Hope that the market will start to grow again and move in the right direction is on the horizon

Mateusz Bonca, JLL: These industries are undoubtedly different when it comes to the type of products and services they provide to clients. However, these sectors’ strategic goals when cooperating with business partners are very similar. Regardless of whether it’s real estate or the financial sector, appropriate competences and experience are key in order to offer advisory services, which are comprehensive in nature and focused on longterm cooperation.

However, I’m under the impression that both the real estate industry as well as the financial and banking sector in Poland have done their homework after the previous crisis, which took place more than a decade ago. Lessons learned are now helping these industries to better navigate the uncertain and turbulent socioeconomic conditions we have been facing over the last twelve months. The excellent professionals who operate in our domestic market are in no small part to thank for this – managing the JLL team proves this to me on a regular basis. It is a company with a unique organizational culture made up of wonderful, wise, talented, and entrepreneurial people.

The pandemic definitely put the brakes on new projects being launched or new lease agreements being signed. This, however, does not mean that the market has stagnated. Let’s not forget that before the pandemic struck, the office sector was really buoyant and new records were being set practically every quarter.

During the first weeks of the pandemic, our clients focused primarily on crisis management and ensuring business continuity within their organizations. After this had been achieved, they started verifying their growth objectives and recruitment plans that had been set before COVID-19, as well as reexamining their respective strategies; some tried to initiate negotiations with landlords in order to adjust rents and amend other lease conditions. We’ve noticed an increase in the number of lease renewals, which illustrates the degree of uncertainty among tenants and the prevailing ‘wait and see’ approach. However, with the arrival of the summer months, some tenants started planning for relocations. This process, of course, was in many cases significantly impacted

The office return is already happening. Companies such as Google are already reopening their offices to their employees. The narrative and mood surrounding remote work and its supposed advantages over working in the office are also clearly changing. Employee productivity working from the office as opposed to working from home is currently one of the key questions on the agenda of many corporations.

by successive lockdowns and related travel restrictions as well as the curbing of on-site visits; but there is hope that the market will start to grow again and move in the right direction. We observe similar trends across other parts of Europe.

Quite paradoxically, a smooth implementation of WFH across companies in the business services sector will translate or has already translated into growth for this sector. BPO, SSC, and ITO companies in Poland have proven that they possess all the necessary competences and infrastructure to enable them to operate effectively, even when the world around them is gripped by the chaos the pandemic has wrought. We have managed to maintain business continuity in an exemplary manner, especially when compared to say, some of the Asian countries. However, confining workers to their houses or apartments cannot last forever. We can see this through the actions of our clients who ask us for support in both developing an office return strategy and adapting their office space to the ‘new normal’. We also run a number of relocation and expansion consultancy projects and advise companies which are considering Poland as their new location. Such projects require time, but the good news is that shared service centers (and not only) have very ambitious development plans.

The question is whether the tempting you refer to will be necessary in the first place. Conversations with our teams and clients have allowed us to conclude that fatigue from continuous remote working has well and truly set in. Naturally, there are many advantages to the home office model – we do not have to spend precious time commuting to and from the office on a daily basis, we can have a ‘casual Friday’ every day, and we can spend more time with our families. But we are also tired of the seemingly endless conference calls; not having our own desk; children having their online classes in the same room. In addition, not all business can be conducted remotely in the long run, because some tasks require effective teamwork; also, many of the best ideas and solutions occur out of the blue, over lunch or coffee with your colleagues via those face-to-face interactions.

The office return is already happening. Companies such as Google are already reopening their offices to their employees. The narrative and mood surrounding remote work and its supposed advantages over working in the office are also clearly changing. Employee productivity working from the office as opposed to working from home is currently one of the key questions on the agenda of many corporations.

Considering the office space developed around the Rondo Daszyńskiego area in Warsaw, it is difficult to imagine projects which can be more modern. Our research shows that 51% of companies will reduce their presence in buildings of a lower technical standard. The market and the companies’ strategy will force changes and the need to adapt. I also expect that the coming months and years will see more solutions in the areas of sustainable development and real estate gain traction.

Environmental issues are currently being overshadowed by the pandemic, but climate change continues apace, and

Our research shows that 51% of companies will reduce their presence in buildings of a lower technical standard. The market and the companies’ strategy will force changes and the need to adapt. I also expect that the coming months and years will see more solutions in the areas of sustainable development and real estate gain traction.

our sector bears a lot of responsibility in this area. A 2018 study estimated that the real estate industry is responsible for 40% of the world’s carbon emissions. This motivates developers and tenants to implement specific solutions that reduce the industry’s carbon footprint. JLL committed to achieve net zero carbon emissions across all JLL-occupied buildings by 2030. We also actively support our clients in drawing up strategies of this kind – one example of the work we do in this area is the contract we have recently concluded with ROBYG.

The future of the office market will be partially shaped by flexibility. This, in turn, should translate into flex offices enjoying great popularity. On the one hand, their attractiveness is boosted by the short-term conditions and nature of the use of space and workstations, which can be relatively quickly adjusted to current business needs. Moreover, the months of remote work have brought us a certain degree of freedom, meaning we perform our daily business assignments where we feel best and safest. Flex offices offer us a lot of freedom in this regard and many of them, due to their modern layout, motivate us and stimulate our creativity.

Companies will probably start moving towards a model combining standard leases with the use of flexible office spaces. Every office sector participant has different needs, and flex offices have helped to diversify the sector. Older office buildings already offer shorter, predominantly three-year lease agreements. Different lease periods are also offered by companies subletting a portion of their space. It has been a significant market trend, which will continue to have an impact for the next year or so. Currently there is approximately 120,000 m2 of space for sublease on offer in Warsaw alone. Flexible space operators, after a difficult period where their industry experienced a great deal of volatility, should emerge unscathed from the current crisis and benefit from the ‘new normal’. Of course, the traditional lease market will continue to do well, but flexible office spaces will continue to complement the sector.

Even before the end of 2020 there was a lot of talk that the pre-pandemic development activity would lead to an oversupply of office space. However, our data shows that developer activity has returned to a level similar to that seen in 2013. Currently, 1.2 million m2 of space is under construction; for comparison purposes this figure is 400,000 m2 lower than the corresponding period in 2020. This will likely lead to a gradual absorption of available office space and will offset a rising vacancy rate.

It is possible that we will be dealing with a supply gap and a lack of available space in some markets in 2-3 years' time. We’re already seeing this pattern emerging in Poznań.

Some older office buildings will also be removed from the market, with some being demolished and others undergoing a change in functionality. Some owners of older properties will choose to modernize their facilities. This will allow room for the development and implementation of new technologies and innovations, which will help in the adaptation of older portfolios and their adjustment to the new needs of tenants. I very much believe that interesting years lie ahead of us with Poland’s office market now having entered a phase of change and transformation. In fact, it’s just like everything else around us.