Project: office What every tenant should know about the Warsaw office market in 2017 www.axiimmo.com Office map with buildings under construction – Warsaw (Q1 2017) N ŻOLIBORZ PRAGA-PółNOC W E 38 Nowa Praga 34 S Powązki 25 36 Koło Stare Miasto 39 4 BEMOWO PRAGA-PołUDNIE ŚródmiEŚCIE 31 27 17 3 24 29 WOLA 28 2 1 35 30 5 6 8 Saska Kępa 16 9 7 26 11 13 10 Odolany Filtry łazienki OCHOTA Królewskie Pole Mokotowskie 12 23 Wyględów MOKOTÓW 32 33 14 15 20 Sadyba Okęcie 21 18 22 WŁOCHY 19 Służewiec Stokłosy 37 1 Universal 12 Grójecka Offices 23 Bobrowiecka 8 34 Centrum Praskie Koneser C, O, P, H 2 Cedet 13 West Station II 24 Proximo II 35 Zwycięzców 2 3 Centrum Marszałkowska 14 Artico 25 Vector+ 36 Praga 306 4 Ec Powiśle B1, B4, B5 15 Ocean Plaza 26 Eqlibrium 37 Poleczki Business Park III 5 Varso 16 Warsaw Hub 27 Wronia 31 bud. Madrid 6 Ethos 17 Świętokrzyska 36 28 Generation Park X Phase I 38 Słonimskiego Art Office 7 Park Avenue 18 Graffit 29 Mennica Legacy Tower 39 Hotel Europejski 8 Poznańska 37 19 P4/A 30 Skyliner 9 Nowogrodzka Square 20 Business Liner 31 Spark A 10 Polna Corner 21 D48 32 Business Garden V, VI, VII 11 Equator IV 22 Villa Metro 33 The Park Warsaw C1 1 Project: office In Q1 2017, 84,000 sq m of new office space was delivered as it being an employee market are producing a need to to the Warsaw office market. This result increased the total create attractive working environments, which should be volume of office space in the capital to nearly 5.12 million taken into account at the very beginning of the process of square metres. Developers are still active and building finding a new office. In this article, we highlight the most new projects. The boom is continuing and it is definitely a important data and trends that will help you get an idea of tenant market. At the same time, office tenants are facing the situation in the Warsaw office market. We hope that it new challenges posed by the labour market. Generational will help you exploit the favourable market situation at a change, the increasing importance of millennials as well time of increasing requirements regarding office space. 2 Stock OFFICE MARKET OVERVIEW 5.12 mln. sq m The situation New supply in the office market in Q1 2017 84,2 favours tenants thous. sq m Supply is at a record level Demand in Q1 2017 197 thous. sq m The total stock of office space in the capital is 5.12 million square metres. In Q1 2017, 84,000 sq m of new office space was delivered to the Warsaw office market, the result of 2016 year was 420,000 sq m. The largest Under construction investments completed last year include Q22 (46,400 700 sq m, Echo Investment) and Warsaw Spire – building A thous. sq m (59,100 sq m, Ghelamco). Investments are not slowing down Stable absorption of office space The high level of activity among developers ongoing for The demand for office space in Q1 2017 reached a level of several years has made the capital not only the largest almost 197,000 sq m. The high level of absorption remain office market in the country (60% of the total volume stable taking into account fact, that the total demand of office space), but also the most attractive in terms of during the whole 2016 was 750,000 sq m. The largest the quality and diversity of space available. At the end of lease transactions in Q1 2017 include: a renewal and the Q1 2017 over 700,000 sq m of modern office space expansion of Astra Zeneca in building Postępu 14 (13,200 was under construction. To the most interesting office sq m) and pre-let contract for Diebold Nixdorf w West buildings under construction in Q1 2017 joined Varso, Station II (9,800 sq m). For comparison, in 2016 the largest in the vicinity of Warsaw Central Railway Station. A transactions included contract for the construction of a 230-metre office tower topped with a 80-metre spire will new headquarters of BGŻ BNP Paribas with Yareal and the the highestamong this type of projects in Poland and CEE lease of office space in Q22 by Allegro. region. 3 Vacancy 14.1% Rents Center (CBD) 19-23 Vacancy rate € / sq m At the end of March 2017 the vacancy rate in Warsaw reached 14.1%. This is an increase of 2 p.p. compared to the end of 2016, but at the same level compared to Rates outside CBD the corresponding period of previous year. A growth of 13-17 € / sq m vacancies during this year is predicted due to numerous speculative investment in Warsaw. The market has a stable level of absorption and newly built office buildings are particularly popular. Incentives for tenants Rents on a downward trend offered by property Rents in the city centre remained stable during the Q1 owners 2017, while in older buildings they showed a downward trend. Average rates in the centre remain at a level of 19 rent holidays to 23 EUR/sq m, while in other locations the cost ranges financial packages for arranging from 13 to 17 EUR/sq m. Due to the high level of supply, space developers are willing to negotiate and they are offering a wider range of rent exemptions and packages for space free parking spaces arrangement than they gave 3-4 years ago. one-time cash bonuses to cover moving costs tenant redemption, i.e. paying outstanding obligations under the current contract 4 CHANGES IN THE LABOUR MARKET Generation Y is presenting new challenges for employers Record low unemployment In January 2017, the unemployment rate in Poland was 8.7%, which is the lowest January unemployment rate in Unemployment 2.8% in Warsaw the last 26 years. In the same month in Warsaw, the level of unemployment was 2.8%1. Number of graduates 243thous. in 2016 Candidate market Staff spending more than 50 8% hours a week in the office Competition for staff is increasing, especially in the business services and IT sectors. The problem affects The average time spent at work all levels of employment. Moreover, the forecasts are h in Poland during one year 1963 not optimistic for employers: the number of students and university graduates, potential office workers, are The percentage of people declining. In 2011, the student population in Warsaw was 68% dissatisfied with their work space 270,000, while five years later this was only 243,0002. An attractive workplace can provide a competitive edge when looking for staff in these new market conditions. The percentage of employers that 49% have a problem with the outflow of talent 1 Source: GUS - 01.01.2017 2Source: GUS - 01.01.2017 5 Millennials in the cross-hairs Increasing number of hours spent in the office In the coming decade, generation Y (those born in the years 1983-2000) will constitute 75% of people in working 1963 hours – this is how long the average Pole spends age. Companies looking for new employees will have to in the workplace during the year. This result puts us in meet the distinctive needs of this group. Development 7th place (among 38 countries) in the OECD ranking4. opportunities, work-life balance, a good working What’s more, this figure has been increasing for the last environment – these are the elements of an employer’s two years. Putting thought into the working environment image that generation Y is interested in. The Gallup State and creating a friendly atmosphere in the company plays of the Global Workplace report shows that only 17% of an important role in attracting and retaining employees. employees in Poland are satisfied with the place where An attractive workplace provides a competitive edge. they work, and more than 68% believe that they don’t Many companies decide to incorporate rest and fun have adequate conditions for effective group or individual zones, which raise the satisfaction and creativity of the work3. Office tenants, apart from cost factors, should team. The extent to which the office is seen as attractive therefore analyse the functionality of an office so as to for employees depends, however, on the character of better adapt the space for the success of the company. the company. Therefore, the search for suitable office For millennials, it is not only important how they work, space should be preceded by a thorough answer to the but also where they work. question: “what do we need?” According to a survey by Antal Market Research, as many as 49% of employers are affected by the problem of losing talented employees5. Given this high rate, more and more decision makers in companies are beginning to see the importance of working conditions in the battle for talented staff. Staff deficitis in Warsaw (office staff)6 website developers and administrators ICT system operators financial and investment advisors construction engineers finance and accounting staff with foreign languages quality control staff telephone and electronic workers customer service, marketers, tele-marketers sales representatives 3 Source: Report State of the Global Workplace 2012-2013, Gallup 4 Source: OECD statistics 5 Source: Antal Market Research 2016 Outflow of employees from organisations 6Source: Barometr zawodów 2017 6 FREQUENTLY ASKED QUESTIONS Office project in a nutshell When to start to renegotiate Where and how to search for an office or search for a new office? that meets your criteria? Any moment is a good moment to start the “office project”.