Demand in Q1-Q3 2020 was 35% lower than in the corresponding period last year, while another trend is a growing volume of office space available for sublease.
The current dynamics on the Warsaw office market is different from the one we had been used to in previous years. Demand between the first and third quarter decreased by 35% compared to the corresponding period in 2019. At the same time, the pandemic additionally contributed to the expected increase in the vacancy rate, which is largely related to the significant volume of new supply. It is worth remembering, however, that the projects planned for the next few years will not have the scale of those that are now being delivered or are under construction, which should compensate for possible shortfalls in demand.
Mateusz Polkowski, Head of Research and Consulting, JLL
Demand
The largest transaction in the last three months was a deal for 6,200 sqm. Moreover, seven largest contracts were renewals, sometimes combined with expansion. Currently, tenants often decide to renew the lease for a short period of time and wait for a return to normalcy before making long-term commitments.
Mateusz Polkowski, Head of Research and Consulting, JLL
A new trend on the Warsaw office market is the increased supply of space for subletting. Currently, approximately 118,000 sqm is available for companies interested in this type of space in the capital, of which approx. 60% is located in the central parts of the city. However, there are certain limitations related to the sublease of offices, i.e. in terms of fit-out, duration of the contract or the obligation to obtain the landlord's consent for a sublet transaction. Therefore, it is not an optimal solution for every tenant. In this situation, many companies are considering flex offices as an alternative. They can be a better solution for tenants waiting for the completion of their target office buildings, the space fit-out, or only setting the target model of the working environment.
Jakub Sylwestrowicz, Head of Tenant Representation, JLL
Supply
In recent years, between 700,000 sqm and 800,000 sqm has been under construction, but now it is approx. 600,000 sqm. Developers are much more cautious about starting new construction projects, which may result in a supply gap, especially outside the city centre. This, in turn, will likely increase the attractiveness and competition for space in the best buildings located in these areas.
Jakub Sylwestrowicz, Head of Tenant Representation, JLL
Investment market – the third best result
The Warsaw market accounted for 61% of the capital invested in the Polish office sector this year. In the period from January to September, eighteen office transactions were concluded in the capital, with a total value of nearly EUR 940 million. This is the third best result for the first nine months of a year in the last decade. At the same time, restrictions related to traveling and viewings has delayed to some extent the implementation of new transactions, despite investor interest in Warsaw.
Tomasz Puch, Head of Office and Industrial Investment, JLL
