After a year of major completions and downward rent pressure, Poland’s capital is expected to see a further decline in office rent rates over the next two years, by nearly 2 percent, according to a recent report prepared by Cushman & Wakefield.
HB Reavis's Konstruktorska Business Center delivered 48,000 sqm to the market
Courtesy of HB Reavis
In 2013, more than 300,000 sqm of modern office space was delivered onto the Warsaw market, up by nearly 15 percent on the previous year. Four office buildings totaling more than 40,000 sqm each were completed, the largest being the Konstruktorska Business Center in Warsaw’s Mokotów district.
“The increase in office supply, expected to remain strong in the forthcoming quarters, pushed many property owners to bring down headline rents in 2013,” said Marcin Kocerba from Cushman & Wakefield. Over the course of 2013 headline office rents in Warsaw fell from €25-27/sqm/month to €22-25/sqm/month.
What’s in store for 2014?
Warsaw’s total office stock will shoot up by 16 percent over the next two years. Some 224,000 sqm will come out of the pipeline in 2014, and 239,000 in 2015.
Office space set to come out of the pipeline in 2014 and 2015 will amount to 224,000 sqm and 239,000 sqm respectively, which will push Warsaw’s total office stock up by as much as 16 percent.
Source: Cushman & Wakefield
Despite the improving state of the real estate industry in Poland’s capital, riding on the back of increasing economic growth, “there is a danger that with a large amount of speculative space due to complete in 2014 any improvements in employment will not be able to offset rental declines before a more robust 2015,” the report said.
According to Mr Kocerba, next year will see two major trends. On the one hand, companies will look to relocate outside of Warsaw’s CBD, likely to the Mokotów or Ochota districts, where headline rents are at some €15-18/sqm/month. On the other hand, companies will look at the declining rents as an opportunity to upgrade occupied space.
However, rates for the best class-A office space will be subject to less volatility. After a modest decrease in 2014 to €25/sqm/month from the current €25.50, prime rents are expected to go return to €25.50 in 2015.
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