At the end of June, the total stock of office space in Warsaw amounted to approximately 6.27 million sq m. In the first half of 2022, over 129,000 sq m were commissioned. sqm office space. The largest facilities that received the occupancy permit were: Forest Tower, SkySawa complex and Lixa C.
In the second half of 2022, three more buildings will be completed with a total area of approximately 105.3 thousand sq m. sqm At the end of the second quarter of this year, there were approximately 234,000 sq m under construction in Warsaw. sqm of office space with a completion date between 2022 and 2025. There is also an increased activity of developers at all stages of investment preparation - from the purchase of land to obtaining building permits.
The vacancy rate has remained under increasing pressure since the start of the pandemic. Despite the relatively high level of new supply in the first half of 2022, the vacancy rate in the second quarter fell again by 0.3 pp. on a quarterly basis and by 0.5 pp. on an annual basis and amounted to 11.9 percent. The availability of "immediately available" space at the end of June amounted to 747.7 thousand. sq m, which translates into a decrease of nearly 2 percent. on an annual basis.
The growing activity of tenants is also noticeable in the net absorption ratio, which in mid-2022 amounted to approximately 158,000 sq m. sqm and was higher than in the whole of 2021. Net absorption from January to June 2022 exceeded the level of new supply in this period.
We expect that in the coming quarters we will observe the continuation of the compression trend of the vacancy rate due to the growing activity of tenants, limited supply of new office space and a relatively high level of pre-let in buildings planned for delivery in 2022 - emphasizes Jan Szulborski, senior consultant in the Advisory Department and Market Research at Cushman & Wakefield.
The total tenant activity in Warsaw in the first half of 2022 amounted to approximately 479 thousand. sqm and compared to the same period last year, it was higher by 94%. This is an increase of 19 percent. compared to 2019.
The largest agreements concluded in this period include: PKO BP pre-lease agreement in the SkySawa I&II building, Pekao pre-lease agreement in the Forest Tower project, renegotiation and expansion of the ING group in the Plac Unii project, renegotiation of the agreement by a banking company in the Generation Park X project and relocation of Generali to the Jabłonowski Palace building. Additionally, in the second quarter, Samsung Electronics Polska renegotiated the lease agreement in Warsaw Spire, KOWR in Karolkowa Business Park, and the IT company extended the lease agreement in Warsaw Financial Center.
The recorded activity of tenants is related to the better situation on the rental market and the accumulation of transactions concluded by large tenants from the financial sector in the first quarter. As the pandemic situation improves, some tenants are moving from the suspension of decisions regarding office space to the implementation phase. Confirmation of this phenomenon can be found in the number of transactions concluded in the first half of 2022 - it amounted to 392 and increased by nearly 58%. on an annual basis. At that time, the largest share in the demand structure fell on renegotiations (48%) and new contracts (45%). Expansions accounted for 7 percent. total recorded activity.
We assume that the demand for office space in 2022 in the Warsaw market will continue its gradual upward trend compared to 2021. One of the factors that may reduce tenant activity in the coming quarters is the change or deterioration of tenants' sentiment towards investment plans in Poland due to the uncertain geopolitical situation and the expected reduction in available space due to the lack of new supply - adds Joanna Blumert, head of Occupier Services Warsaw, Office Agency, Cushman & Wakefield.
Due to the uncertain geopolitical situation and the increase in the costs of construction and finishing office space, rents recorded another increase. In the second quarter of 2022, the rents for the best office space in Warsaw amounted to EUR 22-26 per sq m. per month in the city center and EUR 13.50-16.50 per sq m. in a month in other non-central locations.
Projects under construction are under the greatest pressure to increase headline rents, which is due to the greatest exposure to rising construction and finishing costs. There is also a greater flexibility of negotiated financial parameters, such as the length of the contract, the number of rent exemptions granted or the additional payment for finishing the surface.
We expect that in the coming quarters, cost factors will exert further pressure on the increase in headline rents, additionally exacerbated by the gradual reduction of available space in the most attractive locations and projects, sums up Jan Szulborski.
