Regional markets will receive about 330,000 sqm of new office space in 2023, and the Warsaw market will receive about 66,000 sqm, according to estimates by Cushman & Wakefield. According to its experts, over the past three years, the market has seen a progressive decline in the total area of investments under construction due to the completion of previously started projects and a reduction in the number of new ones. This trend is particularly evident in Warsaw, where about 181,500 sqm. are currently under construction. (for comparison: at the beginning of 2020 it was close to 750 thousand sqm). In regional cities, on the other hand, about 410 thousand sqm of space remains under construction, which is more than double the pre-pandemic level, when developers were completing 850 thousand sqm.
The lower activity of developers in the regions is a result of higher construction and finishing costs and the general economic downturn in Poland and the world. We expect 330,000 sqm to be delivered to regional markets in the whole of 2023, which is 20% lower than the average of the last five years. This could start a period of ‘supply gap’ in regional cities, which will lag behind Warsaw by about twelve months. Tenants may feel it as early as 2024, according to Office market expert Jan Szulborski said.
“The Warsaw office market will expand by about 66,000 sqm this year, while at the same time entering a period of the so-called ‘supply gap’, which may last even until 2025,” he said.
At the end of Q4 2022, the total stock of modern office space in Poland’s nine largest markets exceeded 12.7 million sqm. In the October-December period, new supply in Warsaw amounted to 8,700 sqm in one project, and nearly 237,000 sqm of space in all of 2022, 10% below the five-year average. In regional cities, on the other hand, 12 office buildings with a total area of almost 74 thousand sqm were completed in Q4. The total supply of new space in the regions last year was 5% lower than the previous five-year average and amounted to more than 405,000 sqm, C&W calculated.
“In 2022, the strength of the office market in Poland was influenced by transactions of entities already present for many years. Despite the lack of a common pattern on the decisions made by the organizations, their actions allowed them to emerge from the period of destabilization with a defensive hand. Market activity, measured by the total scale of lease transactions including renegotiations, expansions and relocations, exceeded 1.4 million sqm. This was a level comparable to the results of the last eight years. Contrary to appearances, absorption was not among the low ones either, and the total volume of new agreements and expansions remained only 10% lower than in the pre-pandemic period, which allows us to look with optimism for the coming quarters. The road to further stabilization of the market will lead through a number of interesting developments that we can expect to see this and in the coming years. At the forefront are the differences in the condition of the office market between different cities and the expected slowdown in supply in Warsaw in 2023 and in the outlook for regional cities in 2024. We also expect further increases in office rents this year, which will be particularly visible in city centers and will affect the dynamics of the entire market,” Head of Regional Markets at Cushman & Wakefield Michal Galimski concluded.
Source: Cushman & Wakefield and ISBnews
