The number of vacant offices in the capital city is dropping due to tenants' high activity at the beginning of the year. If the tendency doe not change and supply will keep decreasing, we may soon face problems finding an office and the rental rates will soar.
Low supply
According to a report made by Colliers International in the first quarter of this year supply of new office space on the market in the capital city was not significant. There was only one new project in Warszawa - Pałac Młodziejowskiego which provided nearly 5 thousand square meters of office space. At present, in Warszawa there is about 140 thousand square meters of office space under construction, out of which 25 thousand square meters will be commissioned to use in the second quarter of this year.
In the first quarter of the year, tenants' activity on the market in Warszawa reached 198 thousand square meters. Offices outside the city centre were the most popular (60% of all transactions). However, analysts from Colliers International draw our attention to the fact that the majority of the most important transactions on the market was concerned with renegotiation and renewal of existing agreements. That is how tenants protect themselves against possible changes in the rental rates on the office market. Significant increase in the number of transactions, and low supply of new office space raise concerns that rental rates will soar.
Expected increases in the prices
At present, rental prices in Warszawa are relatively stable, even though current high demand for office space can cause increase in the price trend. According to a report by Jones Lang La Salle, in the first quarter of the year, in the city centre rental rates were on the level of 21-23.5 EUR/sq.m., sometimes reaching 25 EUR/sq.m. Outside of the city centre the prices are much lower, at the level of 14-15 EUR/sq.m.
Investors respond
Investors are optimistic and realize such projects which will answer the needs of the market. – Tenants are looking for places which will provide high rental quality in an interesting building at a competitive price. They do not limit their search to the city centre, it is just the other way around – says Andrzej Ołdakowski, President of PBM Południe Development. The project which is now being realized by the company answers tenants' expectations and provides office property for just 65 PLN/sq.m. Kijowska project, which will be commissioned to use in September, is an office and services complex including a revitalized 19th century historical building at ul. Kijowska 5 and a modern office building with interesting architectural solutions. It features, among other things, a pylon made of various materials and a four-storey overhang over Wieczorkiewicza Street, with traffic underneath.
Better economic conditions
As the situation on the office market improves, the vacancy rate in Centralny Obszar Biznesu (Central Business Area) in Warszawa dropped to 8.1% and outside the zone to 5.8%. The rate for regions outside the city centre is at the lowest level since 2009 and clearly indicates the direction of expansion. It is natural as rental rates in class A office buildings outside the city centre are even 30 percent lower than in the centre. Those who are looking for office space to rent know that high prices in the city centre result from the prestige of the location by the main communication routes of the capital, which frequently is the only different element.