Eurobuild Conferences’ 15th Office Conference: Trends and Forecasts

On October 17th, ‘The 15th Office Conference: Trends and Forecasts’ took place at the Sound Garden Hotel in Warsaw. Those who took part were involved in a lively discussion about the current situation on the market and its future. They talked of the challenges and shared their assessments of what the future would bring. It was also an excellent opportunity to network. Many were optimistic, although two separate stories could clearly be heard. Even though the panellists gave the Warsaw market a 5 out of 5, they only awarded the regional market a 3. Outside Warsaw, the office market is still battling with the consequences of Covid.

But what basis is there for optimism or caution over the prospects of a return to form for the market? Do we have the data to precisely assess the situation? These are the questions that Piotr Smagała posed in the opening presentation of the conference. “Why do we need transparency in the commercial real estate market?” The managing director and co-founder of the REDD platform, which collates real estate data, argued that this indeed allows for better decisions to be made by all market players. Independent databases result in greater predictability, even when it’s difficult to process so much data, but that’s a task for AI. Piotr Smagała believes that markets that are only attractive to investors when there is such freely available data.

The panel discussion on the investment market was led by Marcin Kocerba of Cushman & Wakefield. He stated that a clear improvement could be seen and that a number of large transactions were in progress. The question is, how quickly will the improvements come? He also admitted that opportunistic deals were dominating and that we still have to wait for core transactions. Karol Pilniewicz of the Futureal Group spoke of the background to the acquisition of Lipowy Office Park (formerly known as Wiśniowy Business Park) in 2023 and the quick sale of two office buildings in this complex to the 1AM CEE Student Housing Fund, who decided to convert them into student halls. Mariusz Napiórkowsi of Syrena Real Estate described his company’s investment strategy that concentrates on modernising buildings. (Syrena’s portfolio includes the Diuna building in Warsaw’s Mokotów district). Piotr Paśko, responsible for tax advisory at MDDP, pointed out the challenges resulting from the investment cycle being longer than it used to be. Companies now have to wait longer before exiting an investment. Judyta Sawicka of Echo Investment argued that today it is still worth developing office buildings in the regions too and added that her company has a two-pronged approach, since it also buys up older buildings with a view to converting them to new uses, such as its Modern Mokotów project in Warsaw. “It’s difficult to talk about a single office market,” she said, pointing out that older buildings in weaker locations face a different situation than those that meet taxonomy, are built in the CBD, and attract interest from potential tenants.

All the panellists talked of the need to introduce REITs to Poland, which would create new sources of financing and increase the share of Polish capital in the market – particularly for larger projects. When will they appear? “I rarely say this when it comes to Polish legislation, but now I’m optimistic,” declared Piotr Paśko.

The Warsaw office market is returning to form, but the mood is worse in the regions. According to Błażej Kucharski of Itra Polska, who moderated the panel, the supply of new space is low and vacancy is high. However, Michał Krępa of TDJ calmly stated that this is just the natural stage of the real estate economic cycle. Indeed, this is a golden time for many companies to make their transaction of a lifetime. Jacek Trybusz of Probuild, despite his cautious assessment of the situation in the regions, admitted that tenants were leaving their homes and vacancy rates had stabilised.

The stagnation of regional markets could be turned by flex-office operators to their advantage. Michał Dorszewski of IWG PLC (which owns such brands as Regus) pointed out that he is convinced that flexible office space is driving a hidden demand and that such operators will do well even when traditional leasing is in crisis. Paweł Mosor of Form Contractor talked of the prospects for fit-out firms and told the panel that most tenders were for reconstructions resulting from rent renewals and not for completely new offices. The panellists looked at the importance of the expense of fit-out costs, which they attributed to the greater average lease periods.

The latest office buildings may seem hyper-modern, but it turns out that the Polish office market is lagging behind when it comes to technological innovation. Michał Kozłowski, the co-founder of Digital Real Estate, insisted on how necessary it is to use it in his presentation, arguing that you can’t streamline processes without digitisation. “Developers are not investing enough in technology,” he stated, pointing out that sustainable development is forcing the real estate sector to act in new ways as collecting data and automating a building’s systems become essential.

The topic of flexible office space returned with the next panel on the leasing market, moderated by Paweł Dobrowolski of CBRE. The strength of a market is hugely dependent on its location. “In Warsaw, we virtually have no free space. But looking at Poland as a whole, I would give the market a C+,” announced Łukasz Jarzyło of GTC. He also claimed that after a long period of occupancy rates going down, the market was stabilising and employees were returning to their offices. As for flex-space, Łukasz Jarzyło saw it as completing what was on offer and not as an alternative for tenants. Cezary Błaszczyk of HB Reavis argued that from the point of view of an owner and manager, even in an easily leased building, it’s worthwhile having some flexible space. As he pointed out, tenants would often exchange larger space outside the city centre for something smaller in a better location. He also pointed out that tenants are often asking for clauses that enable them to change a lease contract while it is in effect, such as allowing them to lease less space.

Szymon Zduńczyk of Karimpol was not complaining about any lack of tenants, which was no surprise considering the two Skyliner buildings are now under construction near Rondo Daszyńskiego. He pointed out that although both buildings were chock full of new tech, this is not a major factor for tenants in their choice as they now consider advanced technology to be a no-brainer. He also argued that flex-space in office buildings is an advantage for both sides. “This is a symbiosis and is not competition,” he said.

Magdalena Ruta of Golden Star Estate is optimistic about the Polish real estate market, as a lot is happening. However, she also foresees a lot of difficulties, such as high fit-out costs. This is all the more so because currently, optimising offices depends not only on reducing their size but raising their quality in terms of workspace comfort. Tenants are needing more time to close their leasing deals even though everything depends on the building and on the tenant. “We can still get a lease signed within 1.5 months,” claimed Rafał Lisak of Hines, who also pointed out the differences between the different sectors in the market. He believes that Warsaw’s CBD is currently is peerless as a market in Poland, whereas the city’s Mokotów office district now requires a more creative approach.

To finish off the conference, the final panel discussed whether the ideal office existed and what it would comprise. So the talk went from fit-outs (Barbara Kułak-Steciak, Viva Design, Jaromir Ciechanowicz, Wes.Expert), and flexible space (Piotr Woźny, Omnioffice) to technological amenities (Marek Jakubow, the Sing platform). The discussion was led by Tomasz Węglarza of BNM – Real Estate Advisory and much was also said about budgets, employee need analysis and organisations maintaining their consistency in the age of hybrid work. Jaromir Ciechanowicz summed everything up nicely with the words: “Managing change is a long process and the office is a part of it,”

We would like to thank our partners and all those who took part in the event, including our Content Partners MDDP and Form Contractor, as well as our Silver Sponsor, GTC Polska. We also invite you to attend our future events!