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Not so scary this winter

Events
Despite the glut of new supply on the office market and the growth in vacancy, business is still chugging along and there is reason for optimism – or so the prevailing view seemed to be at the 7th Office Market for Poland conference organised by ‘Eurobuild CEE’

More than 200 people arrived at the Hotel Marriott in Warsaw on October 12th to hear the discussions, analyses and market insights of developers, investors and real estate specialists. “Last year we said, using the Game of Thrones catchphrase, that winter was coming to the office sector in Warsaw. CBRE was one of the first agencies to announce that vacancy in Warsaw in 2016 would reach 19 pct under the most optimistic scenario and 22 pct under the pessimistic scenario. Now our panellists will tell us how things in fact turned out,” began Ewa Andrzejewska, the editor-in-chief of ‘Eurobuild CEE’, in her introduction to the first discussion. During this panel, Magdalena Kowalewska, the operations country manager of Immofinanz, in reference to her remarks said that since winter is already here everybody should move quicker and work more effectively. The market keeps changing and developers need to adapt. “Today it is no longer a question of location, location, location. Today it is flexibility, flexibility, flexibility
that counts. Tenants expect the most innovative offices from us,” added Ewelina Kałużna, the leasing and asset management director of Skanska Property Poland. The participants also pointed out, however, that investment continues to flow into Poland, with new companies from Western Europe steadily appearing on the market. And if the Brexit is going to have any effect on the real estate market in Poland it will be positive. Frankfurt, Dublin and Paris will be the natural destinations for companies considering a change of location, but Warsaw would also be not so far down this list. When asked about their predictions for the vacancy level in Warsaw at the end of this year, most agreed that it would not go much above 15 pct. “Savvy investors should not be scared of this,” concluded Karol Klin, the regional director of Echo Investment.

Joanna Mroczek, the director of the research and consultancy department at CBRE, next took to the stage to detail the results of a survey carried out by the agency for ‘Eurobuild CEE’ to find the best regional cities for business in Poland. Gdańsk came out on top – both in the eyes of tenants and developers – followed by Wrocław and Poznań. Joanna Mroczek pointed out that developers and tenants usually have different assessment criteria. Developers tend to value healthy relations with the local authorities, a stable labour market and good infrastructure, while for the tenants what counts is access to highly qualified labour, a good supply of office space and the business environment in that particular city.

Why has Gdańsk topped this ranking? – was one of questions raised during the panel discussion that followed. “I am surprised myself,” said Maciej Kotarski, the leasing director of the city’s Olivia Business Center. “Most tenants are still attracted to such cities as Kraków and Wrocław, but Gdańsk seems to have appeared out of nowhere. The project developed here by Hines and Echo’s project in Gdańsk are still not full,” he added. Jarosław Nowrotek, the president of Centralny Ośrodek Informacji Gospodarczej [the Economic Information Bureau], pointed out that as the employment pool starts to run dry, smaller cities such as Bydgoszcz will see their chance. Adam Grehl, the deputy mayor of Wrocław, seemed to agree. “Wrocław has a very simple development plan. Its academic potential is the key for attracting investors. The second factor is the cooperation with investors and the third is the quality of life. How attractively you can spend your free time also matters,” he concluded, outlining the key points of his city’s business development plan. The city’s attractiveness and pool of labour also explains Gdańsk’s success.

After a short coffee break Monika Sułdecka-Karaś, a partner and regional director at Knight Frank, gave a presentation on the importance of the BPO/SSC sector for the office market in Poland. While in Warsaw this sector is responsible for the leasing of only 4 pct of the available space, in Wrocław and Łódź it has a 36 pct share and in Kraków the figure comes to as much as even 48 pct. “For companies office space is not so important, what really counts is the people,” commented Paweł Panczyj, the managing director of ABSL. “Corporate migration eastwards is also occurring. This has been the case for several years and we are halfway through the process. As a result, 800,000 jobs will come to the CEE region,” said Andrew Majlath, a partner at Process Solutions.

The next panel concentrated on investment and the attractiveness of regional cities for investors. “I still believe there is as massive an attraction to the regional markets as there is to Warsaw, despite all the predictions about oversupply. I think that the market fundamentals are still there, but the main stumbling block is the access to personnel, and this is a major worry,” opined Richard Aboo, a partner and head of the office department at Cushman & Wakefield. The panellists pointed out that smaller cities such as Lublin, Rzeszów, Olsztyn or Bydgoszcz are still failing to attract international investors. “The previous panel ended with a statement: build even in smaller cities, build office space, because there is demand from tenants. Hopefully this is the case, but it is not going to be as easy to trade the buildings in smaller cities. So it actually does make a lot of sense, but only for those developers who are prepared for a longer term investment and it is also an opportunity for Polish capital,” concluded moderator Tomasz Trzósło, the managing director and head of capital markets at JLL Poland.

After the optimism seen in the earlier panel discussions, the next topic on demographics and employment was like a spoon of tar in a barrel of honey. It started with a presentation by Karolina Białowarczuk, the principal consultant and construction and property team manager of Hays Poland, who alerted us to some worrying projections. In the next five years the number of people of productive age in Poland will drop by almost 1.4 mln, and in 2050 the difference will amount to 8 mln. “By 2050, in Europe one person in three will be 60 years old or more. I don’t think we realise how important human capital is as a resource,” pointed out Magda Stawska, the manager of the people and change department at KPMG in the discussion that followed. Average life expectancy is also expected to keep on increasing. Those born in 2007 should live to around 104, while today’s average is only 84. “It is a significant challenge to take care of your employees to keep them effective even into their old age and to still want to continue to develop their skills,” stressed Mariola Stawińska, the senior HR business partner at HB Reavis Poland.

After the lunch break a presentation was given by Tomasz Wróbel, the Poland regional manager of Erco Lighting, showing the extent to which modern lighting can transform offices and reduce operational costs. The transformation of office space was in fact at the heart of the next panel discussion, on the design of modern offices. It was started with another presentation, this time by Aleksandra Krawsz, the marketing and PR manager of Kinnarps Polska, which outlined the current trends in office design. As it turns out, battery chicken style offices are a thing of the past, as now they have to provide much more room and variety. The panellists shared their views on the best methods that they themselves have used in their companies’ headquarters as well as those for their clients. “The three things that have turned out to be the most important for our clients are the lighting, mobile solutions and air-conditioning,” said Barnaba Grzelecki, the CEO of JMP Service.

The final panel of the day, moderated by Beniamin Krasicki, a member of the board of the Polish Chamber of Security, was on building security. “Where office safety is concerned the situation is not bad – it’s tragic,” commented Daniel Zalewski, a facility specialist at Samsung R&D Poland. The security service in office buildings is typically staffed either by people in their retirement or men in suits who do not know what they are doing. What might be of some consolation, however, is the fact that offices and high-rise buildings are not the most likely targets for terrorism. “Rather it is railway stations and airports that are most at risk,” claimed Krzysztof Liedel, the director of the Terrorism Studies Center of Collegium Civitas. Hopefully, those who went to the cocktail party that brought the event to a close were put at some ease by this last thought.

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