The potential is still big

Jarosław Zagorski, Commercial Director of Business Development & Ghelamco Poland, tells the story of a Warsaw Spire, the situation on the office market and plans for the future.
Jarosław Zagórski
Jarosław Zagórski

What is the process of building such large buildings like the Warsaw Spire? What kind of challenges must  the investor consider?

Contrary to appearances, the hardest and most time consuming is not building such a facility, but designing it, obtaining all necessary licences and preparing for construction. This is a more complex process than that which applies to conventional office buildings, offering 15 000 -20 000 sq.m. low to middle high. In the case of the Warsaw Spire, it took us nearly five years.

When implementing such a large object a huge knowledge is needed and the ability to predict which trends will be on the market at the time the building will be put to use. In the case of the Warsaw Spire, 5 years ago we had to identify and take into account the needs of tenants at the time they will move to the building, that is year 2015, and even take a look at the use of complex at even further into the future, another 10 years.

When designing a building, it is necessary to draw attention to issues of the functional efficiency of the surface and the technical infrastructure. This translates to very simple things, for example, what size duct shafts are to be designed so that after a few years it will not become apparent that there is not enough room for the installations. It is obvious that the tenants' requirements gradually grow together with technological development mainly in the telecommunications sphere. We cannot forget that such large objects affect surroundings and, therefore, we need to properly evaluate the sphere of impact and neatly integrate project in an existing neighborhood. In these respects, the design show a basic difficulty "I know-how".

It has been said that Warsaw is now one big building site. In 2013,  it seem that the record amount of office space will be delivered. Does the Capital needs such large projects?

It is hard to predict what investments will be made, because a lot of these buildings are still "on paper". I think, however, that not only Warsaw may be named as the building site, this also applies to the whole Poland. After all, there are multiple objects in the process of being built in Wroclaw, Cracow and Katowice.

But after all, they are not comparable with the supply of the capital.

Of course, the centre of gravity is located in Warsaw. In the capital, which is natural, companies want to locate main headquarters. Regional markets take over the side services such as BPO or SSC. Reviews on demand pages differ, however, you can pay attention to some of the rankings. For example, there are listings based on the number of sqm. modern office space per metropolis inhabitant, in which Warsaw as an European city, clasifies at the bottom. This means that the potential uptake is still large. However, the question arises - at what pace?

Some larger projects,will increase the level of  office space vacancy, which will cause downward pressure on rents. This situation is in favour to renters, worse from the point of view of the developer. The situation on the market depends on the proportion of supply and demand.

Great potential lies in companies that develop, combine, take over and consolidate. In the current economic downturn many companies assume competition or entering into other synergistic sectors. Often these companies' headquarters are located in several different locations, in order to optimize costs and increase functionality of companies they decide on one address. This means that a large stream of demand comes just from the niche companies.

This also means that there are plenty of companies that have reduced, by what appears as a sublease on the secondary market, which in turn is not a good solution for large enterprises. For them it is too risky because the arrangement of space under the specific needs is expensive. Sublet is the preferred option for companies that develop - they can rent space for a year, two years, and then leave. This process raises the level of flexibility in the market.

You should pay attention to the vacancy rate. It currently stands at about 8.8 percent, while the market is considered to be sustainable at a time when the rate reaches 11%.

So you could say that they still see potential for further growth.

Yes. Of course, two or three major projects over a period of time can affect the balance of the market and cause the impression that these plots are too much. However, if the market is going to rise gradually, and the supply will be adjusted to demand. In Warsaw and regional cities the development is possible for at least the next several years.

It is worth noticing a few trends. First, over the next 3-4 years the emergence of another 100 000 jobs within the BPO/SSC sector. Probably most of them will be created in Wroclaw, Cracow, Tri-City, perhaps in Lodz and Katowice. In addition, most public administrations and
semi-public companies and offices are located in older buildings, energy insufficient and inefficient. It can already be noted in Warsaw, that gradually they are moving to more modern office buildings, where the rent is higher, but it saves on the cost of consumables. In addition, such objects generally have green certificates, which affects positively the image of tenants. For example, large areas in the building were rented recently by General Directorate For National Roads and Motorways and the Regional Development Agency.

Many of the smaller companies prefers the buildings of type B or B +, because they are, after all, cheaper.

Yes, these are the objects which are about 10-15 years old and will offer the offices at the lower price, but at much lower standard. You should also remember about enterprises, which now reside in the houses and slowly they consider moving to office buildings. I remember, when at the beginning of my Real Estate advanture, around 1995, it didn't bother anyone, that the company is based in an apartment. Currently, such address may cause less trust on the part of business partners and customers.

What group is targeted for the Warsaw Spire? Are these essentially large tenants?

At this stage we are looking for big tenants due to the structure of the project and its location while it is not possible to have only such tenants. Therefore, in order to establish itself as efficiently as tenants in Warsaw Spire, we arranged the tenant mix, which in the future will make it possible to extend and adapt the surface for larger, developing companies within the framework of our complex.

What are the other plans for Ghelamaco in the next few years, apart from the Warsaw Spire?

Currently, the focus is on the implementation of the Warsaw Spire, which is very complicated and absorbent. It will offer a total of 100,000 sqm. of surface-this could be divided into several smaller objects.

Last year we started and we did several projects simultaneously. In May, we received a license to operate a new T-Mobile headquarters and Lopuszanska Business Park. In 2012, we finished well Mokotow Nova and the Senator's - a very unique office building. At the moment we are focused on Warsaw Spire, while we have prepared several projects which we can begin almost anytime, if the client gets eager for a given location.

Do you plan on selling your buildings?

Of course, we just sold the Senator building for 120 million euros.  We are planning on getting more.

And are there any plans yet or the talks are already underway?

Already underway.

Tags: Ghelamco
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