Tomasz Czuba

Tomasz Czuba, board member, executive director, head of office agency & tenant representation, JLL Poland, talks to the BPCC’s Michael Dembinski about the current state of the Polish office market, and the prospects for the short- and medium term


There’s very much a ‘wait-and-see’ attitude when it comes to new office development. We still don’t know how remote work and hybrid work will affect demand for space, in Poland, across Europe and indeed globally. How does this uncertainty affect current vacancy rates, what are the prospects for at least the near future?

I do not entirely agree with that statement. The wait-and-see approach is pretty much over. Look at the number of transactions signed in 2022 – it was almost a record breaking year with over 800,000m2 signed in Warsaw alone. Big occupiers and corporations have already decided how they want to work, and this has translated into transactions on the market.

I agree with one thing though – we still do not know how the chosen way of working affects or suits a given company’s strategy and how it fits with its organisational culture. The coming years will be definitely a testing ground for chosen way of working.

Getting people to want to return to the office – typically spending two hours a day in transit – has now become a major challenge for HR directors, who are key partners for the real-estate industry in terms of ensuring stronger demand for space. Have you got any good case studies of initiatives that show how to make coming to the office more attractive for employees?

HR definitely plays a major role in planning the way of working in our future offices. JLL partners with HR departments in advising the best solutions to make our working spaces more attractive for employees and to draw them back to the office. Our Workplace Advisory Department usually undertakes a thorough analysis of office occupation, ways of communication between departments, interviews with leaders, numerous space-planning activities etc. This all sums up into a detailed report that we provide to HR departments and decision-makers, to enable them to decide how they want their office to attract their employees back. We have numerous cases and thousands of square metres analysed this way.

We hear that more and more investors in the tech sector are looking around for flex-space, working on the assumption that it would be for the core management team, while the majority of employees would be expected to work remotely. How does supply and demand for this type of property look across Poland today? Is flex-space becoming an important trend?

Flex spaces are extremely popular in Poland. We have very limited vacancy in all major cities. Definitely tech sector is one of the drivers of this demand but it would be a simplification to say they are the only ones. The demand for flex spaces comes also from big corporate clients that are carrying out temporary projects or just want such space next to their HQ office in order to accommodate any kinds of expansion needs. In response to your question I would not completely agree that the flex space is dedicated only to core employees. It really depends on the company’s way of working, culture and needs.

In recent years, construction costs have risen much faster than rents; we are no longer in an era of cheap money. Given the high yields on government bonds these days, has commercial real estate become less attractive as an asset class to investors – and do you see any chance of the situation improving?

That is why we have now a very limited supply. Five years ago there was 800,000m2 under construction in Warsaw only. Now we have less than a quarter of than – around 190,000 m2. The supply this year will be around 70,000m2. Major developments that are currently being carried out by developers are being financed by equity or bonds issued some time ago. Definitely in 2023 selling a core office building at yields of the 5% we still remember from 2019 will not be happening in my view. We can see, however, that there are a number of transactions in regional markets where local – mostly central European – funds, are acquiring average- to small-sized office buildings with yields of around 7%.

I definitely see a chance of improving this situation; a first step to this change will be increasing rents. If you look at the graphs with headline rent changes in Poland versus other European countries, they are pretty much stable here since the time of the last financial crisis. Meanwhile in Western Europe, these rents have increased by even 60-80% in several locations.

Poland and the CEE region remains cheaper than Western Europe or the US. Does this factor pull in new investors who are striving to cut their cost base to our region?

I am not sure it is currently pulling in investors, but in my view this should be pulling them! Taking into consideration the upcoming rental growth, I believe there is enough potential to be more active on the Polish market.

To what extent has Russian aggression in Ukraine put off investors from the Polish real-estate market?

I believe to some extent this might be a reason not to enter the market by a newcomer, this is especially true of investors that come from distant places. This effect was clearly visible at the beginning of the Russian aggression. Currently, when the risk is more limited, I believe this might be more of an excuse rather than a real reason. I believe that more challenging issues facing investors right now are the cost of capital and increasing construction costs. Especially when we talk about the office market.

With today’s corporate emphasis on ESG and green finance, office space that’s BREAM or LEED-certificated still commands a premium. But what is the future of older office stock? How much can be thermo-modernised, how much can be repurposed?

I would rather say that in the longer term if they want to keep up with the ESG requirements of tenants, they will have to be modernised. There is no other way for them. This is why we are currently working with a number of investors and landlords on modernising and sometimes repositioning their assets to make them more competitive on what’s becoming an increasingly demanding environment.

One great advantage of Poland is that it’s not a one-city economy. Each of the main commercial centres has its own economic drivers – which Polish cities would you assess as being the most vibrant, and most attractive to investors, developers and tenants?

The answer will come as no surprise – I’d say Kraków, Wrocław, Tri-City, Łódź, Katowice, Poznań – these are the main ones. All of Poland’s regional cities play a key role in the modern services sector, which now employs over 400,000 people across the country. In some of these cities, the sector’s share in occupation of the office stock averages between 60 and 70%.