Hanging on in there

“We are not living through a really grim time now in Poland – that’s what’s happening across our Eastern border. What we are seeing here right now is just a different phase of the office real estate cycle,” summed up a view that was repeatedly expressed during this year’s office conference organised by Eurobuild. “We’ve already come more than one crisis – and if you are in real estate you just need to be patient,” added another panellist.

But on the day, the conference started on a relatively quiet note, with a presentation on ESG. This could be a sign of the times, or rather, yet more proof of the growing importance of ESG compliance for real estate. Przemysław Sienkiewicz, the country sales lead of Manpowergroup, emphasised that ESG is crucial for retaining and acquiring talent. This is reflected by the fact that many companies are expanding their ESG teams. “Almost 70 pct of Polish companies have stated that their ESG departments will grow in size,” he pointed out.

The panel discussion that followed explored the current difficulties involved in raising the finance required for real estate projects. “The present situation is extremely tough in terms of the cost of the capital, so when we now analyse a new project to judge whether it works, we have to expect it to work at any time in the future,” remarked Paweł Sobień, the corporate clients director at Santander Bank Polska. Developers now need to have much more capital than just a few years back – and that’s not good for the market. “You need to invest at least 40 to 50 pct of your own capital in a project in order to obtain financing. That will slow down the rate of development, because there won’t be enough capital available,” suggested Maciej Krenek, the country director of Atenor.

Different kinds of worries were expressed during the next panel, which was focused on the leasing market. As the moderator, Knight Frank’s associate director Aleksandra Markiewicz explained, the running costs of buildings have increased by 30 pct in Warsaw and by 20 pct in regional cities. The vacancy in every large city has now reached over 12 pct – something that has never been seen before on the Polish market. There was not even a single office building completion in Q1 2023, which hasn’t happened for almost 20 years. “I don’t think it can get worse than this, because we’ve already had Covid and the outbreak of the war. I don’t know anything worse that could happen. We certainly still have to solve the problem of returning employees to the office, which is dragging on considerably,” admitted Kinga Nowakowska, the COO and a board member of Capital Park Group.

After the coffee break, there was a discussion on how ESG has changed the design of office buildings. “For the first time, we have an EU regulation that obligates us to reduce carbon emissions to zero by 2050. This is something new and we need to take it on board,” insisted Piotr Pluciński, the western region technical director of App-Projekt. What followed was a lively debate between a developer and a local authority representative. Its highlights included Kinga Nowakowska of Capital Park Group sharing some of her disappointment over the lengthy process required for acquiring the building permit for the Norblin Factory mixed-use project in Warsaw. Monika Konrad, the head of the City of Warsaw’s spatial planning department, on the other hand, stressed the need for business and the authorities to work together to achieve common goals.

The final panel brought to the stage operators and users of flex offices and coworking space. “Flex offices are no longer just another tool for reducing the vacant space in a building. They are a component that landlords now want to have,” argued Rafał Pisklewicz, the managing partner of flex office operator The Shire. Much of the discussion focused on the hybrid system of work, which according to the panellists is now with us for good. The current system is: Tuesday, Wednesday and Thursday at the office and Monday and Friday at home. “Before the pandemic, our business mostly involved leasing out office space, but now we actually advise companies on how to return to the office,” revealed Michał Kwinta, the Poland city lead of Mindspace. When this final discussion drew to a close, all the guests headed to the hotel restaurant for lunch and some networking.