From MORDOR with LOVE

Służewiec, which is also referred to as Warsaw’s Mokotów business district, has a bit of a bad rep. In fact, colloquially Varsovians refer to the area as Mordor. However, it’s well known that JRR Tolkien based the land of Sauron on the industrial city of Birmingham and I doubt he ever visited Poland’s capital. But such mere facts did not stop some bright spark putting up a sign as if the district was named just that even though it was almost instantly taken down by the city authorities who didn’t seem to get the joke. But is the district really quite so dismal?

A little history

Służewiec was first joined to Warsaw in 1938, and soon afterwards the Warsaw racecourse moved there, although nowadays the track is formally part of Warsaw’s Ursynów district. In 1951, the portentous decision was made to turn Słuzewiec into an industrial area and numerous factories were set up on what was then 250 ha of farmland. It wasn’t until 1992 that the first office building, Curtis Plaza, was built. Afterwards office buildings began to supplant the now uneconomic heavy industry. Demand for office space was further spurred by the opening of the Galeria Mokotów shopping centre in 2000, but it wasn’t until 2008/2009 that the demand peaked. The district now has the largest concentration of office space within the country, with over 1 mln sqm gla in 77 office buildings.

According to real estate agency Savills, one of the biggest challenges now faced by the district is its lack of infrastructure. “It is a fact that the development of infrastructure has not kept pace with the development of office buildings. Having said that, ongoing developments are expected to improve the traffic, but it will take another 2–3 years for them to finish and those years will be the most challenging,” says Wioleta Wojtczak, the head of research at Savills Polska. Indeed, the first Warsaw metro line, which was opened in 1995, seemed to studiously miss the district. It is true that it does have a tram line, but it only leads to a terminal. It is also true that there is a train station, but right on the very edge of the district far from most of the office developments. Today the district is notorious for traffic jams, which is not surprising when one considers that there are an estimated 80,000–100,000 people working in the area and up 250,000 come into the district during the day. In 2016 JLL estimated that the average time to commute into the district using public transport was twice as long as it took to drive in by private car. But at night all is very different with many of the streets becoming eerily empty and quiet. It seems that only recently have residential developers ventured in. Last year 1,043 new apartments were put onto the market within the district, while 1,606 were sold. Currently there are residential developments on ul. Bokserska, ul. Obrzeżna, ul. Cybernetyki, ul. Postępu, ul. Woronicza and ul. Konstruktorska. According to Savills, the majority of such apartments are bought by those who work within the district.

Most people appear to agree that what a successful business district needs is a mix of different types of development. “The future development of the district needs to be more sustainable, which is the same as for every other hub that is currently experiencing high demand for office space. Adding hotels, more residential investments and places people can also spend their time after office hours will improve the image of Slużewiec,” argues Wioleta Wojtczak. Indeed, when it comes to hotels, Słuzewiec is particularly undersupplied. There are simply no branded hotels in the district even though, according to Savills, around 1,000 hotel guestrooms are absolutely necessary. But don’t worry. All is about to change. Around 1,000 to 1,100 rooms are to be delivered to the local market by 2020. Four Points by Sheraton is set to open in Q2 2018 on ul. Suwak; Hampton by Hilton will open in Q4 2018 on ul. Postępu, Holiday Inn Express Mokotów is set to open in 2019 (exact details have yet to be announced); Moxy and Residence Inn are to open on ul. Wilanowska in around 2019 and Focus Hotel Premium is to open in 2020.

Not the only place to do business

Służewiec is indeed an important business district where around PLN 6 bln is transacted yearly without even counting the turnovers generated in the Galeria Mokotów shopping centre. But that does not mean it is not without competition. The mere announcement of plans to build Warsaw’s second metro line has had the effect of allowing Warsaw’s businesses to move out west of the city centre – and now Wola has suddenly entered the scene as a brash contender for the position of Warsaw’s main office hub. Moreover, due to the fact that developers have only relatively recently moved into the area, they have been at pains to avoid some of the perceived mistakes made in the Mokotów district. No longer are developers looking to create strictly business districts. “In 2006, Ghelamco bought a post-industrial site in the quarter bounded by ul. Grzybowska, ul. Wronia, ul. Łucka and ul. Towarowa,” explains Jarosław Zagórski, the director for retail and development at Ghelamco Poland. “After ten years of concept design and construction work, the Warsaw Spire complex has arisen. At its base, we’ve created the pl. Europejski square, which is open to the public, full of greenery, fountains and running water, and surrounded by cafés and restaurants with the Art Walk open air art gallery. In its entirety it has become one of the catalysts of the changes that are happening in the Wola district. We have returned life to a once inaccessible quarter of the city,” he claims. However, to a certain extent Wola occupies a slightly different niche to that of Służewiec, being much closer to the city centre and with slightly higher rents. “Despite its close proximity, Wola is not yet considered part of the CBD, although it may be perceived as its natural westward extension. The offices here are marginally cheaper than those in that prominent downtown location. However, in terms of the scale of development and the type of buildings (numerous office towers), the Rondo Daszyńskiego area will soon become a dense CBD-like office cluster. But the proximity to the CBD provides an attractive alternative for many companies that are looking for a ‘more central’ location, but do not need to be exclusively located in the heart of the city. The centre of gravity of Warsaw is gradually moving westwards, so these two areas may in fact overlap,” explains Jan Jakub Zombirt, the director of the market research and consulting department at JLL Polska.

Israeli developer Adgar, however, has a great deal of faith in the Służewiec district. The company believes that the traffic problems are irrelevant and the relative lack of residential development are a positive advantage. To prove its point, the company compares Mokotów to the Tel Aviv district of Ramat Ha’Hayal. This business district is largely dominated by IT companies, but with only two exits and almost no public transportation, and its streets are almost permanently gridlocked. But the company’s views are not entirely perverse. Adgar does believe in a mix of functions and that retail is one of the most important elements of a successful district.

“We can see that retail brings life to a building,” says Eyal Litwin, the CEO of Adgar Poland. “When I bought Park West my first instruction to the architect was take down all the fences. We did it because we wanted the retail to be exposed.” He also says that other developers in the area are now seeing the error of their ways and have also started ripping them down.

And in comparison to Wola, Mokotów seems a much more interesting location to Eyal. “In Mokotów especially in what is now called Mordor it’s exactly like Ramat Ha’Hayal: you have a bunch of offices with zero residential around.” The point he makes is that residents don’t often appreciate late night carousing at their front door, but it is the restaurants and pubs in particular that serve businessmen by day and then serve late night revellers until the wee hours of the morning that really bring life to a district. “Most big developers open canteens in their buildings, something which is expected by funds – their future partners. As a long term investor and owner we prefer restaurants in our buildings in Poland. In Ramat Ha’Hayal all the canteens are now leaving the buildings because again the restaurants offer a better alternative,” he explains. Moreover, pubs, clubs, restaurants and parks create a reason to stay in a district after work and thus help reduce traffic at the peak of the five-o’clock rush hour.

Unfortunately, Służewiec isn’t quite like that yet. The retail map of Mokotów doesn’t quite match up to the city’s more central locations. There’s Galeria Mokotów… and that’s about it. As for catering facilities: “In Mokotów I have Green Caffè, but I don’t want to eat there everyday,” says Eyal Litwin.

It’s not so bad really

In one sense it doesn’t matter that the reputation of Służewiec is so poor. Demand for office space is high and set to grow. Whatever space is delivered to the Warsaw market is likely to be filled. Indeed, by the end of 2019 a further 85,000 sqm of space should come onto the Służewiec market and 30 pct of the space that is to come onto the market this year has already been leased. The vacancy rate within the district has risen to 18.9 pct, largely as a result of companies moving to Wola, but is predicted to fall once again.

“The location is still an attractive one, even without the ongoing modernisations. The close proximity to the airport is an undeniable advantage. Also, being a non-central office hub the rent levels are attractive, which combined with the availability of office space is an incentive to companies,” points out Wioleta Wojtczak of Savills. This does not change the fact that, as Jan Jakub Zombirt of JLL explains: “Most of the cities that rank highly for quality of life are walkable. This means that the need to use cars is reduced, as the urban layout and design encourages walking – the distances to major points are short, the streets are safe and attractive. Retail, services and restaurants on ground floors are in fact what creates this attractiveness, as they make walking enjoyable. A wide range of retail services also reduces the need to travel and contributes to the overall balance of a given district.”