Decisive again

After the guests had been welcomed to the conference by Anna Korólczyk-Lewandowska, the deputy editor of ‘Eurobuild CEE’, Andrzej Falkowski, the chair of the economic psychology and business department of SWPS University in Warsaw, took to the rostrum. During his presentation, on the pros and cons of remote working, he cited scientific studies that show that the initial satisfaction derived from working from home declines after around two months. He also voiced an opinion that came as a bit of a shock to some of the audience, by asserting that mixing the home and work environments is both absurd and unhealthy. [A longer interview with Prof. Falkowski appears in this issue – Ed.]

A discussion on the investment market then followed. The panel was moderated by Krzysztof Cipiur of Knight Frank, who kicked things off by drawing attention to the effects of rising inflation and the war in Ukraine on the appetite of office investors. “Recently, however, we have seen a great deal of movement on the market. Every few days there’s been news of some other big transaction,” pointed out Dorota Latkowska-Diniejko of Reino Partners. Bartłomiej Kordeczka of Dentons admitted that indeed a lot has been happening, but negotiations have been evidently more tense and they are also taking longer. “The increased financing costs are also an obvious factor, posing something of a big challenge in valuations,” admitted Rafał Gierczak of Ghelamco. Dieter Knittel of Pbb Deutsche Pfandbriefbank spoke of the challenges faced by the office market throughout the entire CEE region, while Piotr Zamkotowicz of ISOC Group noted that it is not just the war, but also inflation and interest rates that are affecting the investment market as well as the disruption to supply chains – particularly those from Asia. The panel was also optimistic about the future in the wake of such transactions as the sale of the Warsaw Hub to Google. “You need to have a little bit of luck for this – as well as the best building in the city,” commented Rafał Gierczak, with a smile. But does all of this mean that now is a good time for office transactions? “Yes, but that doesn’t necessarily mean skyscrapers,” asserted Dorota Latkowska-Diniejko, but for Piotr Zamkotowicz the decision-making paralysis ended with the lifting of the pandemic restrictions.

The next panel was all about the tenant market and was moderated by Mikołaj Sznajder of CBRE. The panellists included Sylwia Piechnik (EPP), Antonio Pomes (Golden Star Estate), Sebastian Suchodolski (Cavatina), Kamil Krępa (TDJ Estate) and Rafał Latuszek (PHN). Everyone agreed that tenants were returning to offices. “But this return isn’t as quick as we could have expected,” pointed out Sylwia Piechnik. Antonio Pomes noted that there are tough negotiations between employers and workers over the conditions of returning. Rafał Latuszek cited ESG policy as a factor to encourage people to return, while Sebastian Suchodolski pointed to the PR prestige of an office and that it was an essential place for new recruits to get to know the entire organisation. “Under the current circumstances, employees can be scattered across the world, but nonetheless, it is worthwhile having a central location. It’s not just the building itself that’s important, but its interiors as well,” agreed Kamil Krępa. “Offices are not being left deserted and are still necessary,” summed up the moderator, as everyone present breathed a sigh of relief.

The next panel was concerned with ESG policy. The moderator was Andrzej Gutowski of Colliers, who with Ewelina Grodzicka (HB Reavis), Dariusz Malinowski (Malinowski Design), Hajo Engelke (Westbridge Advisory International) and Wesley Thomson (Avison Young) considered whether ESG will permanently alter the way that companies operate. The parts of the acronym that are the hardest for large organisations to achieve also came up for discussion. “ESG has to be an integral part of a company’s strategy rather than a separate thing, so the concept should become part of a company’s DNA,” argued Hajo Engelke. “Putting ESG principles into practice is slowly becoming a necessity because the latest regulations are enforcing it. Moreover, tenants now expect such an approach,” insisted Ewelina Grodzicka.

After the coffee break, Mateusz Polkowski of JLL took to the podium for his presentation on what the future might bring to the office market. The bad news is that a supply gap is set to hit Warsaw over the 2023/2024 period, and in 2024 regional markets will also be hit. Land for new development is also getting thin on the ground and in Warsaw the shortage has already become acute. “Therefore, it is worth looking at so-called second-hand properties,” he argued, while pointing out that older buildings tend to come with various technical and legal issues. These are buildings that often require reconstruction or renovation work and sometimes might even be worth demolishing due to how attractive their site is.

The next panel looked at the issue of coworking and flexible office space. It was moderated by Jarosław Pilch of Savills. “You cannot hide the fact that more than two years of the pandemic have resulted in the interest for such space falling significantly,” lamented Robert Chmielewski of ShareSpace, although Jarosław Pilch countered that many operators have hardly been affected by the pandemic and now there is almost no longer any sign of its impact. This was backed up by some of the data cited during the discussion: “82 pct of our space is occupied,” revealed Hubert Abt of New Work. To this Jacek Bednorz of Business Link then added that the occupancy rate in his offices was over 90 pct. Michał Kwinta of Mindspace then broke down his figures: “Before the pandemic, our space was 90 pct occupied. At its height, this figure was around 75 pct, but this was followed by a significant bounce back and currently we have an occupancy rate of 98 pct,” he said. He also admitted that a large part of his space is occupied by Ukrainian companies that have moved their businesses to Poland. [This issue is explored in another article in this issue of Eurobuild – Ed.] Even though there is more coworking and flex space in Poland and across the entire region, all the panellists agreed that traditional offices are not losing out. “Flex space complements the office space market,” insisted Jacek Bednorz. Asked by the moderator what their plans were to develop their brands, the panellists answered that they have been receiving enquiries about various locations. “Everyone is happy with the presence and development of this market. With the huge costs of a typical office, the best alternative is flex,” concluded Robert Chemielewski.

The final discussion, led by Anna Górska-Kwiatkowska of C&W, looked at the development market. The panel considered whether the pandemic was still affecting investment and the mark that the war to the east had left on business. “The market is bouncing back. Rents have to go up because of inflation and rising construction costs,” argued Marta Zawadzka of Yareal. When asked what impact the war was having on the market, Mateusz Strzelecki of Walter Herz answered that Ukrainian companies have had a major effect on filling up flex space, but it wasn’t going to stop there. “Everything depends on how long the war is going to last. If it drags on, Ukrainian businesses will be looking for permanent locations and contracts. These kinds of companies often move their employees to Poland, which is something other property sectors can benefit from, such as PRS and hotels,” suggested Dominik Rafałko of CMS. The moderator also raised the question of what future projects were going to be like in Poland and the rest of the region. “Large cities need mixed-use projects, such as the one developed by Lixa. This represents an alternative to office towers,” declared Marta Zawadzka. “I’m not going to predict the end of glass towers, since the lack of sites in good locations within large cities means that there’s still a lot of interest in such projects,” added Dominik Rafałko.

This year’s conference was sponsored by New Work, APP-Projekt, Cavatina and TDJ Estate, while the content partners were law firm CMS and PHN.

We would like to thank everyone for taking part. And we hope to see you all at future Eurobuild events!

See the photo gallery.