Public sector is becoming bolder in looking for commercial offices

In Warsaw alone, approx. 700 thousand sq m of offices is under construction. In the other largest cities in the country, 750 thousand sq m office space is emerging. In conditions of high supply and strong competition on the market, developers are forced to compete for customers by offering attractive lease terms. Office buildings owners would be happy to see state institutions and offices on their list of tenants. These institutions more and more often decide to move to commercial buildings, acknowledging the benefits of relocation.

- In recent months, we have frequently received inquiries about leasing offices from public institutions. We are currently negotiating several lease agreements for space contracted by institutional clients – says Bartłomiej Zagrodnik, CEO of Walter Herz consulting company.

Bartłomiej Zagrodnik indicates that after a detailed analysis of the overall costs of maintaining buildings occupied by state offices, it turns out that apart from more comfortable headquarters, relocation brings considerable savings to institutions, thanks to the negotiated terms of the lease, including bonuses in the form of rent-free periods. - In addition, selected facilities provide administrative units with attractive services and better security, in terms of access to both the building and the infrastructure, as public institutions pay particular attention to those – explains Zagrodnik.

Clearly defined requirements

Walter Herz CEO adds that the state-owned companies usually decide on a location outside the city center of Warsaw, but the one that provides convenient transport connections. State offices choose space that gives possibility to divide into cabinets. They also require clearly defined rent and operating costs in the contract. Also, the issue of security in the facility, as well as a guarantee of expansion in a situation where it is necessary to increase space is of great importance to the administrative entities.

According to Bartłomiej Zagrodnik, public administration should take advantage of the privileged position which companies looking for space in the office market are currently enjoying - Our calculations show that what brings the biggest profit is the relocation to the new offices from the old office buildings that require major repairs, the maintenance of which constantly generates expenses related to the necessity of ad hoc technical improvements –notes Walter Herz’s CEO.

Bartłomiej Zagrodnik points out that Warsaw office market, the resources of which have exceeded 5 million square meters of modern space, is becoming more mature. It makes it easier for the institutional tenants to find the right offer.

Tenant with several years of history

Stable financial standing and interest in large office space and long-term lease contracts makes state institutions a desirable tenant for the owners of office buildings. A problematic issue may be the fact that public sector entities prefer rent measured in PLN and have their own guidelines for securing the contract, different from deposit or bank guarantee practiced on the market. However, as specialists ensure, there are tools that are helpful in getting a compromise on these issues, and the institutions themselves in an increasing number of recent cases agreed to pay rent in euro.

Public sector is a relatively new group of tenants on the office market. The history of renting space for offices and state institutions in commercial buildings is only dating back seven years. In 2015, public sector leased approx. 80 thousand sq m of offices, while the total volume of lease last year, amounted to 1.5 million square meters of space. Demand for commercial offices from state institutions has been remaining at a similar level for several years. Nowadays, public sector has become more interested in the transition from old buildings to the newer office buildings.

Record lease agreements

The most fruitful in this respect has so far been 2014, when the participation of public sector in the office leasing market closed not with few, but over ten per cent. At the time, significant lease agreement were concluded by, among others, PKP, Agricultural Market Agency, National Office for Registration of Medical Products, General Inspectorate of Road Transport, the Civil Aviation Authority and the Agricultural Property Agency.

Last year, the Centre for EU Transport Projects, as well as the European Agency for the Management of Operational Cooperation at the External Borders of the Member States of the European Union Frontex, became tenants of over 6 thousand sq m of space in the Warsaw Spire complex. The latter leased space of 14.6 thousand sq m.

In 2015, companies from Poczta Polska Group also changed their headquarters, and leased a total of 18 thousand sq m in Domaniewska Office Hub, whereas the Ministry of Foreign Affairs, moved to Foksal City building.

One of the largest commercial lease agreements signed by the companies owned by the Treasury was concluded by Powszechny Zakład Ubezpieczeń, which decided to lease 17.5 thousand sq m of space in Konstruktorska Business Center office building. In addition, significant contracts were finalized by Polskie Sieci Elektroenergetyczne, Gaz-System and PKP Cargo

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Public sector is becoming bolder in looking for commercial offices

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