The uncertainty related to the state of the economy and the development of the pandemic causes some corporations to adopt a conservative approach to development plans and, as a result, to suspend the lease processes. This trend may continue in the next year, experts from Colliers International estimate. Nevertheless, the demand for office space will not disappear, although it will change – for example, the reduction of “open space” and an increase in the space provided for one workplace.
“The coming quarters will be the time of redefining the office function, changing its function and being treated as a meeting place with colleagues and creative teamwork. We forecast that despite the fact that in the coming years the demand for offices may be reduced, the demand for office space will not disappear. Many companies and employees have found out that total remote work is not conducive to building an organizational culture and relations between employees, “said senior partner, head of the office space department, Paweł Skałba, quoted in the release. The safety and well-being of employees will play a key role in shaping the working environment. The changes that may occur include the limitation of the “open space” and return to office spaces, an increase in the space provided for one workstation in order to allow adequate spacing between employees, a number of sanitary changes reducing the risk of contamination, i.e. frequent air exchange, disinfection , non-contact door opening systems etc are also given. The pandemic accelerated the decision of many companies to use proptech tools. Applications for booking desks and parking spaces in the office or coworking space, remote viewing, non-contact systems, applications for remote control of office conditions (temperature, lighting, etc.), as well as a wide range of tools facilitating remote work are no longer an added value, but are a standard on the office market and not only, says Colliers. “In recent months, many new solutions have appeared on the market to meet the current needs of customers, such as the Office App or Colliers Mobility Pass. They are designed to ensure the safety of employees who want to work from the office or co-working space. The trend of the hybrid work model, which it will certainly gain strength in 2021, it may cause an even greater demand for this type of technology “- said Skałba. Experts point out that an increase in the vacancy rate is an inevitable effect of the increase in supply and lower demand. “The construction of many projects, which have already been put into operation this year or will hit the market in 2021, began even before the pandemic. Uncertainty about the state of the economy and the development of the pandemic causes some corporations to adopt a conservative approach to development plans and, as a result, to suspend the processes. This trend may continue in the next year “- commented Olga Drela, senior analyst in the consulting and market research department. A fall in demand and an increase in the amount of vacant space will result in an adjustment in rental rates, namely a decrease in headline and effective rents. Owners of buildings with a high share of vacancies will strive for tenants, offering them very competitive and flexible lease terms and extensive incentive packages, ended in the forecasting part. Currently, despite the economic slowdown in the office market, high developer activity continues. Since the beginning of the year, approximately 600,000 sq m has been commissioned in Poland. m2, of which 238 thousand. m2 in Warsaw within 12 projects. The largest of them are The Warsaw Hub B and C (89,000 m2 in total), Varso II (39,900 m2) and Chmielna 89 (25,200 m2). “The result for 2020 is 47% higher than the total new supply registered in 2019. And that is not the end. By the end of the year, the supply on the Polish office market may increase by another 165,000 m2. Importantly, the delivered projects are significantly leased, “said Dominika Jędrak, the director of the consulting and market research department. Experts also observe a significant increase in the share of renegotiations in the structure of concluded lease agreements. In the third quarter, they accounted for as much as 48% of all contracts signed on the Warsaw market. Compared to the corresponding period of 2019, this is an increase by as much as 19 percentage points. In regional markets, the largest share of renegotiations was recorded in Kraków and Wrocław. “Tenants are withholding decisions on relocations and extending their contracts for 3-5 years on favorable terms in current locations. Many companies, looking for savings, decided to sublet some of their office space,” Skałba said.
At the end of the third quarter in Warsaw, 106 thousand. m2, which accounted for almost 2% of the existing supply. According to experts from Colliers, another over 100,000 m2 is available for sublet in regional markets. Despite the reduced demand, record transactions took place in the office market in 2020. In Warsaw, under a pre-let agreement, PZU leased 46.6 thousand. m2 in the Generation Park Y building. The largest transaction on the regional markets was the renegotiation of the contract for nearly 30,000. m2 in West Gate and West Link office buildings in Wrocław by Nokia Siemens Network. The second largest agreement on the regional markets was the renegotiation of 20 thousand. m2 in the Axis project in Kraków for ABB. The podium in the regions is closed by a pre-let agreement signed by Fujitsu Technology Solutions for the lease of 16.3 thousand sq m. m2 in the mixed-use Fuzja complex in Łódź, recalls Colliers. Despite the pandemic and the resulting economic slowdown and business difficulties, the office investment market recorded several significant transactions. Warsaw and Krakow were very popular among investors. Significant transactions in the capital include: sale of the Wola Center complex to Hines European Value Fund for EUR 102 million and the sale of the Spark B building by Skanska to Stena Fastigheter for EUR 70 million. In Kraków, the High5ive II building, sold for EUR 125 million to Credit Suisse, and the Equal Business Park office park acquired by the joint venture Apollo-Rida (30%) and Ares (70%) for EUR 99.5 million, changed owners, summarized.
