Time to optimise

Small talk
Tenant representation agency ITRA has been operating on the Polish market for almost a year - and what an eventful year it has been! We spoke to Artur Sutor, the CEO of ITRA Poland, about the year that was and the one ahead of us

Youve been operating on the market for almost a year. What, apart from founding your company, has been the most important moment for you over this time?

Artur Sutor, the CEO of ITRA Poland: It’s difficult to single out one thing. It’s been a busy year full of challenges and characterised by certain issues. How ITRA was received by the market was dependent not only on my past reputation but also the history of all those who placed their trust in me. Today I can say that the company has been a success. We’ve filled a certain gap in the market. The market lacked experienced advisors who exclusively represented tenants. Over this last year we have closed 30 deals and have just as many in the pipeline. These include negotiations for large areas – of even up to many thousands of square metres.

How would you summarise what has happened over the past year on the commercial real estate market? Which predictions came true and what surprises have there been?

After two years of lockdowns and the pandemic, which forced everyone to work from home, we thought that we had come to the end of the turbulence and that the office market would start to stabilise. Then the war in Ukraine broke out. International companies began to withdraw from Russia and Belarus and started relocating some of their staff to Poland, which strengthened its position as a hub between Western and Eastern Europe. These changes increased the demand for office space, but at the same time investors and developers, due to the economic situation, adopted a wait-and-see attitude. The decisions by some firms to lease more office space became something of a barometer for their fears, but with the rising popularity of new work models, it turned out that these decisions were not always justified. For this reason, we expect further rounds of subleasing. When it comes to other surprises, there were certainly very few people on the market who expected the significant cost rises. This includes both office and warehouse tenants. We’ve been witnessing a snowball effect over the last few months, with inflation, the euro, minimum wages and even energy prices all rising. This has all meant that running costs are up – even by as much as 20 pct year-on-year.

Right now, you are mainly active on the warehouse and office markets. How much do these sectors differ at the moment?

We are facing similar challenges in both sectors, since they both have the same problems – including rising building material prices and running costs. The difference is that during the pandemic the office market was frozen for a while, whereas the warehouse market grew rapidly. As events have shown us over the last few years, the distance between warehousing and production facilities is crucial for maintaining business continuity. Even though investment has fallen off somewhat, Poland’s advantageous geographical location, its numerous transit routes and its access to ports, all mean that the country is still attractive to both investors and tenants who are not so sensitive to rising rents. Rents are still a good deal lower than in Western Europe.

What do you think will happen to the sector over 2023?

Fixed costs are going to be quite a few percentage points higher for tenants than they were a year ago. Unfortunately, they will have to live with them, so needs analyses have to go far deeper. This is the only way to find savings. This is what ITRA is already doing today. We verify the expectations of the tenant in light of their business and long-term plans for development, and then we advise them on solutions to optimise the space they rent. We try to make sure that our tenants won’t soon have to start looking for sub-lessors. The impact of the war in Ukraine is still going to make itself felt and companies from across the eastern border are still increasing their staffing levels in Poland by bringing over their workers. Here they have many possible locations, not just in Warsaw but also in regional cities where shared service centres operate. In my opinion, we are going to see companies relocate to those cities more often than to Warsaw. We can see that developers are still active in the regions, where they are providing new supplies of space, whereas Warsaw is going to see the lowest amount of new office space coming onto the market in the last ten years.

And what is ITRA planning? Are you going to expand beyond offices and warehouses? And will you be building up your team?

In the first quarter of the year, we are planning to work intensively in the warehouse market and this will result in us bringing new specialists onto our team. The rapidly changing regional situation means that we are looking to open permanent offices in the regions. We are also active in sector associations, such as AmCham and PINK, but this is only the start of an initiative to increase our visibility on the market. We are also carefully looking at the entire CEE region.

What do you do to get away from work?

It’s a well-known fact that running a new firm requires a great deal of involvement, but I always try to find time for those activities that I find relaxing and help me to recharge my batteries. I’ve been passionate for many years about motor sports. I ride a motorbike and a quad and I have a few youngtimers in my collection. Naturally, I am worried by the rising price of fuel. In my free time I escape to my allotment in the Masurian lakes to restore my balance. I’m a fan of history and everything to do with it. And those who know me well know I also like writing hip hop lyrics.

Interviewer: Anna Korólczyk-Lewandowska