Global real estate services firm Cushman & Wakefield has summarized the situation on the Warsaw office market in 2023, which saw the lowest annual supply in 25 years as some office buildings were temporarily taken off the market for refurbishment. Meanwhile, office take-up - measured by the number of deals closed - was up by almost 18% compared with the peak year of 2019. Tenants in Warsaw will, however, continue to face upward pressure on rental rates and steadily shrinking office availability.
SUPPLY: OFFICE STOCK REMAINED UNCHANGED FROM 2022
Last year’s new supply was the lowest in nearly 25 years, with the average for that period of approximately 250,000 sq m. Despite new office completions, Warsaw’s office stock remained unchanged from 2022,
says Jan Szulborski, Business Development & Insight Manager, Cushman & Wakefield.
Refurbishment and repurposing works are necessary to adapt buildings to increasing ESG standards, among other things. This is a notable trend in Poland and beyond as Cushman & Wakefield estimates that more than three quarters (76%) of office stock across Europe will be at risk of obsolescence by 2030 unless landlords actively invest in improving the quality of their space or look to find alternative uses for it,
adds Jan Szulborski.
TAKE-UP: LOWER LEASING VOLUME BUT MORE TRANSACTIONS
However, the number of transactions closed on the Warsaw office market was up by nearly 18% compared to the office take-up in the peak year of 2019 and only 5% lower than in 2022. The relatively large number of leases is testament to high leasing market liquidity,
explains Ewa Derlatka-Chilewicz, Head of Research, Cushman & Wakefield.
In 2023, the structure of demand was dominated by relocations which accounted for approximately 53% of all deals. Renegotiations and expansions made up 43% and 4% respectively. Renegotiations, however, saw their share rise by nearly 4 pp compared to 2022. Leasing activity on the Warsaw office market is expected to remain stable in the coming quarters,
adds Ewa Derlatka-Chilewicz.
RENTS: THE LOCATION, QUALITY AND OCCUPANCY LEVELS OF OFFICE BUILDINGS WILL REMAIN KEY DRIVERS OF RENTAL GROWTH
Upward pressure on rents will continue throughout 2024, especially for projects underway. In addition, the effects of indexation will continue to be felt in 2024, with indexation under EUR-denominated leases expected to reach around 4-5%. While indexation applies to the vast majority of existing leases, landlords’ strategies regarding new leases will vary depending on the parameters they adopt for their portfolios,
comments Grzegorz Dyląg, Partner, Head of Asset Services Business Space, Asset Services EMEA, Cushman & Wakefield.
VACANCY RATE: OFFICE AVAILABILITY CONTINUES TO SHRINK
In 2023, net absorption on the Warsaw office market totalled more than 114,300 sq m, a decrease of around 60% from 2022. The rate of absorption in 2024 is expected to remain below previous years’ levels as tenants continue to optimize offices, which in the long term will adversely affect the balance of new leases and expansions relative to space reductions,
concludes Joanna Blumert, Head of Occupier Services, Cushman & Wakefield.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in approximately 400 offices and 60 countries. In 2022, the firm reported revenue of $10.1 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), Environmental, Social and Governance (ESG) and more. For additional information, visit: www.cushmanwakefield.com.