With high levels of available office stock, tenants appear to be gaining the upper hand in lease negotiations, which puts an increased pressure on owners and managers of office buildings. This trend is most notable on the Warsaw market.
Given the impending office supply, the main objective of building owners and managers is to maintain the value and quality of the buildings and strengthen relationships with tenants to ensure a high occupancy level and tenant retention. Companies are more willing to have high-quality interior design and fit-out that would best reflect their core business values and culture. Common area fit-out and including amenities such as a café, a gym, or an entertainment and relaxation area for employees provide a high-performance and attractive working environment, adding to the prestige of the building.
New technologies will constitute both a challenge and an opportunity for office building managers over the coming years. In addition to advancing energy efficiency of a building and operational efficiency of its systems, they also help to improve tenant communication through various mobile applications. An advanced website and helpdesk are also a great convenience for tenants.
Another major task that managers have to face is to enhance the quality of a building’s external infrastructure and to establish cooperation with city authorities for the benefit of local communities in order to offset the disparity between modern office buildings and their surroundings, which is characteristic of post-industrial districts. The revitalization of such areas requires time and a close collaboration between businesses, city authorities and property owners, particularly in terms of improving access to public transport and road infrastructure.
Property managers are also expected to participate in various green initiatives aimed at promoting environmental protection and a healthy lifestyle. Support in tenants’ extensive reporting on sustainability and CSR issues is another important factor, especially with tenants forming part of global corporations.
Managers continue to struggle with various legal issues. Last year’s amendments to the Polish Building Law have failed to facilitate the fit-out permit process, which remains the same as in the case of new office buildings. Regulatory changes are expected to be introduced in 2016, but it is difficult to assess their effectiveness. Higher land perpetual usufruct fees, on the other hand, will arguably constitute a higher budget burden. In addition, as a result of the amended Social Insurance Act, obligatory social insurance contributions have to be paid on all mandate contracts from 1st January 2016, which will slightly increase the costs of security and cleaning services. Tenants and managers will therefore need to look for savings elsewhere.
With changing market conditions and rising affluence, tenants are more willing to pay a slight premium for superior office fit-out, amenities, work comfort and green features. This constitutes a major challenge for property managers, whose focus is to keep operating costs down while maintaining or improving the quality of building resources and services.
Expert: Zuzanna Paciorkiewicz, Ph.D., MRICS, Director, Business Space Asset Services, Cushman & Wakefield