensure proper profiling may allow such buildings to operate for many years to come
Patrycja Dzikowska, Head of Research and Consultancy, BNP Paribas Real Estate Poland
High demand on the part of tenants, recorded in the recent years, has convinced many developers to deliver their projects. Currently, there are about 780,000 sqm of modern office space under construction, and the City Centre zone, especially its western edge, near Daszyńskiego Roundabout, is one huge construction site. By the end of 2021, the Warsaw Hub, Warsaw Unit, Skyliner, Generation Park Y and the Mennica Legacy Tower will be completed at Daszyńskiego Roundabout and in its vicinity, as well as other, more compact, but no less attractive projects, such as the new phases of Browary Warszawskie, Fabryka Norblina or Lixa.
In October 2019, 30 years had passed since the opening of the first building which offered modern office space and still continues to do so. At the time of its opening LIM Center was one of the few skyscrapers in Warsaw. Today it is only one of many elements of the capital city's skyline.