Warsaw Office Market in the First Half of 2024: Stabilization and New Trends in Investment

Among the completed developments, Yareal completed the Lixa D (9.3 thousand sq. m.) and Lixa E (16.9 thousand sq. m.) buildings, while Saski Crescent (15.5 thousand sq. m.) from CA Immo's portfolio returned to the market after modernization. "Makro Cash and Carry constructed a building on Jerozolimskie Avenue for its own use (6.9 thousand sq. m.)," while Ghelamco completed the first phase of the Vibe complex (15 thousand sq. m.). With these developments, the total supply of office space increased by only 0.03%, reaching 6.26 million sq. m. at the end of June.

Axi Immo 's expert forecasts indicate a further increase in new office supply in the coming years. Among the key projects under construction are The Bridge (47 thousand sq. m.), Upper One (35.9 thousand sq. m.), the modernized V Tower (33.7 thousand sq. m.) and Skyliner II (24 thousand sq. m.). Developers are increasingly locating their investments in central office zones, responding to tenants' growing expectations regarding the availability and quality of office space. "A significant part of them will be completed in 2025, about 160,000 sqm. It is also worth mentioning that the investments launched this year are mostly concentrated in the center of Warsaw," comments Emilia Trofimiuk, research manager at Axi Immo.

The vacancy rate in Warsaw stood at 10.9% at the end of the first half of 2024, stabilizing compared to the previous quarter and declining year-on-year. In the central office zones, the rate reached 9.1%, with a downward trend. The largest amount of vacant space is in the Służewiec (19.6%) and Żwirki i Wigury (13.5%) zones.

New work trends and changing tenant preferences are influencing the organization of office space. Companies are more willing to choose central locations, ready to pay higher rates for better quality and accessibility. "It is also becoming increasingly important to meet environmental standards, the more willing to choose new projects, legitimized by certificates at the level of even Excellent and higher." - adds Jakub Potocki, associate director at Axi Immo.

Demand and Transaction Dynamics

In H1 2024, demand for office space was dominated by contract extensions (51%) compared to new contracts (38%) and expansions (7%). Total tenant activity amounted to 320,000 sqm, down 2% year-on-year. The largest transactions during the period were contract extensions of between 13 and 14 thousand sqm.

The office market is seeing a dominance of mid-size and small transactions, due to the popularity of the hybrid working model. "The average deal size in the office market from January to June 2024 was less than 1 thousand sqm. The largest new lease was less than 4 thousand sqm." - notes Bartosz Oleksak of Axi Immo.

Rental rates in prestigious office buildings in central Warsaw locations remained in the range of 19.50-26.50 eur/sqm per month. In non-central areas, rents start at 10.00 eur/sqm per month. Service charges, depending on the standard of the space and location, ranged from 17.00 to 43.50 eur/sqm per month and remain on an upward trend.