First symptoms of Covid-19 impact on Warsaw office market visible

The coronavirus pandemic has had a relatively benign effect on the Q1 2020 Warsaw office market figures, according to the latest Savills research. However, tenants already started to optimize costs which soon may increase the number of lease renewals and subleases. Companies will look for more flexible lease terms and cost-effective locations.

According to Savills, only one new office building was completed in Q1 2020 in Warsaw – the first building of the Varso Place complex with an office (6,700 sqm), retail (1,600 sqm) and hotel part (hotel Nyx). This increased the total Warsaw office stock to 5.59 million sqm.

Almost 792,000 sqm of office space remains under construction across Warsaw, with over 421,000 sqm expected to be delivered throughout the remaining three quarters of 2020. Most of the new supply (70 percent) planned for this year constitute of large scale projects, which are currently on the final straight and are in over 85 percent preleased or secured with the LOI (Letter of Intent). However, construction works and labor issues may cause some delays, especially when it comes to new developments which start may be postponed.

“Coronavirus pandemic has already forced a number of companies to revise their office space needs. Some of them may start to consider sublease of their current office space or renegotiating terms of preleased agreements. Tenants will be looking to reduce costs, for example by combining traditional offices with coworking space or by implementing hot-desking and home office. Furthermore, as part of the cost optimization process, some companies may start looking for locations with more attractive rents, such as Służewiec,” Monika Wakulska, Associate Director, Landlord Representation, Office Agency, Savills, said.

Służewiec along with the City Centre West subzones stood out as best performing subzones with almost the same amount of space leased in both of them in Q1 (37,200 sqm and 37,100 sqm respectively). Demand was driven mainly by the banking and financial services sector (23 percent), services (22 percent) and IT sector (12.5 percent).

“In the upcoming months, the demand for office space is expected to decline. Ongoing rental processes will continue, but new ones are hardly being started at present, as tenants are trying to postpone decisions regarding letting the space where possible,” Wakulska added.

(WBJ)