Warsaw office market development under pressure

Inflation in Poland is currently above 12% and is the highest in over two decades. The impact of inflation on the real estate market is particularly noticeable among office developers, who are struggling with rapidly rising prices of construction materials and wage pressure, Polish Properties reports in its latest publication.

There is currently only 260,000 sqm of office space under construction in Warsaw, the least in more than 20 years. Most of the ongoing construction was started before the pandemic and only a few (about 30 percent of the space under construction) after it began. Rising inflation further discourages developers from starting new projects.

"Development activity is unlikely to improve in the near future, despite the easing of coronavirus-related restrictions and some recovery in demand for office space. Indeed, the large amount of new space delivered to the market in previous years has contributed to the decline in development activity," Dorota Lachowska, Head of Market Research at Polish Properties, said.

"It is worth noting that more than 1 million sqm of office space has been built in Warsaw over the past four years, representing 18% of the total office stock in Warsaw. During the pandemic alone, additional space delivered to the market amounted to 730,000 sqm and another 180,000 sqm will be delivered by the end of this year," she added.

(WBJ)