Polish office market is driven by BPO sector

outsourcing office

Most of the office space under construction in Poland is contracted by the modern business services sector. Last year, the employment in the sector increased by 15 per cent.

Demand for office space significantly exceeds new market supply. According to Walter Herz analysts, approximately 1.35 million sq m of offices were leased, and less than 900 thousand sq m were commissioned last year on the biggest office markets in Poland. In 2015, the demand for office space exceeded a record of 1.5 million sq m. This is a big leap when compared with the average absorption of the market in the previous years, as in 2014 in the leading agglomerations demand closed in 1 million sq m.

Business services sector remains the main tenant of the offices. Last year (between the first quarter of 2016 and the first quarter of 2017), the sector generated almost 60 per cent of the total volume of lease noted on the regional office markets outside Warsaw. According to the latest ABSL report, in most major cities, except Poznań and Szczecin, the share of this industry exceeded 50 per cent. In Cracow, companies from the modern business services sector account for almost 70 per cent of the office space lease volume in 2016.

92 new service centers

Over the last 12 months, 92 new service centers have started operating in Poland by the end of the first quarter of the year. Currently, our country has a total of 1078 business service centers, 748 of which are owned by foreign companies. Most centers are located in Warsaw (167 facilities). Among the 724 companies that located their service centers in our country are 80 investors from the Fortune Global 500 (2016). Among the centers opened last year, the largest number of the investments came from the US.

At that time, employment in the industry increased by 32 thousand individuals, that is by 15 per cent. As many as ¾ of the new jobs were generated by foreign centers, which bring together 198 thousand people. The sector currently employs a total of 244 thousand professionals, and ABSL predicts that in 2020, it will exceed 300 thousand people in Poland.

39 BPO/SSC/IT centers across the country

Cracow is the undisputed leader in the sector, with service centers employing 55.8 thousand individuals, about a quarter of all employed in the industry. Apart from that, the largest centers of business services are Warsaw, Wrocław, the Tri-City, Katowice, Łódź and Poznań. 85 per cent of the total number of employees in the sector works in these seven agglomerations. In the other nine cities, service centers employ from 1 thousand up to 10 thousand people. Jobs in this segment of the market are generated by as many as 39 centers in Poland.

The largest number of new jobs created in the analyzed period was in Warsaw (5.9 thousand), Wrocław (5.7 thousand) and Cracow (5.5 thousand). These three cities account for over a half of the newly created positions.

IT centers dominate among the newest ones

Nearly half of new investments are IT centers (48 per cent), one quarter are shared service centers (27 per cent), and several per cent are R&D centers (14 per cent) and BPO centers (11 per cent).

Walter Herz analysts estimate that there are over 9.13 million sq m of space currently available on the nine office markets in the country (Warsaw, Cracow, Wrocław, the Tri-City, Katowice, Poznań, Łódź, Szczecin, Lublin), including 5.12 million sq m in Warsaw itself. It is still low, because the demand for offices is growing not only in the largest agglomerations, but also in the smaller cities, such as Rzeszów, Bydgoszcz, Szczecin and Radom. Specialists note that recent lease transactions concluded on these markets confirm it. Among the smaller cities that have experienced the greatest development during the last year, Walter Herz’s experts include, among others, Rzeszów and Lublin.

According to Walter Herz experts, during the first three months of the year, 200 thousand sq m offices were leased on the Warsaw market alone, and about 85 thousand sq m were commissioned. Office supply is growing fast, some companies bring even several large investments at the same time. According to the specialists, in the largest agglomerations in the country, nearly 1.7 million square meters of modern office space remains under construction.

Brexit is a chance for new tenants

Developers rely on new investments, hoping that Poland will take advantage of the opportunity provided by Brexit and the demand for modern office space will increase in the near future. Primarily, companies from banking and financial sector located on the British Isles, are researching the opportunities offered by the Polish market.

Investors in the sector of modern business services are encouraged by access to well-educated staff, not only from Polish academic centers, but also from other countries, primarily Ukraine, Spain and Italy. The lower the cost of leasing office space when compared with the other European capitals, as well as the good economic situation in our country is also important.

The most promising office market in Poland is Warsaw, which enjoys the highest credit rating of the Financial Times and is considered Europe’s fourth most business-friendly city. Nevertheless, Cracow remains the largest center for modern business services in Poland.

Autor: Walter Herz