The BSS sector is driving growth in Polish cities and dominates the regional office landscape. Companies from this sector account for more than half of leased space outside of Warsaw. The first half of 2021 saw companies from the modern business services sector (BSS) lease nearly 210,000 sqm of office space in Poland. This is more than 40% of the total demand registered in the country’s major markets. Excluding Warsaw, BSS companies accounted for as much as 60% of office demand
"Despite the pandemic, the business services sector continues to develop and is one of the fastest-growing branches of the Polish economy. The prospect of the sector further expanding is a strong impulse for the development of the office market in Poland, especially in regional cities. For example, in Kraków, which is the BSS location, employment in this sector is around 82,000 people. In the capital of the Małopolska region, over 1.3 million sqm of offices are currently leased, of which more than 60% are now occupied by BSS companies," says Jakub Sylwestrowicz, Head of Office Tenant Representation, JLL.
Regions mean services
Poland provides a wide and diverse choice of office locations. In H1 2021, total office stock exceeded 12 million sqm and the regional markets have almost caught up with Warsaw in terms of supply. From January to June 2021, a total of over 514,000 sqm of leases were signed in Poland. Regional markets accounted for over 50% of the volume (264,000 sqm), with the most active tenant continuing to be the BSS sector.
"Excluding the capital city, the BSS companies leased over 160,000 sqm in the first half of the year, accounting for over 60% of office demand in regional cities. The sector’s appetite for office space was illustrated by Katowice which saw the BSS sector claim a 90% share of demand in the city. In turn, BSS companies in Kraków accounted for three-quarters of total demand for offices in this period with Poznań in third with 57%. In comparison, Warsaw, which is the second-largest business services market after Kraków, saw BSS firms only register a 19% share of demand. However, given the fact that the capital city plays host to a large number of corporate headquarters, this is still a very good result", says Mateusz Polkowski, Head of Research and Consulting, JLL.
The largest BSS leases in H1 included: Rockwell Automation's renegotiation and expansion for a total of 19,500 sqm at A4 Business Park in Katowice, a 12,300 sqm pre-let for 3M at MidPoint 71 in Wrocław, Heineken Global Shared Services' new lease of 8,600 sqm at Podium Park in Kraków and a renegotiation of 3,400 sqm for Sii in the Maraton office building, located in Poznań.
"The business services sector dominates the regional office landscape and remains the key tenant outside of Warsaw. BSS centres occupy over 60% of occupied office stock in Kraków, more than 55% in Łódź and 49% in Wrocław. In total, BSS tenants occupy more than 3.5 million sqm of offices across Poland, including 2.8 million sqm outside of Warsaw", comments Mateusz Polkowski.
There are many indications that this trend will continue in the long term. Over 1,600 business services centres in Poland employ 355,300. The share of the business services, in total employment in business sector, has risen to 5.6%, up from 5.2% in 2020 – despite the pandemic. According to ABSL, the number of jobs could increase by 6.1% y-o-y to 376 900 in Q1 2022, demonstrating the sector's huge potential.
"The disruption to global supply chains brought on by COVID-19 has caused companies to revise their outsourcing strategies and, in an effort to maintain the continuity of business processes, are increasingly willing to analyse options to launch operations closer to the country of origin. Poland may be one of the largest beneficiaries of this trend. Moreover, some tenants are taking more cautious strategic decisions regarding changes in their office portfolio due to the recent pandemic, which shows that there is still potential for further increases in the rental market", comments Jakub Sylwestrowicz.
Offices of the ‘new normal’ era
BSS companies are looking for locations that offer high-quality office space in order to provide new employees with a comfortable and optimal working environment, and that take into account the challenges of the 'new normal'.
"Services sector companies employing thousands of professionals, and following the expectations of their employees, naturally set trends related to the shaping of modern office space. They are also adapting the office to the needs of returning employees who work in the increasingly popular hybrid model. The challenge regarding the working environment that companies increasingly come to us with is how to provide employees with a positive experience that both encourages them to be in the office, and supports their productivity and creativity. In response to current needs, both entire new buildings and proposed solutions for individual offices are based, among other things, on the idea of meetings, including spaces for quick presentations, and rooms for teamwork. Spaces which are equipped with multimedia technology and that are able to help in successfully integrating employees are also taken into account", emphasises Jakub Zieliński, Team Leader, Workplace Advisory, JLL.
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