A significantly increased tenants activity, new square metres handed-over in various types of projects, a break put on the growth of the vacancy rate and people filling up offices again. These are the key conclusions from the last quarter’s analysis regarding Warsaw’s office space market, as compiled by experts from BNP Paribas Real Estate Poland.

The consolidated office space area located within Warsaw is approaching 6.2 million sqm. From July until the end of September, the market grew by almost 68,000m², of which more than half was delivered in the mix-use complex built on the site of the former Norblin factory within Warsaw's Wola district. It is one of the most expensive as well as being one of the most awaited investments in the Poland’s capital city. Work on it lasted close to four years and the occupancy permit was granted in September. At the Norblin Factory complex, office tenants will have 39,000m² of space certified with the highest A+ standard at their disposal, which the architects have brought into being in two nine-storey buildings, that tower over the urban revitalization beneath them.

- The Norblin factory is a very important investment for Warsaw, and not only from an officespace perspective. It is a well-thought through and coherent revitalization project. It significantly reshapes the surrounding urban fabric and becomes a major part of the urban bloodstream, as it melds the city together and is not separated from it. A whole host of new and engaging public spaces have also come into being. By delivery of ‘Fabryka na Woli’, a range of high-class offices have been created - occupying nearly two-thirds of the complex area – right next to a district dedicated to entertainment, culture, the arts, retail, various gastronomic concepts and meeting places - says Ewa Nicewicz, a Consultant at the Office Agency, BNP Paribas Real Estate.

In spite of the global Covid pandemic, the new offices at Prosta St.  have managed to successfully attract a number of large tenants. The Norblin Factory will host Allegro.pl (over 16,000m²), Japan Tobacco International Global Business Services Centre (8500m²) and the new ISS World Services headquarters (over 4000m²). At the end of the quarter, newonce.media, one of the country’s most popular media groups, announced a move to Norblin, where a new broadcast studio or editorial offices of newonce.net, newonce.radio or newonce.sport portals will be established.

In the third quarter, new offices arose also in the CBD zone of Warsaw city centre, due to the 94-metre high Widok Towers skyscraper. Tenants will have almost 29,000m² at their disposal, while 10 of the 28 floors situated at the back of the Rotunda will be occupied by officials from Warsaw’s city hall.

The report’s authors also point to a continuous increase in tenant activity, observed from quarter to quarter

In the evaluated third quarter, it was higher by almost 7%. compared to the previous period and over a third higher (an increase by 35%) compared to the period from July to September. While looking at these increases, it is worth noting that over 53% of thirs quarter take-up volume are new lease agreements, while the remaining 42% as well as over 4%, are respectively the leases of company renewing their contracts  at current locations, or expansions into additional space.

- The flexibility drill is in full swing. It is clear that each tenant, regardless of transaction type (a new contract, renewal or expansion), desires to be treated individually. This approach allows for a much better space selection and establishment of lease parameters, which as a result, provide opportunities for having  optimally arranged space on a daily basis - indicates Klaudia Okoń, Consultant from the Business Intelligence Hub at BNP Paribas Real Estate Poland, the department responsible for writing the report.

Tenants' activity translated into a stop ofthe overall vacancy rate growth which have been observed for the last quarters. At the end of the analysed period, the percentage of vacant space was estimated to be 12.5%, which is exactly the same as in the quarter two.

A return to the office, slowly but surely

The third quarter points to a further gradual return to office occupancy. Experts from BNP Paribas Real Estate Poland estimate that at the end of September, the average office population occupancy was between 40% and 45%. In the studied period, there was no change in the attitude of employees who still expect flexibility in their office use habits. For employers operating on the employee market, this means a need for a much deeper analysis of the overall situation, a better adaptation of offices to new working models, introducing more flexible hours of commencing and ending work days, and primarily, the development of a hybrid model, that combines work at the office with work from home.

Rents remain unchanged

In the third quarter, the top-line rents for the best space in the capital remained stable, yet similar to previous quarters. The slowdown in demand and the availability of vacant space put significant pressure on the reduction of effective rents by landlords.

- In the near term, the first symptoms of recovery in Warsaw offices will probably be accompanied by rising utility costs. We are also analysing possible new tax obligations outlined within the new Polish governance declaration. Undoubtedly, price hikes and taxes will have a significant impact on operating costs. Furthermore, pressure on an increase in top-line rents will be generated by the supply gap which is favourable to owners, something we can expect in 2023 and 2024 - says Mikołaj Laskowski, Office Space Leasing Department Director at BNP Paribas Real Estate Poland.

The report’s authors indicate that one of the key challenges within the context of offices – and not only those located in Warsaw, but office spaces in general - are and will be, the costs of setting-up new work-spaces and revamping existing ones. The marked increases associated with the fitting-out of commercial office space, is the result of material shortages, increased transportation costs as a result of broken supply chains and spiralling labour costs within the construction and finishing industries.

AAG Office Warsaw Q3 2021 press release ENG
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Mikołaj Laskowski
Head of Office agency
mikolaj.laskowski@realestate.bnpparibas
AAG Office Warsaw Q3 2021 press release PL
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