Supply
In the first half (H1) of 2006, about 128,100 sq m of office space were available on the market, bringing total office space in Warsaw to 2,493.5 million sq m. By comparison, 118,000 sq m of office blocks were completed in 2005. The most active areas of Warsaw in this respect were the city center, with 44 percent of the completions in H1 2006, and the Mokotów-Służewiec area with 38 percent. Stock is expected to significantly increase towards the end of 2007 and 2008 with development focused on non-central areas.

Demand
Demand for modern office space remains strong. This is shown by approx. 203,600 sq m of occupied accommodations in H1 alone, compared to 373,000 sq m leased in all of 2005. Non-central locations accounted for nearly 60 percent of occupancy thus far. Healthy demand, mainly from expanding manufacturing and service companies, coupled with rapid office completions has decreased vacancy in Warsaw. The capital averages an 11.4-percent vacancy rate in the center, and 5.5 percent in non-central locations.

Rentals
In Warsaw, office space costs more than anywhere else in Poland. Rents for space in prime office buildings in the city center are currently at 18-21euros/sq m per month, while the best quality offices in non-central locations command 13-15 euros/sq m.
Average rents are 15-18euros/sq m in the center and 12.5-14 euros outside of the city center. Looking at average rents, downtown locations have become more affordable, and it is not uncommon for these locations to be considered in conjunction with non-central areas, in particular the buildings on the immediate outskirts of the city center.

Forecast
Prime rents are expected to remain unchanged over the next 6-12 months. Although there is an upward trend in rents, these apply mainly to currently occupied spaces. The reason behind this is, in part, a decreasing number of tenant incentives, including rent-free periods or cash contributions. The next two years should see a number of new office buildings being completed, which may affect the overall market.

Source: Warsaw City Profile
Jones Lang LaSalle