Warsaw Crane Survey 2021 Warsaw Crane Survey 2021 Contents Introduction 3 Key findings 4 Building permits and application analysis 6 Unutilised building permits 8 Revitalisation is the important trend in Warsaw 9 The race for height 10 Warsaw’s Office Market 12 Śródmieście: Is a central location the future? 13 Wola on the rise 15 Construction numbers are decreasing in Mokotów 17 No new building permits in Ochota 19 Office stock in Włochy 20 Revitalised schemes are dominant in Praga office stock 21 Non-business districts 22 What will Warsaw of the future look like? 23 Methodology 25 Contacts 26 2 Warsaw Crane Survey 2021 Introduction Welcome to the second edition of the Deloitte Warsaw Crane Survey. The Warsaw office market has reached maturity after three decades of spectacular development. Since 1990, when the supply was very limited following the fall of communism, now the stock of modern office space has grown to more than 5.6m sqm. However, in the two editions of our What? survey, one of the most interesting findings has been the decreasing number of building permits issued for office developments. Is this a sign The Crane Survey measures the volume of office development in Warsaw. We have analysed all of an approaching slowdown? Has the impact of COVID-19 affected the number of projects underway and the volume of construction work on building permits for schemes with a GLA over office projects in Warsaw? 2,500 sqm issued in the last eleven years. The Deloitte Warsaw Office Crane Survey 2021 We have also looked at other administrative decisions. How? is a barometer of business activity in Poland’s capital, These include WZ decisions, defining the conditions We have taken a street-level view of Warsaw in which we examine Warsaw’s current office stock and under which a development may be launched. Although to monitor all office construction underway, future potential supply. As current stock is easy to track 60% of the city is not yet covered by local plans, we can verifying our observations with data from the using abundant market data we decided in the first take into account most of Warsaw’s land area by looking Architecture & Planning Department of Warsaw edition to focus on future as well as current office stock. at WZ decisions. This allows us to investigate future City Administration and our in-house real estate The Crane Survey is unique in analysing the modern office projects in most of the city. experts. stock in all Warsaw’s districts with a special focus on building permits and administrative decisions. Through The two building permits issued for large schemes When? a collaboration with the City of Warsaw, we have also confirm the trend seen in the last few years: that The survey covers the last 11 years (2010-2020). analysed the building permits issued during the last developers are building larger and higher schemes. We 11 years, giving us a complete overview of the trends can see more revitalisation and mixed-use projects. influencing developer activities. Where? We hope you find this report a valuable tool for Dominik Stojek The report covers all districts within Warsaw’s The Crane Survey measures the volume of office understanding the Warsaw office market. Partner Associate city administrative boundaries. development in Warsaw. We have analysed the building Real Estate Advisory permits issued during the last decade for schemes with Who? a gross leasable area (GLA) of more than 2,500 sqm. The report is addressed to all real estate market players, including developers, investment funds, advisors, investors, financial and administrative institutions. 3 Warsaw Crane Survey 2021 Key findings • The 2020 data confirms that the pandemic has • After record-breaking 2016, when around 400,000 sqm • The low occupancy rate across several new projects, strengthened the existing slowdown in Warsaw’s of new stock was delivered, the market saw three combined with the second-highest amount of office market for new office projects. In the previous edition of consecutive years of decline in the delivery of modern stock to come to market in a single year (after the the Warsaw Crane Survey, we reported that 17 building office stock. In 2020 at more than 300,000 sqm, we record-breaking 2016), is likely to reduce future planned 2 permits for office and service projects were issued saw the the second-highest amount of new office supply. new building permits for office projects in 2020 in 2019, 7 of which were for modern office stock. In stock delivered to the Warsaw market in a single year. • The COVID-19 pandemic has influenced tenants’ (7 in 2019) 2020, only two such building permits were issued: the Furthermore, according to construction schedules, decisions to postpone or halt much planned expansion Skanska project located at Łucka Street (former the new stock planned for 2021 will exceed last year’s and many new lease agreements. This may stretch yet Impexmetal), next to Art.Norblin; and The Bridge results. further the gap between net demand and the new stock 0 new applications for office building permits filled of Ghelamco, located next to Warsaw Spire scheme. • While the average vacancy rate across Warsaw is to be delivered this year. in 2020 There is a significant discrepancy between numbers of around 10%, several office schemes that either opened issued building permits (2 vs. 7 in 2019), however the in recent months or will be delivered in 2021 have difference in GLA is only 10% lower. This confirms our relatively high vacancy rates of more than 40%. ca. 62,000 conclusions from the last report - we are building fewer estimated GLA of building permits for office but larger projects. projects issued in 2020 (-27% y/y) Correlation of building permits and projects commissioning Number of building permits and planned GLA for modern office buildings 100% 700 000 700 000 45 of building permits issued in 2020 are located in 40 Wola district 600 000 600 000 35 500 000 500 000 30 over 300,000 ) 400 000 ) 400 000 25 stock delivered to the market in 2020 300 000 300 000 20 GLA (sqm GLA (sqm 15 over 380,000 200 000 200 000 10 stock forecasted to be delivered to the market 100 000 in 2021 100 000 5 0 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 over 5.6m total modern office stock in Warsaw GLA of issued building permits GLA of commissioned projects GLA Number of buildings 4 Warsaw Crane Survey 2021 Average period between obtaining building permit and building commissioning Building permits obtained by developers in terms of GLA 5 The most building permits in the last 11 years were issued for Wola district (47) with a total 17% 4 Ghelamco leasable area of 1.1 million sqm HB Reavis 3 Skanska 12% 16 building permits, issued before 2016, where 2 Echo Investment construction works still did not start 50% PHN 1 9% Karimpol 27 office projects with a building permit, at the inne 0 planning or construction stage (as of 31/12/2020) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 5% 3% 4% On-going investment processes (considering time from obtaining building permit and commisioning of a building) Warsaw’s Top 6 GLA of building permits obtained by developers in the last 11 years 1 500 000 100 GLA (sqm) Number of projects Ghelamco 449 000 13 80 1 000 000 HB Reavis 290 000 7 60 Skanska 226 000 12 40 500 000 Echo Investment 135 000 7 20 PHN 91 000 3 0 0 Karimpol 70 000 2 2010 20112012 2013 2014 20152016 2017 20182019 2020 GLA Number 5 Warsaw Crane Survey 2021 Building permits and application analysis Building permits analysis indicators including applications for building permits and According to the market and report methodology, only development conditions (hereinafter referred to as WZ two building permits for modern office developments decision). were issued in 2020. The first of these was for the Skanska 40% project located at Łucka Street (formerly Impexmetal - At least five applications for WZ decisions appeared in The area covered by local plans in Warsaw. ca. 15,000 sqm), next to the Art.Norblin scheme. 2020 for office projects or mixed-use developments WZ decisions apply in 60% of the Warsaw area. including an office element. Developers are currently 26% of plans are under preparation. The second permit, issued in mid-December 2020, was preparing new projects, which will be realised once the for The Bridge (ca. 47,000 sqm), the new office project of current market slowdown is over. However, none of Ghelamco, formerly known as Bellona Tower. applications for building permits we saw were for new Intraco Prime office schemes. This may indicate a longer slowdown for Drucianka During analysis we did not notice any new application for construction in the years ahead. Plac Grzybowski a building permit. The Bridge There are signs of a shift of focus in older projects, away Development conditions from offices to other uses such as residential or hotel. Łucka 5/7 Dobra To help us predict future construction trends, as well as the building permits issued we looked at other Lixa (next phase) Towarowa 22 Złota 58/64 Dor Plaza Building permits by year for buildings commissioned in 2020 P180 9 8 7 6 5 Equinix 4 3 Construction started 2 Issued building permits 1 Issued WZ Decisions 0 2012 2013 2014 2015 2016 2017 2018 Application of WZ Decision 6 Warsaw Crane Survey 2021 Building permits replaced by residential function Office function replaced by residential Construction work has not started on the Libero Tower During our analysis of the Crane Survey’s findings, we saw Echo Investment is planning to develop a primarily (Burakowska St.), although a permit has been issued.