The more, the merrier

Office & mixed-use development
The office subleasing sector has been growing at a dizzying rate. Market players say that they want to grow, there is a great deal of available space on the market and it is a promising segment. And everyone is saying that there is either no competition or that they are not afraid of it. Is this the ideal business to be in?

The growth of the shared, serviced and co-working office market is the latest repsonse to changing realities. “The traditional model for leasing office space has recently been undergoing some significant changes, which on the one hand represents an obvious evolution towards fulfilling employees’ expectations, and on the other hand is a response to the deteriorating conditions for travelling to work,” says Paweł Ornatek, the managing director at Regus Poland, which has provided office space in 15 locations in six Polish cities for 25 years. “On the market there are traditional offices and workplaces for business incubators. We are somewhere in-between,” explains Hadley Dean, who is developing a new chain of serviced offices under the name of Compass Offices in the region. Until recently Regus had a virtual monopoly in the field of subleasing offices. Of course, there have always been co-working areas, but these have mostly been created for start-ups. Cities and student organisations were mostly involved in this. As regards developed companies that for some reason were not opting for the individual leasing of offices, Regus was practically the only company on the scene. Until now. Even though Compass Offices is only just starting in the region, it is going about this intensively. However, the market is expected to become even tighter. “We expect other foreign players to enter the Polish market with similar services within two or three years,” says Hadley Dean, the head of Compass Offices, EMEA. Such companies that operate in the West include Youroffice Management and Workspace Group Your Space. Compass Offices is so far present in 14 countries, mostly in the Far East. Now Compass is entering Central and Eastern Europe and has started from Poland. Why? “Well, I personally like Poland!” replies the head of Compass in the region.

The company wants to open a few centres in Poland before the end of this year. And a few more in the main cities in the region. The first location in Warsaw was opened at the end of September – in the Rondo 1 office building. “We are planning to open a few more similar locations in Warsaw. This decision involves the employment of a sales department, a manager responsible for the country and a financial department.
You need to have a suitable scale in order for it work. Each centre should ideally include around 200–230 workstations. Entry costs are very high because we are investing millions of dollars in the centres. So you need to have all the systems ready from the beginning. We are in the process of negotiating contracts in Warsaw. Our next location is Plac Unii and we are looking for other buildings. We want to have five or six of them in Warsaw; each will have a similar area, around 2,000 sqm,” says Hadley Dean, who was also the former head of Colliers International in Eastern Europe. “First Warsaw, then Prague followed by Budapest and Bucharest. The office in the capital of Hungary will be opened before the end of this year,” he reveals. Compass is planning to open 70 centres in Europe, the Middle East and Africa over two years. The numbers are impressive for such a short timeframe. “The opening of 10–15 centres was not the reason why I left Colliers. We have much more ambitious plans than that,” he says with a smile.

Competition not as daunting as it seems...

However, Regus is not afraid of the direct competition, which has been growing. “We are not worried. New companies will help to raise awareness of the revolution we are participating in a revolution in the method of working as well as flexible approaches to time and place of working,” declares Paweł Ornatek, the country manager of Regus. “We have not changed our plans. Our growth will be dramatic compared to the past. Our plan envisages the greater concentration of our chain. It was drawn up before we found out about our new competition,” he adds. In Poland Regus is planning to open as many as several hundred business centres over the next few years. Next year dozens will be opened in Warsaw as well as in many cities and towns across Poland. “Companies of various sizes representing all sectors are interested in such space,” says Paweł Ornatek. The representatives of both companies agree that there is enough room for both companies in Poland. According to Paweł Ornatek, the traditional office model makes it impossible to react to a company’s needs quickly enough or to increase or decrease the office area needed. Compass is focused on the accessibility of traditional offices in the best office buildings, but on a small scale in terms of both their size and leasing period. Compass Offices offers the short- and long-term lease of serviced offices. The offices can be rented even for just one week. Or for a month or for ten years. The majority of our clients have three-month agreements that can be extended,” explains Hadley Dean. The first such space was opened in the Rondo 1 office building. Compass occupied the entire 10th floor – an area of 1,900 sqm – and created several dozen small offices with reception areas, kitchens, communal space and, uniquely, with a bar, ideal for business meetings. Some offices are already leased. “Filling such a centre takes nine months,” tells us Hadley Dean. “The market is very promising. Many companies would like to have an office in Rondo 1, but they are not big enough to rent a whole floor,” says the representative of Compass Offices.

In slippers, on the sofa

So if working in a traditional office is so bad, why it is not possible to work from home if off-site work is now more and more feasible. “Working from home is not a long-term solution. Our respondents are quick to stress that they need to be around other people in the kind of professional, motivational atmosphere conducive to working. The networking and the service are also very important. And the opportunity to meet clients without being in your slippers. I would go mad after just a few months of working from home,” admits Paweł Ornatek of Regus. And the main goal for Hadley Dean of Compass is community creation. “Working from home is excellent and many people like it, but what counts in business is the community. We want to build ties between tenants and so have an open door policy. We want to offer a professional workplace. You come to work, meet people and together form a community. Functioning within such a community has an advantage over traditional workplaces,” he explains. Thus the emphasis on communal areas, large dining rooms, the kitchens, meeting places and mini-bars. There is one more thing which will distinguish Compass. The lack of its logo. “We are not the most important ones here. We do not put our signs or logotype all over the place – there will not be any of that. We are not meant to be there. These will be the offices of our tenants and only their names will be visible,” declares Hadley Dean.

Smaller scale competition

Even though Regus and Compass say that small purely co-working areas do not pose any realistic competition for them, this does not mean that they are not significant players on the market and are not looking for growth. Such common open space with rentable desks, which are often hot desks without any personalisation or reservation, is also needed. Particularly to those who are just starting their businesses or travelling business-people. “This is not our competition,” says Hadley Dean. “Small co-working offices direct their offer to start-ups. We are thinking about companies that are slightly more developed. The companies in the former field, however, only have a few to a dozen or so employees. This is a different market segment,” the head of Compass claims. However, Regus can see the potential of this submarket. It has 15 such exclusively co-working places. “We will also be developing a co-working project, but I cannot say anything more about the subject at this time,” reveals Paweł Ornatek. Idea Bank also wants to attract new business clients with the co-working concept. Of course, you need to become a client of the bank before you can use its colourful space, its desks with all the connections and drink the coffee available in the quiet area. The desks are ‘hot’, which is not suitable for everyone. And you have to comply with the terms offered by Idea Bank to young companies. If you do not want to change your bank, you will have to look elsewhere. For those who prefer to have their own desk, but Compass and Regus are a bit too much for them, there is Strych na Wróble (Attic for Sparrows) in Warsaw. This is a place suitable for micro-companies, freelancers, foundations and artists as well as novice business people who need their own space and permanence – at least in terms of the desks. The owners of the company are planning to open many more such premises, copying successful centres in the West. “Idea Bank is not our competition – firstly, there’s the atmosphere and the magic of the place, and secondly, fixed desks. They are not there, there is simply a desk but it is not assigned to anyone. Here everyone has their own space,” says Philip Kempa, the owner and director of the company investing in the Strych centres and managing them. The Strych concept is based upon the uniqueness and the rarity of the space it provides. The first centre happened to be opened in the loft of a tenement building near ul. Chmielna, on the corner of ul. Żelazna. The lack of logo or information at the gate is Strych’s form of identification. Only those who know where they are going can enter. And this is appreciated by the tenants. Strych na Wróble has a conference and training room, which is also available to the public.

Price ofhappiness

The prices on offer in this segment differ only slightly. With Compass it is about EUR 500 per month per desk, but this is negotiable, at least at the beginning. Idea Hub is seemingly free of charge, but you have to consider the bank’s service fees. Regus advertises that you can work for as little as PLN 59 per month in their centres. The question is what, is included in the price? Strych, meanwhile, costs app. PLN 400 per month. The company admits that not everyone can afford it straight away. In such a case you can negotiate – this forms one aspect of the support offered by Strych to companies. “This is why Strych attracts entities that might have problems with liquidity, such as freelancers – and we are also focusing on artists,” says Philip Kempa of Strych. “We have one open space and three larger areas for small companies. A total of 25 people work here now. In addition we lease a conference room, which is available to co-workers, and offer a virtual office service,” he reveals.

Sparrows breed

“We are planning to open an additional co-working area of 800 sqm. This is our minimum. How much space will actually be opened depends on the area we manage to find. At least 60 people will be able to permanently work there. We tend to lease the area and there are two independent companies that look for the space for us. We are interested in long-term leases due to the investment we have to make in the offices. This could mean opening a few premises. We are keeping an eye on a few locations. But for sure we will be in negotiations over the lease of one of them,” emphasises Philip Kempa. Whether the chain will develop under the original Strych logo has not yet been decided upon. “A modern office building is out of the question. We are mostly interested in an old communist pavilions, tenement buildings or commercial premises owned by the city,” says the director of Strych. The main thing is to have the right atmosphere, which can be a major a bargaining chip when it comes to some groups of entrepreneurs. “The units have to be private or owned by the city, but we are more inclined towards municipal properties. We would like to sign the contracts for a minimum of three years but five years would be ideal. This is related to the security of investment in the design and redevelopment of the interior. “We want the project to pay for itself within a year and have about 40 people working in it. In my opinion the prospects for this market are very good,” believes Philip Kempa. At the beginning Strych wants to invest app. PLN 300,000 in each of its locations, although this amount is subject to the buildings the company finds.

Abird inthehand...

Developers also want to increase their leasing levels and so are starting to become involved in serviced and co-working offices. One example of this is O4 in the Olivia Four building, which is part of the Olivia Business Centre complex in Gdańsk. O4 consists of a co-working area with offices that can be leased for a few hours as well as a social area and a multimedia conference centre.

The city of Warsaw has had a similar idea. An area where you can lease workstations, operating under the Centrum Przedsiębiorczości Smolna brand, is being co-financed by EU funds. The project is designed to create favourable conditions for entrepreneurs and people who are thinking about setting up their own businesses.

A good number of market players are starting to organise workplaces outside the traditional mainstream. It seems that the market is becoming more and more absorbent. If this indeed is the result of actual changes in the style of work or even small companies needing super offices, the prospects for the office market look promising. But if it’s all about cost cutting, this might mean that companies are making less and less money – and then perhaps it would not bode so well...