Cushman & Wakefield, a global real estate services firm, has published “Vacancy Rates. Warsaw Office Market”, an in-depth analysis of the unleased space structure on the Warsaw office market, taking into account the buildings’ age and location.
After a record take-up in 2015, the vacancy rate in Warsaw office buildings dropped to 12.3% (from 13,3% at the end of 2014), which corresponds to ca. 570,000 sq m of available space.
A close analysis of the structure of vacant space in Warsaw suggests that some of these offices, especially in central locations, are either in the buildings that are not actively leased out (e.g. because of planned demolition or refurbishments) or their landlords demand rents above the market rates. If we excluded these buildings, the vacancy rate for central zones would amount to ca. 10% (instead of 13.4% recorded at the moment).
The highest volume of vacant offices was recorded in the schemes that were put on the market in the last two years (vacancy rate of 21%) and those developed in the years 2008–2009 (16%).
Interestingly older office buildings (delivered before 2006) remain popular. The vacancy rate in these schemes does not exceed 11% and has been relatively stable for the past two years. Such locations are chosen especially by tenants that had earlier occupied space in class C (or lower) schemes, e.g. state-owned companies and public entities.
Location-wise, the highest vacancy rates were recorded in the Central Business District (the Core subzone, situated between Elektoralna, Marszałkowska, Nowogrodzka and Jana Pawła II streets) at 16.5%, and in Upper South (14.3%), which comprises the so-called Industrial Służewiec, an area with the largest concentration of office space in Warsaw.
Taking into account the high supply planned for the next 2–3 years, we can expect an upward pressure on the vacancy rates.
“Relatively high vacancy rates in new buildings are a natural situation on the market, as a certain amount of time is required to fully lease the space (currently it is about 2 years). At the end of 2015, the vacancy rate for the projects completed in 2014 was at 15% (42,000 sq m), significantly lower than at the time of their delivery, when it amounted to 49% (137,000 sq m). When put into use, office buildings constructed in 2015 were unleased at the level of 42%, while by the end of the year this figure fell to 28%. Such figures indicate a stable and healthy demand for office space in Warsaw,” said Katarzyna Lipka, Associate Director, Consulting & Research at Cushman & Wakefield.
“The drop in Warsaw vacancy rates in 2015 took everyone by surprise. The record take up levels coming from expansions and "new" demand has managed to keep vacancy levels at bay encouraging developers to forge ahead with their development plans. Invariably this will put some pressure on vacancies but should sustain at reasonable levels as older generation buildings become obsolete and take up increases,” said Richard Aboo, Partner, Head of Office Department, Cushman & Wakefield.