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Global real estate services firm Cushman & Wakefield summarises H1 2019 on the Warsaw office market

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At the end of the first half of 2019, Warsaw’s total office stock amounted to 5,543,700 sq m, up by 80,550 sq m since January. The city’s vacancy rate stood at 8.5%, equating to 427,900 sq m of readily available space, which represented a 2.5 pp decrease compared with the same period in 2018. Prime headline rents remain flat at EUR 23.75/sq m/month.

Occupier activity shows no sign of slowing down on the Warsaw office market after the first half of 2019 - the leasing volume in the second quarter of 2019 alone hit the highest quarterly level since records began. This record take-up was driven by several large office lettings in central locations, particularly in the vicinity of Daszyńskiego Roundabout.

Pre-lets make up a growing proportion of take-up due to the shrinking volume of office space available for immediate occupancy. They account for 68% at office projects to be delivered to the market in the second half of 2019 and 42% at schemes scheduled for completion in 2020. This is likely to push Warsaw’s vacancy rate down in the coming 18 months with effective rents coming under pressure.

The supply gap that began in 2018 will carry into 2020 despite the planned annual office supply in this period being above the five-year average. The falling availability of office space across Warsaw will benefit non-central locations such as Służewiec, which offers the largest volume of readily available space of all the office zones in the capital city.

In the first half of 2019, investment activity totalled EUR 998.7 million, up by EUR 630.5 million on the same period in 2018. The largest transactions closed in the first six months of the year included West Station (Mapletree), Ethos (Credit Suisse) and Warsaw Trade Tower (Globalworth). Given the number of pending transactions such as the acquisition of Warsaw Spire by Immofinanz, the total investment volume is expected to continue to grow. Prime Warsaw office yields stand at 4.75%, with further strong yield compression expected, particularly in the case of office buildings in the centre of Warsaw.