Global real estate services firm Cushman & Wakefield has summarized the first quarter of 2023 and trends shaping the Warsaw office market, which came third among key European office locations for take-up. The Polish capital is entering a phase of renewing leases made in the peak years of 2018-2019. Another positive development is the prospect of several new construction starts in the city’s central zones. According to Cushman & Wakefield, new projects will experience the strongest upward pressure on rents.
Take-up: Warsaw is entering a phase of lease renewals
In 2023, the Warsaw office market has entered a period of renegotiating leases made in the peak years of 2018-2019. The increased focus on renewals expected to commence any time soon is likely to boost office demand throughout 2023. Economic uncertainty reflected in worsening economic indicators is, however, likely to weigh heavy on this year’s total leasing activity,
says Joanna Blumert, Head of Occupier Services, Cushman & Wakefield.
Supply: the number of new projects in the centre of Warsaw on the rise
Around 181,500 sq m is currently under construction, but several new office starts are expected in the centre of Warsaw in the coming months - these include Upper One of STRABAG Real Estate, The Form of Lincoln Properties and Karimpol’s Skyliner II, which are scheduled for delivery in 2025-2026. That said, the Warsaw market will continue to suffer a supply gap until late 2025,
comments Joanna Blumert.
The greater control over development costs is likely to incentivize investors to launch new office projects. However, most projects which are expected to break ground in the next 12 months will be in prime locations so that developers can maximize their returns,
adds Jan Szulborski, Office Market Expert at Cushman & Wakefield.
Rents: the location, quality and occupancy levels of office buildings to be key drivers of office rental growth
In addition, rental growth for the broader office market will be driven by the record-high indexation under EUR-denominated leases, rising construction, fit-out and operating costs. However, the pricing policy of landlords will largely depend on the location, quality and occupancy levels of their buildings portfolios,
says Katarzyna Lipka, Head of Consulting and Research, Cushman & Wakefield.
Vacancy rate to remain on a downward trend throughout 2023
With new office supply expected to be limited in 2023-2025, the city’s vacancy rate will remain on a downward path, allowing the Warsaw market to absorb the surplus office space from existing stock, which occurred due to the temporarily weaker demand in 2020-2021. The rate of absorption will, however, largely depend on the pace of economic growth, which will impact investment and staff hiring decisions alike,
concludes Vitalii Arkhypenko, Office Market Expert at Cushman & Wakefield.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 52,000 employees in over 400 offices and approximately 60 countries. In 2022, the firm had revenue of $10.1 billion across core services of property, facilities and project management, leasing, capital markets, and valuation and other services. To learn more, visit www.cushmanwakefield.com