Warsaw office supply hits record highs
Office & mixed-use developmentSixteen office buildings comprising a combined 350,000 sqm were completed in Warsaw in the first half of this year, bringing the total modern office stock in the city up to almost 5 mln sqm, according to a recent report by Cushman & Wakefield. “Approximately 100,000 sqm is scheduled for completion in H2 2016, which will bring the annual supply to a new record high of 450,000 sqm,” comments Katarzyna Lipka, an associate director in the research and consultancy department of the company. The highest level of new office supply in H1 was recorded in the city centre, where projects comprising a total of 180,000 sqm were given occupancy permits. The trend is expected to continue as a large number of new office buildings are now under construction and in the pipeline in or near the central locations of Warsaw, according to C&W. The Southwest and North zones have been the two other most popular Warsaw office zones in recent months – 60,000 sqm and 50,000 sqm of new office space, respectively, was delivered in those locations in H1 2016, according to C&W’s data. The largest Warsaw office completions in the period included Ghelamco’s Warsaw Spire A (59,000 sqm), HB Reavis’ Gdański Business Center 2 (49,000 sqm) and Echo Investment’s Q22 (46,400 sqm). The first half of the year also saw strong leasing activity in Warsaw, with a total of 360,000 sqm transacted in the city over the period, a level similar to that recorded in the first half of the record-breaking year of 2015. The net absorption amounted to 133,000 sqm. At the end of H1 2016, the average vacancy rate in Warsaw stood at 15.4 pct, which was 1.3 pp higher than in Q1 2016 and 3.1 pp higher than in Q4 2015. “Given the expected supply and take-up trends, prime monthly headline rents are likely to remain flat by the end of 2016 at EUR 24 per sqm in central locations and at EUR 13–16.50 in non-central locations. Tenants are continuing to enjoy the upper hand in negotiations, benefiting from the strong availability of office space both in existing buildings and project under construction or in the pipeline. Therefore, the owners of office buildings will continue to offer attractive incentive packages that include rent-free periods or fit-out contributions,” said Richard Aboo, a partner and head of office agency at Cushman & Wakefield.
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