The business breakfast organized by Jones Lang LaSalle and the British-Polish Chamber of Commerce and held in Kraków was attended by 50 participants from the international, national and local real estate community. The meeting was under the honorary patronage of the Mayor of Kraków, Małopolska Voivodship and Małopolska Regional Development Agency. The Association of Business Services Leaders in Poland (ABSL) was the contents partner of this event.
A panel discussion was preceded by a presentation on future trends in the office market given by Patricia Lannoije, Head of Research at Jones Lang LaSalle. Global, European and countrywide tendencies were set against the Krakow market fundamentals with the following main aspects being discussed: sustainability, the risk of technical, functional and locational obsolescence of office buildings, new trends in space planning which respond to wider socio-demographic tendencies such as a focus on greater collaboration and teamwork, more open plan areas, increased mobility of staff and greater use of high technologies.
Key stakeholders in the Kraków and Małopolska real estate market including developers, financing institutions, occupiers and organizations that actively invest in the market attended the panel and subsequent debate.
Rafał Oprocha, Associate Director, Jones Lang LaSalle Kraków, who chaired the panel discussion, said: “I am glad that the perception of Kraków as a safe, stable and, what has been repeated in the meeting – increasingly transparent location for business grows. At Jones Lang LaSalle we have always aimed to drive greater market transparency through our regular research publications on the real estate market and the local economy. We are aware this is particularly appreciated by those looking at this market who do not have their representatives locally.”
One of the important subjects raised over the debate was the role of the business services sector for the development of the office and investment market in Małopolska. It was stated that the BPO/ ITO and shared service centres (SSC) give employment to approx. 20 thousand people in Kraków alone. Interestingly, panelists representing this sector and ABSL in the discussion agreed that the existing service centres in Kraków continue to grow whereby increasingly more complex, and knowledge-driven processes and functions are being relocated to the capital of Małopolska. This is an important observation as Jones Lang LaSalle estimates, the BPO/ ITO and SSC centres already occupy 41% of the modern office space in Kraków, compared to 34% in Wrocław and only 3% in Warsaw. Thus, the city’s development towards more advanced and know-how based services, which are difficult to migrate to another macro location, is the local answer to questions such as: is the occupier market in Kraków diversified enough? Does the high share of the business services sector represent a risk to financing institutions and investors to office assets in Kraków? In addition to risk mitigation via more knowledge-based processes, the occupiers sitting in the panel debate also pointed to that fact that the BPO centres in Krakow service clients representing a wide spectrum of branches from marketing to finance, which should also protect against an arguable lack of diversification.
As a key requirement towards landlords and developers of office space, companies representing occupiers views pointed to needing flexible office space and need to accommodate seasonal fluctuations in headcount. By contrast, a lack of a single point of contact at public institutions, which would look after the needs and specific requirements of BPO/ ITO and SSC occupiers, was raised as a potential barrier to the growth of the business services sector in Kraków, albeit it was concluded the city has made a great deal of progress in this respect.
Another interesting topic discussed at the meeting was the approach towards the speculative development of office space. The tenants from the BPO/ ITO and SSC sector would potentially commit to a pre-let agreement (one signed before the construction works on an office building commence) if it were to demonstrably lead to a reduction in their occupancy costs. Given the cautious approach from financing banks towards financing speculative developments, tenants being prepared to commit to an office building prior to its construction would certainly facilitate further growth of the office market in Kraków.
Finally, it was stated by the representatives of the financial sector in the panel, that Poland today makes one of the core investment markets in Europe, behind the UK, France and Germany. The perception of Poland as a stable and increasingly more transparent capital market is clearly reflected in a positive market sentiment and trust with Kraków, the second largest Polish city, increasingly regarded as as a prime, institutional quality market.
Referring to the presentation on future trends in office space, Rafał Oprocha concluded: „Despite the fact that central locations are generally considered to be more future-proof and sustainable, non-central locations which provide access to public transport, such as for example Bonarka 4 Business, also meet the sustainability criteria. Also, the risk of functional and technological obsolescence and the resulting commercial risk is not an issue in Kraków yet, compared to Western Europe. Only 2% of office stock in Kraków is more than 15 years old and can now be regarded as obsolete. In Brussels for instance it is 44%. However, a number of global and European tendencies in space planning and working culture are already pronounced in Kraków e.g. a trend towards greater mobility of staff, increased use of high technology, hot-desking/ shared-desking and finally greater focus on teamwork and collaboration as opposed to individual work.”