There Is More Than Just Glass Towers on the Market

There Is More Than Just Glass Towers on the Market

Well-located office space in the modernized buildings is as attractive for tenants as offices in the new buildings

For several years, office market in Poland has been recording a rapid increase in the supply of high-quality space provided by numerous new projects. At the same time, the market share of space in modernized, several years or several decades old buildings is increasing.

In Warsaw, which is the most mature office market in Poland, the percentage of space in office buildings older than 10 years is the biggest in the country. According to experts from Walter Herz consulting company, such offices constitute over 40 per cent of offers in the agglomeration. On the largest regional office markets there is much less resources that are older. In Cracow and Wroclaw, such space constitutes approximately 20 per cent of total supply.

Good addresses do not age

The experts point out that not only the latest facilities, but also the older buildings, commissioned several years or even a few decades ago in Warsaw, continue to attract the attention of tenants. Provided, however, that they are located in attractive locations. Good examples are commissioned in 2003 Metropolitan as well as Rondo 1 building completed in 2006.

The representative office buildings in Warsaw constructed many years ago continue to go through renovations, so the space offered there does not yield to the new facilities. These include, among others, Atrium, Błękitny Wieżowiec, Moniuszki Tower and Spectrum Tower. In many popular metropolitan office buildings, such as Warsaw Trade Tower and Warsaw Financial Center the revitalization of common parts, mainly halls and reception areas, is currently under way. Walter Herz experts point out that the owners of certain older buildings are also certifying facilities, increasing their efficiency and reducing operating costs, so that they can become more competitive on the market.

Relocation rewarded

Nowadays, the office market belongs to the tenant who now more than ever has the possibility to negotiate attractive lease terms. This applies particularly to Warsaw. The owners of the buildings seek tenants in various ways. Walter Herz consultants admit that the situation encourages businesses looking for offices.

Longer rent free periods encourage the lease. So do parking spaces included in the price, comprehensive quality of office space arranged according to the preferences of the companies, as well as reimbursements of expenditures on relocation and marketing associated with the change of premises.

New vs. old

Both new and old office buildings have their pros and cons. The supply of new buildings continues to increase. Investors should therefore offer much more than the high-end office space. Thus, the youngest buildings offer extensive additional infrastructure.

Their advantages include modern architectural solutions, great integration of projects with the urban tissue and ecological solutions conducive to environment. Also, green areas for relaxation, creative work environment, direct access to different services thanks to co-working space as well as facilities for cyclists and owners of the electric vehicles.

According to Walter Herz experts, new facilities can also fully meet the needs of companies looking for large office space. When it comes to the less favorable aspects for tenants, the experts enumerate inflexible terms of contract as to the rental period, higher costs of maintenance of the common areas in the buildings as well as rental rates expressed in euro and the risk associated with changes of the currency exchange.

Verified, hence good

Walter Herz experts point out that not all tenants decide to relocate after the end of the lease. In Warsaw, extensions of the contracts constitute up to one-third of all transactions. The companies renegotiate the contracts and remain in the locations that have worked thus far.

The experts point out that the tenants are equally interested in the latest projects as in the attractively located older buildings in good condition. The advisers admit that in the case of the older buildings one can negotiate better terms. This applies to both rent and other lease terms. The advantage is also the possibility of settling accounts in Polish zloty, which is important especially for state institutions.

The limiting aspect is the layout in the older generation buildings, which sometimes does not allow freedom in designing office space or needs greater investment expenses for its implementation. The future changes may also be difficult, while technical installations tend to be less efficient. But it does not concern all of the older buildings. Some of them are designed in such a way that despite their age, they continue to meet all expectations of the tenants.

According to Walter Herz specialists, only the old buildings that have not yet been upgraded, and cannot compete with their location are in a difficult position. The experts believe, however, that there is also demand for such offices. The companies that seek the most cost-effective solutions are interested in such offer.

Older office is not always cheaper

Walter Herz experts inform that rents in over ten year-old buildings can be lower by up to 20 per cent when compared with the new buildings. Everything depends on the location and the technical standard of the facility. However, it is not always the norm. Even around a dozen year old, well-managed, prestigious buildings with interesting architectural arrangement, in exclusive locations compete successfully with the latest office buildings. Often, their rental rates remain on the same level as in new ones.

The advisers point out that asking rents in the prime locations in the city center dropped slightly over the last year and currently reach 24 euro per sq m per month. For similar offices located outside the city center one has to pay 12-16 euro / sq m / month.

Even 9 euro per square meter in Warsaw

In the facilities built before 2000 in central locations, the average rent is approx. 16 euro per sq m. And already in the Mokotów district, in Służewiec office area, space is offered for an average price of 11 euro per square meter. Advisers claim however, that office space can be leased for less. In the Class B office buildings in Warsaw the nominal rents rank amount to 9-10 euro per sq m.

On the main regional markets in Cracow, Wroclaw and the Tri-city, differences in rents for the newest and the older offices are not as large as in Warsaw. They range from 1-2 euro / sq m. The reason is less diverse age of the office buildings, most of which aren’t over ten years old.

Author: Walter Herz

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There Is More Than Just Glass Towers on the Market

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