This website uses cookies to give you the best experience when you visit our website and for statistical purposes. By not blocking cookies, you are agreeing to them being used and saved in the memory of your device. Please remember that you can manage your cookies by changing your browser settings. By not changing your browser settings you consent to these terms.
Savills expects over 5.7m sq m of new European office space to be completed in 2022
According to Savills latest research, over 5.7m sq m of new office space will be completed in Europe in 2022, of which 49% is currently prelet. In Warsaw, Savills forecasts that a rebound in demand and an undersupply of new office stock will translate into visibly shrinking availability.
A further 5.1m sq m of space is scheduled for 2023, of which 23% is already prelet. In total over the next two years, this marks a 43% increase per annum on the average level of completions over the previous five years. However, rising construction costs as well as shortages of materials and labour are adding pressure to supply chains and delaying some office completions. Furthermore, they are impacting fit out costs which in some countries in Europe.
In terms of quantum of space, Berlin (1.8m sq m) and Munich (1.0m sq m) have the highest development pipelines in Europe by end of next year, according to the international real estate advisor. Barcelona (8.3%), Dublin (7.7%), Budapest (7.3%) and Berlin (5.6%) are seeing the highest proportions of speculative development as a proportion of existing stock by end 2023.
Mike Barnes, Associate Director, Savills Commercial Research, comments: “Occupiers’ appetite for new, energy efficient space continues to grow in order to meet self-imposed 2030 carbon emissions targets. Rising energy prices will further accelerate the demand for more energy efficient office buildings. Overall, we anticipate European office take up to rise to circa 9m sq m in 2022 and maintain pace in 2023.”
Christina Sigliano, Savills EMEA Head of Occupier Services, says: “The next big question comes with what happens to secondary office stock amid obsolescence risk and how much landlords are willing to invest to ensure their buildings are still lettable. According to our research, the average cost of raising an office’s EPC rating from Grade D to Grade B stands at circa €500 per sq m. As a result, we anticipate the gap between prime and secondary rents to increase, creating new opportunities for developers to asset-manage older assets to achieve rental uplift.”
Office leasing activity in Warsaw amounted to 273,200 sq m in the three months to March, one of the best-performing quarters in the history of the capital. At the end of March 2022, there was 323,800 sq m of modern office space under construction. Occupier activity in recent months was largely driven by the public sector as well as financial services and IT companies which accounted for 42% of the total office take-up in Warsaw.
Karol Grejbus, Associate Director, Tenant Representation, Office Agency, Savills Poland, comments: “Rising construction and fit-out costs and a rise in utility charges are some of the challenges facing the Polish office market. At the same time, more and more employees are returning to the office and companies are resuming lease decision-making and looking for a head office for years ahead. Despite the Covid-19 pandemic, which affected the pace of growth of the office market, developers in Warsaw are gradually trying to return to their pre-pandemic levels of activity. The Warsaw Municipality issued six planning permissions between January and December 2021. And more importantly, seven new applications were received by the Warsaw City Hall during that time. It is a positive sign but a dearth of new supply is expected to continue until such projects are delivered and companies seeking larger offices, in excess of 5,000 sq m, will also have to consider older buildings in non-central locations”.