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Reuven Havar: tenants’ expectations are growing

Reuven Havar, dyrektor generalny Atlas Management Company (grupa Atlas Estates)

In 2016, the office market in major Polish cities was very dynamic. Developers built and delivered vast amount of modern office space. Currently, the vacancy rate remains stable due to a considerable demand among tenants.

The largest amount of created office space was noted in Warsaw and reached 9 mln sqm. This implies that the office market in Warsaw attained a level comparable to the one represented by European cities. Not only the Warsaw market developed rapidly in 2016. Regional markets such as Krakow, Poznan and Wroclaw met with increased demand as well. The map of new office investments includes cities, which have not been so far of special interest to investors, such as Bielsko Biała, Czestochowa or Zielona Góra. The office markets in these cities are not saturated yet and they possess advantages to tenants, e.g. much lower remuneration or lower office rental rates in comparison with other big cities. The demand in the regional cities is mainly driven by companies belonging to the BPO and SSC sector. In Poland there are more than 200 thousand employees working in BPO’s service centers. Over the last year, employment in this industry increased by one-fourth, and until 2020 it is expected to grow to 300 thousand people. Until then, the BPO sector in Poland will need approx. one million sqm of office space.

Office buildings which grant easy access to public transport are the most attractive to tenants. Due to a large supply, the market becomes more and more demanding. As a consequence, tenants expect higher quality of office space, extra facilities or financial incentives during the negotiations. Atlas Estates, which is the owner and property manager of Millennium Plaza near Zawisza Square, tries to meet those tenants’ and market’s expectations offering additional facilities in several different ways. So far, this approach has brought desired results. In the last three years the overall level of office occupying Millennium Plaza has grown steadily and currently it amounts to over 85%. Last year we invested more than PLN 5 million in improving the standard of office space. We increased the efficiency of the air conditioning system, greatly improved security in the building, replaced the fire alarm system, renewed elevator and partially common parts inside the building. Responding to tenants’ needs in the near future, we are planning to renew common parts of Millennium Plaza in accordance with the latest trends in interior design. Thanks to these improvements the interior of the building will become modern, bright and spacious.

In 2017, we predict that a considerable demand for office space in major cities in the country will remain at high level because many office projects are currently under construction and their completion date is in the coming year. This will contribute to a decline in rental rates and will rise tenants’ expectations in order to receive extra packages of incentives in the form of e.g. free rent. Along with a market saturation on the key markets, new, attractive and promising cities will be of great interest among investors. Tenants, in turn, will favor even more offices located in the city center.

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