The first quarter of 2022 has come to an end. In retrospect, it will be examined mainly in the context of the Russian aggression against Ukraine. The war across the eastern border has increased the pace of change occurring also in the serviced office market.
The slow march towards a new normal
Since the beginning of the second half of last year, we have observed a significant rebound in the serviced office rental market. The main reasons for this phenomenon can be found in the optimism caused by the recovery from the COVID-19 pandemic. The increasing share of fully vaccinated people in the population, allowed companies to catch their rhythm. And the role of predictability and repeatability cannot be underestimated. For many tenants, the first year and a half of the pandemic had something of a musical staccato – short, snatches of teamwork in the office punctuated by periods of remote work and distraction. The prospect of emerging from a pandemic crisis meant that many companies had to make long-delayed decisions about where, and above all, how to work.
Not all companies made decisions in the same way. Small companies have been much quicker to make choices than large corporations. Often with financial benefit: the gradual increase (or rather recovery) of rental prices has continued up to now. From our, the operator’s perspective, this is also essential. Locations constructed around smaller offices, such as #CitySpaceRondo 1, #CitySpacePlacUnii or #CitySpaceParkRozwoju, have become a natural destination for small teams. Therefore, already in early autumn, all #CitySpace offices in Warsaw and Gdańsk could boast great occupancy rates. As for southern locations in Wrocław, Katowice or Kraków, where our offices have more open space, we remain in symbiosis with corporations. Their decision-making processes frequently take several weeks, so the positive effects of the rebound in the south are delayed in comparison to the capital market.
To each according to his needs
The question asked earlier how to work, in the commercial real estate world, is often synonymous with how much to lease? The answer depends on the extent to which a company has adopted agile working policies: remote working, distributed teams or teleconferencing infrastructure. CitySpace’s role is to help you tailor solutions to your already defined needs.
Thus, we are moving to a change in the tenant mix. The profile of the companies leasing space is changing. Within a given business centre, there are more entities renting fewer workstations at the same time.
Companies with 10 employees frequently require only 6-7 workstations, as a third of the workforce rotates between working from the office and working from home. Of the predictions about the future of work made at the start of the pandemic, this is certainly the one that has been most faithfully reflected in reality.
This method of structuring work involves running a head office (while often limiting its size) connected to several smaller offices. Satellite offices take the form of branches in other cities or smaller branches within a single city. Let us pay particular attention to the second case. On the wave of the development of the employee market, companies are looking for new ways to attract talent. A natural complement to hybrid working is to allow teams to work in diverse locations and closer to home or flat. The larger the city, the more flexible office options become important.
Companies planning to use this methodology may be particularly interested in CitySpace solutions offered in Warsaw and Wroclaw. In the capital we have 4 locations in Downtown and Mokotów, and in the capital of Lower Silesia we will soon open our fourth office. What is especially essential when choosing an office within one network – each CitySpace office is the same highest standard providing the best quality on every elementary level: space per employee, daylight, acoustics, and ventilation. At the same time, our offices are spread out across the city map, giving companies and employees a real choice.
Impact of war
Russia’s attack on Ukraine has accelerated change and reinforced most of the trends we have observed since last year. The influx of nearly two million refugees is a great challenge for Poland: the central government, local governments, NGOs, entrepreneurs and, above all, ourselves – the citizens. The increase in enquiries, in the last 4 weeks by over 30%, is significant. We are being approached by Ukrainian companies which are relocating their teams, as well as international entities which, until recently, had their branches in our eastern neighbours. In the light of disinformation, half-truths and blatant manipulation, it should be noted that Ukrainian companies moving their business to Poland openly communicate their interest in renting on normal commercial terms.
The second dimension is the expansion of Ukrainian companies, which already had their teams in CitySpace. This situation is well visible in the Wrocław market. Helping these companies is often no less an emotional effort than planning a relocation. Dramatic experiences trigger solidarity and ingenuity in people, thanks to which it is possible to solve problems that previously seemed untouchable.
Help the young
The first place we helped was Wroclaw. Here, among our clients, are companies with branches in Kyiv and Donetsk. Just a few hours after the outbreak of war, the evacuation process began. Over the next few days, the companies brought dozens of people to Wrocław, most of them women with children. In parallel, our team, in cooperation with Era Psyche and the association Grupa z Pasją, prepared support for the youngest. Since mid-March, regular classes for children and meetings with Ukrainian and Russian-speaking therapists have been held in the shared premises of the CitySpace Nobilis office. We plan to continue this form of support in the coming weeks, attempting to monitor the needs of our tenants on an ongoing basis.
Support from Echo Investment Group
CitySpace has joined the aid prepared by its owner, Echo Investment group. The developer provided the Empark office building as part of the #Property4Ukraine campaign. It houses around 800 people. Ready to accept refugees, the space together with sanitary facilities is being handed over to the care of the Municipal Social Assistance Centre, which will then manage the space made available. The second facility is offices at Kapelanka in Krakow. The centre is already ready to receive nearly 300 refugees. They have full sanitary facilities at their disposal, including kitchens, showers, a laundry and a dining room, as well as doctor and psychologist appointments. Since March 23rd, mothers with children have been living here, which is why Echo Investment together with MOPS created a play area and computer rooms for them.
CitySpace supported the refugees staying in the buildings provided by the group by organising two collections together with our clients. We donated much-needed toys for children at this time and underwear for all those in need, regardless of gender age. We are constantly monitoring the situation and are in contact with the aid coordinators.
We expect to further strengthen the position of serviced offices in the commercial property market. The prediction of flexible working methodologies as a result of the pandemic proved to be accurate. Attractive workspace with great working conditions will be the norm to convince people to work from the office. A smaller supply of new office space plays a significant role. At the beginning of this year, there were half as many office buildings under construction in Warsaw as in 2019. Currently, CitySpace continues to work on opening two new business centre and expanding current projects.
The duration of the impact of Russian aggression on the office market situation is difficult to estimate, as it depends on the course of the conflict – we leave this assessment to the experts. However, we express our sincerest hope that the end of the violence is just ahead.