Colliers summarises two decades of Warsaw’s office market

After 20 years of the dynamic development and with 5,1 million sqm of modern office space, Warsaw has become one of the most developed office markets in Europe. Colliers International has played a vital role in this success. Having been operating on Poland’s commercial real estate market for 20 years and responding efficiently to market changes, Colliers International has become one of the leading advisory firms in the office market.

From grey blocks to glass skyscrapers

Over two decades, the landscape of Warsaw has changed with the emergence of new skyscrapers. Today, buildings impress with their size, architecture, interior design and amenities based on new technologies. The momentum in the Warsaw office market has been building for years. However, in 1997, the total supply of office space in Warsaw was only 371,200 sqm, whereas in 2007 it had grown to 2.6 million sqm. Over the next ten years, the supply of office space in Warsaw nearly doubled, surpassing 5.1 million sqm in Q1 2017. Thus, Warsaw has reinforced its leading position on the office market in Poland and Central and Eastern Europe.

Office construction site

At the beginning of the 1990s, Warsaw’s office market was at an early stage of development. Tenants were only able to lease office space in a few buildings located in the very centre (Palace of Culture and Science, Marriott Hotel) and on Plac Bankowy (Intraco, Blue Tower).

“Raiffeisen, when entering Poland 26 years ago, was searching for an office in a prestigious central location in Warsaw. The selection criteria were the quality of the space, the attractiveness of the location and convenience for clients and employees coming from a central location. At the beginning of the 1990s, the choice was really limited compared with current opportunities,” recalls Eugeniusz Toruń, Head of the Procurement Department at Raiffeisen Bank Polska.

The development of the office market clearly accelerated in the middle of the 1990s, when Warsaw’s first business park (EMPARK Mokotów Business Park) was built at the crossroads of Wołoska and Domaniewska streets. This started the development of the office hub in Mokotów.

“Back then, Warsaw resembled an enormous construction site with cranes at almost every corner. The development peak was in 1999, when roughly 400,000 sqm of office space was delivered in Warsaw. This was a record high level until 2016 when 407,000 sqm was delivered to the market,” says Paweł Skałba, Partner at Colliers International and Director of the Office Agency.

At the end of the 1990s, more buildings, still well known, were built such as Ilmet at Rondo ONZ (slated for demolition) and Warsaw Financial Center, which still enjoys a good reputation. Back then, Warsaw Trade Tower was also built, which was the capital’s tallest office building until last year.

Breakthrough time

Poland joining the European Union in 2004 was a breakthrough moment for Warsaw’s office market. Poland’s accession made Warsaw credible in the eyes of foreign developers and tenants, as well as foreign investors, which created the foundations for the investment market. A significant proportion of office investments were sold during the commercialisation process, and even during building. This reflected the strong demand for office assets and encouraged the development of subsequent buildings (including Metropolitan and Rondo 1), which were quickly occupied by global corporations searching for modern space.

“Poland’s accession to the European Union triggered new opportunities. Back then, the supply of modern office space across the whole of Poland was roughly 2.5 million sqm. In 2005, the development of the BPO sector started. For developers, it was a time of strategic decisions. That was when we decided that our flagship project will be built in Warsaw’s Wola district. In 2016, we purchased a plot that formerly belonged to the Military Graphic Company and began work on the concept for the development of a whole block of streets. Back then, hardly anyone believed that Wola would become Warsaw’s new business centre. We opted on creating a friendly public space - Plac Europejski. This innovative approach has contributed to the success of Warsaw Spire,” says Jarosław Zagórski, Commercial and Development Director at Ghelamco Poland.

Apart from the Palace of Culture and Science, which dominates Plac Defilad, new office buildings tower over today’s Warsaw’s skyline, including Warsaw Spire and Q22. Moreover, 718,000 sqm of modern office space is currently under construction. Only this year, developers expect to deliver another 240,000 sqm of modern office space in Warsaw. There is a growing interest among tenants and investors in both the city centre and new plots situated in close proximity to Warsaw’s central zone, particularly the Wola district.

“Following the merger of Raiffeisen and Polbank in 2012, there was a need to find a universal and efficient location for the newly merged bank. With Colliers International’s support, we selected the part of Wola near the centre. The district meets our expectations and is becoming a favourite location for the financial sector, offering increasingly better infrastructure. Office buildings built here are not only comfortable, but also ecological, efficient and aesthetic. Comparing searching for space in Warsaw now and years ago, today’s market is more mature and professional, while the investment projects offered are at a high level,” says Eugeniusz Toruń.

“Warsaw’s office market is one of the most attractive and liquid ones in this part of Europe. Roughly half of modern office space being built on the Polish market is constructed in Warsaw. There are planned a few spectacular buildings, which will not only significantly raise the attractiveness of the city skyline, but will also improve the offering for tenants. New buildings emerge particularly in close Wola district and in the city centre. We should still remember about the high potential of office buildings located in Mokotów and Służewiec Przemysłowy. Interestingly, the Polish Office Research Forum (PORF), which Colliers International belongs to, changed the boundaries and names of Warsaw’s office zones this April, responding to the rapidly changing structure of the office market,” says Paweł Skałba.

Not without importance to Warsaw’s office market is the United Kingdom’s departure from the European Union. After the Brexit announcement, Warsaw’s office buildings emerged on the radar of businesses from the West, considering Poland as a potential destination for relocating part of their operations.

Two decades of cooperation

The development of Warsaw’s office market is closely intertwined with the appearance of professional advisory firms in Poland, which have been playing a vital role here since the very beginning. Over 20 years, however, the range of their activities has changed profoundly.

“A dozen or so years ago, the commercial real estate market in Poland was completely different than now. It was more difficult to persuade a property owner to lease space to a particular business. This is the other way round now, when tenants have to be persuaded to select a given location. In turn, what those times have in common with today is the need for building long-term relations with clients,” says Paweł Skałba.