Poland Office market at a turning point

Increases in office lease costs, limited availability of space in high-standard buildings located in central business areas and the low level of new supply are the main indicators that will affect the situation in the sector in 2023. The last three years have brought many changes to the office market. The process of rapid development of the office market over the years has been halted. The growing costs of construction and project financing make it difficult for investors to estimate the final amount of the construction budget, and therefore they are postponing the start of construction of new investments.

New supply is dropping hard

In regional markets, 30 pct less office space is emerging than before the pandemic, while five times less offices is being built in Warsaw than three years ago. The availability of prime space on the Warsaw market is declining. The effect of limited, new supply with demand remaining at a lower than in 2019, but stable level is a slight increase in rental rates. This applies to high-class office buildings located in the centre and in business zones, situated outside the very centre of Warsaw, but also the best real estate on the largest regional office markets in the country.

Rental costs go up

We have a record-breaking inflation, and forecasts indicate that it will continue to grow, which translates into the cost of office lease. The main challenge in 2023 will be maintenance charges. Due to inflation, rising costs of energy and expected increases in the minimum wage, they expect to increase. This will translate into the number of advances on maintenance charges. In addition, utility prices will increase. Prices of finishing works increased on average by 30 pct. Tenants must consider the fact that in the case of demanding projects, additional payments for interior design will be necessary. To compensate landlords for the increase in the cost of fit- out and lower the charges for tenants, longer contracts are now concluded more often.

Negotiating lease terms

Therefore, when negotiating contracts, attention should be paid to the amount of the budget for fit-out, rent exemptions and mechanisms for limiting or controlling the amount of maintenance charges contained in the contract.

Hybrid mode shapes workplaces

Soon, the offices will function as creative, cross-functional, training centres. Their main function will be the exchange of ideas, knowledge and building relationships and social capital. The purpose of re-arranging offices and adapting them to this role is to create an atmosphere of the place that will attract its employees. To adapt workplaces to the hybrid mode, companies are currently reducing the number of desks in favour of collaborative spaces. The offices now primarily serve the team. Their space is supposed to activate employees and provide them with tools not available at home.