Steady supply

Warsaw's office market continued to grow at a brisk pace in H1 this year. Demand significantly outpaced supply, while the vacancy rate fell and rents in central areas rose. A number of major office buildings were also delivered in this period and several large leasing transactions signed.

According to data from DTZ Research, office supply in the capital increased by 139,900 sqm in H1, reaching a total stock of nearly 2.65 million sqm of office space. Around two-thirds of the new supply was delivered in non-central locations.

Take-up in H1 amounted to 232,600 sqm of space (excluding lease renegotiations), marking 34-percent annual growth. Central locations accounted for only around 36 percent of office-space take-up (83,500 sqm), with the "upper south" district of Warsaw - including much of Mokotów - seeing H1 deals for nearly the same amount of space as in the whole of 2006. According to DTZ, the level of demand in Warsaw will remain strong in the near future and 2008 will exceed 2007's estimated results.

After the first two quarters of 2007, the capital's vacancy rate was 4.03 percent. This figure was up from Q1's rate of 3.81 percent, the result of new supply entering the market. At the same time, rents for prime city-center locations increased to E28-30 (zł.105-113) per sqm. Rents in non-central districts showed relatively little growth, however.

The biggest office buildings delivered in H1 were: Trinity Park II (24,000 sqm), delivered by Ghelamco; Lumen (23,500 sqm), from ING Real Estate; and IO-1 (23,000 sqm), by Immoeast. Bank Millennium's pre-let of 22,400 sqm in Harmony Office Centre was by far the largest deal lease in H1, with Raffeisen Bank's contract for 8,200 sqm in Blue Office coming in second.

H2 should see several more office projects delivered to the market, including ING Real Estate's Skylight (21,500 sqm) and SGI Komfort's Comfort Offices (13,300 sqm).