Poland More retail at offices

Recent years have seen a significant shift in user preferences regarding the use of office space and types of services available in office buildings. Retail and service space is growing in popularity, accounting for up to 7 pct of the total floor area of the latest office projects. This growth is being driven by the changing urban landscape associated with the evolving needs of office users and Warsaw inhabitants, the trend towards building multifunctional spaces and the shrinking pool of land in key business locations.

Warsaw’s retail stock, excluding standalone retail warehouses and retail floorspace in shopping centres anchored by large hypermarkets, stands at 1.2 mln sqm in 45 locations. Of that total, only 37,000 sqm of new retail space was delivered to the market in the last two years.

Faced with the shortage of space in shopping centres, retailers are looking for alternative locations and shifting their focus towards units in office and residential buildings. Retail and service zones which are mostly located on the ground floor of office buildings are increasingly attracting external footfall. Our analysis of retail in office locations focuses on A- and B-class buildings, and excludes mixed-use schemes that are slightly different in nature.
Ewelina Staruch, retail market analyst, Cushman & Wakefield

Fundamental changes in working patterns in the capital and in other cities have transformed user preferences regarding office use and amenities available in office buildings. Cushman & Wakefield’s report "Office or Home? What Attracts Polish Workers to the Office" presents the findings of a survey into users’ practical behaviours and expectations about workplace design.

The survey has revealed that 45 pct of respondents use F&B facilities in an office building at least once a month, a third opt for services, with nearly 30 pcyt going to fitness clubs. In addition, 36 pct of respondents use breakout spaces such as gardens, benches or deckchairs, the survey found.
Ewa Derlatka-Chilewicz, head of research, Cushman & Wakefield

These findings are in line with the results of a 2022 survey carried out by Cushman & Wakefield among office managers, with 67 pct naming the restaurant/canteen as the single most important amenity, ahead of an ATM (43 pct), a grocery (30 pct), a café (21 pct) and parcel lockers (19 pct).

All the above choices appear to indicate a direction in which office landlords should go in order to gain a competitive advantage and to create a vibrant office building accommodating plenty of tenants.
Ewa Derlatka-Chilewicz

Although retail and service space accounts on average for 6 pct of a typical office building’s area in Warsaw, this ratio is higher at 7 pct for office projects completed in the last 10 years. At the end of 2023, 64 pct of office buildings had retail and service units, up from 60 pct in 2013. Looking ahead, Cushman & Wakefield expects this proportion to grow.

The highest concentration of retail space in office hubs is the CBD, Służewiec and the City Centre. However, retail stores in the City Core are also the smallest, averaging just over 200 sqm. The largest units of around 400 sqm on average are in the West office zone.
Magdalena Gniazdowska, leasing manager, Retail Agency, Cushman & Wakefield

Warsaw’s office buildings currently have 257 unoccupied retail and service units with a combined area of 53,000 sqm, equating to 18.2 pct of total stock. By comparison, the vacancy rate for shopping centres and retail parks stands at 9.3 pct. Interestingly, the highest retail and service vacancy rates are in the most recent office completions, i.e. buildings delivered in 2020-2024. There are as many as 157 units to let sized between 100-500 sqm – too small to attract a wider range of prospective tenants though.

A vast majority of units for rent are less than 500 sqm in size. A major challenge facing office landlords is how to respond to tenants’ needs and to ease the shortage of large premises. Retailers actively looking for units of more than 500 sqm have a very limited choice due to constrained supply and high occupancy levels, and subsequently low vacancy rates. Only 8 pct of unoccupied units can be classified as large or very large, i.e. more than 500 sqm in size.
Ewelina Staruch

The highest vacancy rates are in the East and Służewiec – 28.4 pct and 21.9 pct respectively. Retail in office buildings is dominated by F&B (26 pct) and services (22 pct), reveals the report from Cushman & Wakefield. Interestingly, office locations are also popular with healthcare providers (105 medical centres, or 9 pct) and grocery retailers (7 pct).

There is some synergy between the offers of business districts and shopping centres. The latter are, however, mostly anchored by fashion, health and beauty, homeware and electronics retailers. Such tenants generally require larger units than those available in office buildings and are after higher footfall levels also – or perhaps above all – at the weekend.
Ewa Derlatka-Chilewicz

Report authors note that there are currently 806 unique retail brands operating in Warsaw office buildings; the top six with the highest number of units are: Żabka, Gorąco Polecam, Zdrofit, Green Caffe Nero, Rossmann and Lux Med.

Retail evolution is happening in large cities, particularly in Warsaw. We are also seeing interest in high streets pick up momentum. Retail and service space in office buildings constitutes an extension of or an addition to high street retailing. It is also worth noting that market rents for such space in prime office buildings stand at EUR 50-60 per sqm, compared to EUR 150-170 in shopping centres. There are, of course, some drawbacks to retailing in office buildings such as lower weekend turnover levels, the lack of large spaces and difficulties with maintaining an aesthetic compromise between office and retail buildings. However, these disadvantages appear to be well compensated by a convenient location and a customer profile.
Magdalena Gniazdowska