Office market in Warsaw 2020-2021 - Savills
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Poland Commercial – July 2020
S P OT L I G H T
Office market in Warsaw
Savills Research
2020-2021
Lower economic growth Remote working Flexibility
Office market in Warsaw 2020-2021 Office market in Warsaw 2020-2021
GDP growth (year-on-year) in Poland: The Covid-19 pandemic has the potential to become one of the biggest tipping
Q1 2020: 2% 2020: -3.5% 2021: 5.6% 2022: 3.6% points for the future of offices, impacting corporate location strategies, office
design and management as well as occupier practices.
Office occupiers – what
GDP growth & Unemployment rate in Poland
Offices - still
a necessity
25%
20%
GDP growth Unemployment rate could change? For a variety of reasons
we don’t’ expect
work from home or
more broadly remote
Covid-19 is definitely a catalyst that could accelerate some them more frequently as we return to (new) normal. While
office occupier trends, some of which were well away before WFH will not be permanent we expect hybrid models to be working to become
15% a permanent solution,
the crisis and will extend beyond the crisis. “The Covid-19 introduced more often. In some companies that solution was
pandemic has the potential to become one of the biggest available for a long time now, but it will gain on popularity. but an option available
tipping points for the future of offices, impacting corporate Staff might be able to work in the office for 3 or 4 days with for staff to work
10%
location strategies, office design and management as well as the remaining weekdays working from home or elsewhere. remotely 1 or 2 days
occupier practices” as read in the Impacts report by Savills. With remote working there are some factors that need to be a week.
5% considered starting at legality of that form of work, through Physical office space
But what will change for office occupiers? Is it the way cyber security, ending with health and good ergonomics at remains a necessity for
we work: from office or remotely or is it the way the office is home office. companies to operate
0% designed? Or a mixture of both and to what extend? with great success, but
Although back in mid-2019 Simon Constable wrote an the office design must
There are a number of strategies office occupiers might article “How Hot-Desking Will Kill Your Company” at Forbes, reflect the future
-5%
consider, including a “wait and see” approach. Other tactics, the hybrid model could result in the rise of hot desking. mobility of workforce.
that are now broadly discussed, e.g. work from home / remote Enforcing staff to hot-desk will most likely reduce some of
working, social distancing and thus increasing number of the office demand in the future. The idea of hot desking might We might see a shift
square meters per one employee or “hub and spoke model” resolve the social distancing obligation, by keeping 1.5-2 m towards a ‘hub & spoke’
instead one big head office, might have a significant impact distance between people. Typically in open space layout office model, meaning
Source Oxford Economics on office markets. What needs to remembered is that offices distance between desks is below the recommended one thus companies will retain
are not only a place of work, but they provide also a sense of a common practise now is to use every second desk in the their central presence
Economic overview
community, connection and create a culture that is specific to office to keep the required sanitary regime. Some companies but with regional and
the organisation and can attract talent to the company. will need to reorganise their offices to meet the condition. local office hubs. This
And with the threat of second wave or other epidemic /
will provide staff with
In two Polish editions of “What workers want” we asked pandemic episodes coming in the future the requirement
greater choice of
As the number of new cases reported daily in European Union and Eurozone is expected to next year (OE forecast), but a sharper increase (to a question about current and ideal workplace. In 2014 issue might stay with us for longer.
workplaces in proximity
Europe is falling, countries are easing lockdowns contract by ca. 7.4% and 8.0% respectively. The 7.5% in 2020 and to 5.3% in the following year) is 10% of respondents were working from home, but for 31% of
but outside of their
and restrictions are being withdrawn, questions largest decline is to be seen in Q2, however not forecasted by European Commission. respondents home office was an ideal place to work from. Five Flexible work for quite a while is a trending phrase. Now
homes.
are raised about the speed of return to normal so severe as expected a few weeks ago as the Q1 years later WFH (work from home) was available for 17% of even more so. It will not only be about different places to work
working practices and the pace and shape of data were substantially better than the declines Forecasts from OE indicate that across Poland, respondents, but for only 15% of them home was indicated as but also flexible workhours. To avoid rush hours on public
For a few years
economic recovery. reported by other countries in the region and employment will fall by 1.4% in 2020. A similar, but their preferred place to work from. transportation flexible workhours are introduced. Although
flexibility was an
Europe. In Poland a negative GDP growth at -3.5% a lower drop (-1.0%), is expected in Warsaw. now, when still a number of staff works from home full time,
important word in the
According to Statistics Poland newest data, in 2020 with strong rebound in 2021 to 5.6% is But in mid-March 2020 a large part of people working in traffic is less (but increasingly so) a problem, to avoid rush
office market, used
gross domestic product in Q1 2020 was down expected. In May, the Monetary Policy Council, for the sectors in which remote work is possible was forced to start hours periods on public transport, typical “core hours” from
by 0.4% q-o-q and up by 2% compared with the third consecutive month reduced interest rates to using remote working technologies at a scale never seen 9 to 5 will change, as employees will choose when to start and often to flexible office
corresponding period of the previous year. GDP Poland is one of those countries which has 0.1% - the lowest level in history. before. And they did it with a great success, which will most end work within agreed limits. We might also see so called associated with
growth figures during the first quarter of the not experienced negative growth since 1991. The likely affect how we work in the coming months and in long- compressed hours, so people will work full time but over coworking. It is now
year showed -5.8% for France, -5.2% for Spain, country was so called “green island” in the global term. fewer days. even more important
whilst in Germany the drop was lower at -2.2%. financial crisis with growth of ca. 2.5%-3%. So as flexible workplace
However, the true depth of the negative spike 2020 will be the first time in many years with It is rather unlikely a permanent WFH situations will be A number of solutions for office tenants, especially in new and workhours are now
is to be revealed in the Q2 2020 figures as the negative GDP growth for Poland. seen in the future as there are some issues with that, e.g. work- or refurbished buildings, will be linked with technologies a part of the typical
full weight of the lockdown only came into play life balance, problems with quality Internet connections, used to ensure safety in workplace, e.g. contactless solutions, office landscape.
during the second half of March. In the labour market a drop in demand is lack of proper office space at home, higher energy footprint. especially in common areas. Disinfectant sprays and liquids in
According to the latest forecast by Oxford expected to bring the unemployment rate up to But remote working technologies have been available for public areas are also becoming part of the landscape.
Economics (OE, June 2020) GDP in 2020 in 4.8% in 2020 and decreasing back to 3.5% in the a long time and were constantly being improved and once
remote working proved to be a success office workers will use
15%
Gross domestic product in Q1 2020 was down by 0.4% quarter-on-quarter but up by 2% when compared share of respondents that indicated home as preferred place
with the same period last year. The true depth of the negative spike is to be revealed in the Q2 figures. to work from in ‘What workers want’ 2019 report Jarosław Pilch
Head of Tenant
Representation,
Office Agency
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Office market in Warsaw 2020-2021 Office market in Warsaw 2020-2021
The next 18 months in Warsaw
Vacancy rate evolution projection - Scenario 2
20%
Although the impact of Covid-19 on office markets is yet to be seen, there are some factors Workforce change
that need to be considered that will have some sort of impact on the level of office occupancy Workforce change+Occupied space vacated
in modern buildings in the next few years. But what might happen over the next 18 months? 16%
16.6%
We decided to prepare two scenarios which may occur.
12%
12.4%
SCENARIO 1:
In this scenario the Covid-19 pandemic will short-term drop in demand may occur due to the total. Some of the projects may be put on hold or
8%
have a limited impact on the Warsaw’s office almost two months economy lockdown, when postponed, nevertheless currently ca. 650,000 sq
market, as main tenants in the capital city are some negotiation processes were put on hold. m of office space to be delivered by the end of 2021
mainly companies headquarters or their main Nevertheless, in the second half of the 2020 we is already secured to some extent with a prelease GFC*
branches, whose resistance to crisis may be expect tenants to become more active so a higher or Letter of Intent (almost 70% in total). 4%
greater than in regional markets. Some companies number of enquires is anticipated to appear on
may revise the expansion plans for the nearest Warsaw’s office market.
future, but in overall business will operate
(almost) as usual. WFH concept will stay with us for longer, 0%
however, in general it will be an option for
Occupier activity will remain stable, albeit volunteers thus will have a very limited or none
due to lack of the large-scale transactions to be effect on demand.
completed in given time perspective (H2 2020- In this scenario a major trigger of the estimated Source Savills Research
Q4 2021) the expected annual take-up volumes vacancy increases (to 10.3% in 2020 and 11.3% in
will be closer to the 10-year average (710,000 sq 2021) is an extremely high new supply expected
m) than to the 5-year one (830,000 sq m). The in 2020 and in 2021 - more than 800,000 sq m in SCENARIO 2:
In the second scenario, coronavirus pandemic • Flexible offices - As of March 2020 more of the subleases - at the end of June 2020
will have a greater impact on the office market than 164,000 m² of flexible space was there was almost 42,000 sq m offered in
in the capital city. As a result the unoccupied offered in Warsaw by international and that form in Warsaw (only a part of it can
office space will increase from the current 7.5% or local operators, as well developers. During be related with the pandemic). Number of
Vacancy rate evolution projection - Scenario 1 418,000 sq m (in Q1 2020) to, depending on the the lockdown almost 80% decrease in tenants already have or are still in a process
elements taken into account, even just below 17%. office requires in flexible offices in Europe of renegotiating valid lease agreements
The main factors affecting the vacancy levels in was observed (based on Workthere data). to receive a rent reduction and/or in some
Warsaw till 2022 are presented below. It is rather certain that in the short to cases to dispose some of the currently
20%
medium term flexible offices will be leased space among others. All these
• Remote work / Work from home affected, as after the crisis people may actions might cause that capital’s office
(WFH) – may cause some decrease of remain cautious about sharing their market to see additional 50,000 sq m up
16%
the occupied office space within the next workspaces with large groups of strangers. to 100,000 sq m of vacant space in a form
18-30 months. Assuming the decrease to As a result of the coronavirus we may see of the sublease or physically vacated space
reach 10-20% additional 200,000 sq m to some consolidations among operators on during the next 18 months.
12%
400,000 sq m of vacant space might be the market causing some of the flexible
11.30% released to the market. spaces to be overtaken by the owners of We expect the share of renewals in the
the buildings with such facilities. Pipeline total take-up volume will increase in
8%
• Workforce reduction - Oxford Economics projects will be also revised, especially the short term perspective and the lease
in the latest projections shows that in 2020 ones where operator was taking more than length may also decrease substantially, as
GFC* the employment in Warsaw will shrink 3,000-5,000 sq m in one project. These tenants prefer to conduct a 12 months to
4%
from 1.378 million in 2019 to 1.364 million actions will effect in a new vacant space 18/24 months lease agreements during the
employees, which gives us a more than released to the market in the short to volatile economic circumstances.
14,000 people unemployed. Assuming medium term perspective.
0%
that on average one employee occupies 10
m² each this gives us over 140,000 m² of • Occupied space contraction - Both WFH
additional vacant space in the entire 2020. and expected workforce reduction in 2020
In 2021 and in 2022 the projections are will result in reduction of occupied space
more optimistic, as they assume ca. 20,000 across the city. Currently, some tenants
*GFC – Global Financial Crisis Source Savills Research headcount growth. are postponing decisions linked with office
leasing, others are vacating office space
no longer needed, for example in the form
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Office market in Warsaw 2020-2021 Office market in Warsaw 2020-2021
Warsaw’s office towers under construction
Widok Towers
28,000 sq m
Warsaw
Home office work and legal regulations
SKYSAWA UNIT
24,400 sq m 56,000 sq m therefore apply to work performed by employees after 4 September 2020. This imprecise provision,
The Warsaw HUB
only “from time to time”? which is binding during the epidemic only, does
(B) 78,500 sq m not dispel many doubts, such as issues related to
(B&C) The epidemic has accelerated occupational health and safety, costs of remote
Central work or options to check on an employee. The
Point the pace of change
Marcin Frąckowiak best (and the safest) solution was and still is
18,200 sq m Generation Skyliner
Attorney at Law, The absence of remote work provisions became to regulate these important issues in remote
Mennica Forest Labour Law Department, particularly apparent during the COVID-19 work by-laws - a course of action adopted by many
Legacy Park Y 49,000 sq m 51,700 sq m Sadkowski i Wspólnicy outbreak. Many employers suddenly had to employers. Due to these doubts, more detailed
Varso Tower 42,900 enable their employees who had concerns about provisions on remote work will be included in
(tower)
Tower 48,100 sq m working in large groups of people to work from another amendment to that Act.
66,300 sq m home. In March 2020, remote work was defined
sq m Telework is not the same as home in Article 3 of the Act on Special Solutions to Does “Shield 4.0” dispel doubts
office work Prevent, Counteract and Combat COVID-19,
about remote work?
Other Contagious Diseases and Crisis Situations
Remote work (also known as home office work) Caused Thereby (commonly known at the “Anti- In the last days of May 2020, on the Sejm’s
is not regulated in the Polish Labour Code, even Crisis Shield”). The provision is as follows: to website, the Polish government’s bill was published
though employers have been lobbying for inclusion counteract COVID-19, an employer may instruct on subsidies to interest on bank loans granted to
of relevant regulations for years. The Labour Code, an employee to perform, for a definite time, work ensure financial liquidity of entrepreneurs affected
however, contains quite extensive and detailed set out in an employment contract, outside the by COVID-19 and amendments to other legislation.
regulations on telework that is fundamentally place of its regular performance (remote work). The bill contains, among other things, provisions
different from the home office concept, so This provision will lose its binding force 180 days modifying the Anti-Crisis Shield, including those
telework regulations cannot be directly applied after the Act comes into force , so remote work will on remote work. The bill specifies in more detail
to employees who occasionally work remotely. no longer be regulated again by any legislative act the following:
Essentially, telework is regular work outside an
employer’s establishment via means of electronic
communication. In this employment model
employees do not physically come to the company’s
office but keep in touch with their employer by
telephone, online messengers and e-mail. To
Depending on to what extent the above listed factors appear on the As any forecasts are difficult in current economic circumstances the introduce telework, an employer must work out an
market year 2021 seems to be rather a challenge for developers, owners and scenarios presented give a rather wide range of where vacancy rate will be arrangement with a trade union, and if no trade
tenants. Depending which factors will have a greater impact on the vacancy over the next 18 months. As usual in such scenarios we will end somewhere union operates at the employer’s establishment,
rate we can expect two possible outcomes: in the middle. telework by-laws must be prepared in consultation
with employee representatives elected in such an
• taking into account mainly estimated workforce change the However, if the permanent remote work solutions become more establishment. Exceptionally, employees may also
increase of vacancy rate to 12.4% in 2021 is expected; popular and desirable by both companies and employees it will result in perform telework if they ask for such an option
the gradual change of the way we will work and how much office space (in which case no such arrangement or telework
• when the projected occupied space reduction of just 3% is added we need and in what formula. So it cannot be ruled out that the expected by-laws are required). Telework provisions set out
that index will grow to 16.6%. vacancy rate may, for a short time, exceed the values indicated in the the employer’s duties connected with providing
scenarios presented above. and insuring work equipment and covering
the costs of its day-to-day use. In addition, the
employer must lay down rules for protection of
data provided to a teleworking employee and
organise relevant training. The Labour Code
Global Financial Crisis – basic market indicators change provides for a possibility of inspecting teleworkers
at their workplace and regulates the employer’s
2008 2009 Annual change duties concerning safe and healthy work during
teleworking.
Vacancy rate (%) 2.9% 7.3% +4.4%
No wonder that many employers are put off by
Vacant space (sq m) 85,450 238,450 +153,000 / +179%
such a complex regulation as the introduction of
telework involves too many formalities. Employees
Take-up (sq m) 523,900 280,200 -243,700 / -46.5%
also appear to have different expectations and
Net absorption (sq m) 250,300 112,200 -138,100 / -55%
seldom perceive remote work as a permanent way
to work. To many, combining work in the office
Source Savills Research with work at home is natural. What rules should
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Office market in Warsaw 2020-2021 Office market in Warsaw 2020-2021
• remote work will be possible only when an The by-laws that set out an employer’s rules for quality of work is important. By-laws must set
employee has the technical capabilities and remote work will work much better. During the out rules for such checks so they enable actual
suitable space at home to do such work and validity period of the Anti-Crisis Shield, such supervision over performed work on the one hand,
such work can be performed remotely; by-laws must be in strict compliance with its and do not excessively interfere with an employee’s
provisions. Certain elements of that legislation right to privacy on the other hand.
• work equipment, tools and materials and as may be used to draft by-laws even when it is no
well as logistics support are to be provided longer in force. Well-prepared by-laws will secure employers’
by employers; interests and give employees clarity as to their
Under current legislation, employers are free rights and duties connected with remote work.
• employees may use their own tools and to decide how many days a week employees may
equipment (e.g. their private computers) work remotely and how many days in the office. It
if protection of confidential information, seems reasonable as it is difficult to foresee future
other legally privileged secrets, including requirements as some employees may need to be in
business secrets, personal data and quarantine for example. After the validity period
employers’ secrets, is ensured; of the special Act is over, remote work should be
planned in a way that it is not treated as telework.
• on an employer’s request employees must It should be therefore performed occasionally,
keep records of performed tasks; not regularly. An employer must set out clear
rules concerning the technical aspects of remote
• employers may withdraw at any time the work, particularly what equipment an employee
instruction to perform remote work; should use. Setting out data security rules should
be an absolute standard in the modern day: how
• employers will be responsible for to access the Internet, what software employees
occupational health and safety conditions may install, what are the encryption rules for
and accidents at work occurring at home company files, what employees should do to
only to the extent they provided such work prevent unauthorized parties reading company
tools, equipment and materials. documents. Caution is advised with respect to
financial matters such as costs of electricity use
Two key issues remain the same: remote work is in an employee’s flat, Internet bills or costs of
still designed as a temporary measure to prevent a desk or a comfortable chair. These elements
COVID-19, and its provisions will lose effect in should be regulated in remote work by-laws but
September 2020. How to plan remote work in the I am not in favour of burdening employers with
future when Shield 4.0 ceases to be in force? such costs indiscriminately. In practice, it would
be unrealistic for employers to set out detailed
Remote work now and post- occupational health and safety conditions for the
place of remote work, but providing information
epidemic
on work ergonomics to employees does not seem
In my view, the imperfect remote work an excessive burden on employers. Employers
regulations may always be remedied by well- must still refer employees for medical check-ups.
written remote work by-laws that employers By-laws should also clearly specify when, in what
should put in place. We need to realise that conditions and with what notice employers may
statutory legislation will never be a “bespoke” instruct employees to discontinue remote work.
solution to the individual needs of employers. And last but not least, being able to check the
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Office market in Warsaw 2020-2021 Office market in Warsaw 2020-2021
Służewiec - MODLIN Q1 2020
AIRPORT
a cost-effective
alternative 5.59 million sq m
Total supply of office
The Warsaw office market is developing very dynamically. Both occupier space
and developer activity have been substantial. In the last five years the
average annual take-up was at the level of 830,000 sq m, while construction
activity was at the level of almost 750,000 sq m. The two subzones stand out
particularly: City Centre West and Służewiec, representing two “opposing
poles”.
Daszyńskiego Roundabout area has turned into the largest S8
construction site in Warsaw. City Centre West subzone is being home
from 31% (in Q1 2017) to even 63% (in Q4 2019) of the entire commenced M M 792,000 sq m
space in Warsaw. Almost 440,000 sq m of modern office space is expected M Total under construction
to increase the stock in City Centre West subzone within the next two M M space
years (2020-2021). By the end of 2021 this subzone can be home to almost M
1.15 million sq m of office space, which will make City Centre West the M
M
largest subzone in Warsaw, larger than Służewiec subzone (1.14 million sq M
M M
m by the end of 2021).
M
Furthermore, the commenced projects at the Daszyńskiego Roundabout M
are gradually changing the capital city landscape with future skyscrapers M
to be completed. One existing tower (Warsaw Spire) and four under
M M
construction (Warsaw UNIT, The Warsaw HUB, Skyliner and Generation
Park Y) will offer tenants almost 280,000 sq m of office space in total. M
M M M M M
6,700 sq m
M M New supply
M M
On the other scale there is the Służewiec subzone, currently the largest M M
subzone in Warsaw. Służewiec is characterized with the limited developer
activity, moderate take-up volumes, competitive headline rents and rather S8 M
M
substantial vacant space offered. The last can be treated as an opportunity M
in the current circumstances, as tenants are starting to seek more cost-
M
effective locations. Almost 183,000 sq m of vacant space in 56 office
buildings gives potential tenants a significant variety of leasing options. S17
M
The occupier activity also remains on a good level in Służewiec subzone,
M 7.5%
as tenants were leasing around 170,000 m² on average during last five years,
which gives us ca. 20% of the entire take-up volume registered in Warsaw
A2 CHOPIN Vacancy rate
M (160 bps drop)
annually. AIRPORT
S2 M
Prime headline rents are also more attractive in Służewiec subzone: EUR
13.00 and 15.00 per sq m per month versus EUR 22.50 to EUR 24.50 per sq m/
month in City Centre West subzone. M
S8 S79 M
M
M
138,900 sq m
M Total take-up
Daniel Czarnecki
Head of Landlord Representation,
Office Agency
Key to symbols:
23,800 sq m
WKD and SKM Park and Ride
M Metro station Railway station
railway station car park
Express road Rail Net absorption
savills.pl 10 11
For further information please contact:
Tomasz Buras Marek Paczuski Adam Pustelnik Daniel Czarnecki Jarosław Pilch
CEO Poland, Director, Associate Director, Director, Associate Director,
Head of Investment Deputy Head of Investment Business Development Head of Landlord Head of Tenant
+48 22 222 4000 +48 666 042 891 Manager Representation Representation
tburas@savills.pl mpaczuski@savills.pl +48 507 841 838 +48 519 033 717 +48 694 497 800
adam.pustelnik@savills.pl dczarnecki@savills.pl jpilch@savills.pl
Jakub Jędrys Bartłomiej Łepkowski Wioleta Wojtczak Agnieszka Giermakowska
Associate Director, Director, Associate Director, Senior Consultant,
Head of Building & Head of Property Head of Research Research Department
Project Consultancy and Asset Management +48 600 422 216 +48 668 313 832
+48 602 566 086 +48 602 566 076 wwojtczak@savills.pl agnieszka.giermakowska@savills.pl
jakub.jedrys@savills.pl bartlomiej.lepkowski@savills.pl
Savills plc: Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the Americas, the UK,
continental Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. This report is for general informative
purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. While every effort has
been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form
is prohibited without written permission from Savills Research.
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