Economy
Rising inflation is expected to remain one of the key factors impacting the office market in 2022. According to data from the Central Statistical Office (GUS), Poland’s GDP grew by 5.7% in 2021 relative to 2020. Meanwhile, inflation accelerated significantly throughout 2021 and reached 8.6% in December 2021, its highest level since 2000. High inflation means above all higher office construction and fit-out costs and rising service charges whose key components include soaring energy bills, utility charges and labour costs.
Supply
Over 324,000 sq m of office space came on stream in 2021, bringing the total stock in Warsaw to more than 6.15 million sq m. The largest completions included Ghelamco’s Warsaw Unit (56,400 sq m), Karimpol’s Skyliner (48,500 sq m) and Generation Park Y developed by Skanska Property Poland (44,200 sq m). At the end of 2021, Warsaw’s development pipeline scheduled for delivery in 2022-2024 comprised approximately 308,000 sq m, the lowest volume under construction since 2009.
“Cushman & Wakefield estimates that 2022’s completions will total around 220,000 sq m, a substantial proportion of which is in projects commenced before the outbreak of the Covid-19 pandemic. With fewer office buildings coming onto the Warsaw market since March 2020, new office supply is likely to be significantly constrained and the expected undersupply to carry into 2025. Some developers are, however, stepping up project planning in order to take advantage of less competition,” says Jan Szulborski, Senior Consultant, Consulting & Research, Cushman & Wakefield. “On the back of the improving market sentiment, new speculative projects are expected to be announced in the next 12 months, with a high level of development activity to be seen in the largest office zones, including the Central Business District, Centre West and Mokotów,” adds Jan Szulborski.
Vacancies
Warsaw’s vacancy rate continued to trend upwards since the second quarter of 2020, largely driven by the economic uncertainty caused by the outbreak of the Covid-19 pandemic. The muted occupier activity in recent quarters and the build-up of new supply pushed the vacancy rate up to 12.7%, representing an increase of 2.8 pp year-on-year.
“In absolute numbers, this relatively high vacancy rate translates into 778,400 sq m of unoccupied office space. Office availability is expected to fall gradually over the next 12 months amid an uptick in leasing activity, especially by large tenants. Additionally, it is worth noting that office projects completed in 2021 are over 94% let, which is confirmation of the healthy market fundamentals at a time of heightened economic uncertainty,” says Katarzyna Lipka, Head of Consulting & Research, Cushman & Wakefield.
Take-up
Office demand was weaker between Q1 2020 and Q2 2021 than in the same period 12 months earlier. The downward trend in leasing activity reversed in Q3 2021, for the first time in 18 months, with gross office take-up reaching 250,800 sq m in Q4 2021, close to its pre-pandemic figure. Total occupier activity in 2021 hit 646,500 sq m, representing an over 7% increase on 2020.
According to preliminary estimates, office leasing activity in 2022 is expected to maintain the gradual upward trend, which began in the second half of 2021.
