The hybrid work model and European ESG-related regulations are changing the office market in Poland, but demand for space remains high – this is the picture that emerges from the latest report Modern Business Services Sector in Poland 2024 by ABSL.

According to experts from Colliers, ABSL's content partner, the Polish office market is one of the most dynamic and innovative in the Central and Eastern European (CEE) region. Reports indicate that hybrid work has become the new normal, forcing both developers and landlords to adapt to this situation. Warsaw remains the leader in terms of office stock, but markets in smaller cities such as Rzeszow, Bydgoszcz and Opole are also growing.

The continuing impact of the hybrid model
92 percent of organizations in the business services sector have already implemented a hybrid model. As a result of adopting flexible work arrangements, the average transaction size in the office market has dropped by 20-30 percent, with landlords prioritizing the ability to tailor leased space to the needs of daily operations and periodic office occupancy. Optimizing square meterage and focusing on the social functions of the office are at the forefront of organizations' needs.

The hybrid work model will remain with us for the long term– three out of four people surveyed by Colliers for the Hybrid & Beyond '23 report declared that the model currently adopted was optimal for them, with 79 percent of organizations responding that incentives to return to the office had been met with resistance from employees. Colliers experts recommend that organizations wishing to see more employees in the office should take advantage of rearrangement options to do so. Currently most common open-space arrangements without separate quiet rooms are becoming less and less popular. Instead, spaces that allow for integration and spontaneous meetings while working are becoming more important.

Dorota Osiecka, Partner at Colliers Define adds, "In the last few years, hybrid work has become the norm in the Polish market. Most organizations have also taken a number of effective measures to adapt to the dispersed model including the implementation of tools and technologies that enable remote work, the adaptation of office space to the new work mode and the development of skills for managing dispersed teams. However, the impact of hybrid work on organizations remains a very complex issue. With the undoubted advantages that such a model brings, companies must also face potential risks. These possibly serious issues include problems in the flow of information, increasing siloization, erosion of culture and a decline in employee engagement. Simple solutions such as pulling employees back to the office do not necessarily yield the desired results. A much better strategy is to diagnose the areas where hybrid risks are likely to surface, using tools such as the Hybrid Barometer and then take targeted corrective and preventive action.

ESG defines the market
As early as January 2025, the largest listed organizations will file their first ESG reports for 2024. Due to environmental requirements, sustainability is one of the main areas affecting the office market. Ultimately, the new EU regulations will cover some 50,000 companies across Europe. European Commission research shows that 53 percent of companies' sustainability statements and declarations to date raise ambiguities or are unfounded. One of the main goals of ESG regulations is full transparency and combating legacy green-washing. The organizations reporting will need accurate data on the energy mix in leased spaces and their alignment with other requirements under EU directives and regulations.

The obligation to provide data will fall on developers and office managers. Reporting will force organizations to include an ESG perspective as one of their main guidelines when leasing. Some developers and property owners have used the last few years to prepare non-financial reports, count their carbon footprint and obtain SmartScore and WiredScore technology certifications. However, buildings which are older than seven years are considered technologically obsolete. In Poland, 70 percent of buildings are energy inefficient. If the owners of these buildings want to continue to compete in the market, they must prepare for major renovations.

Agnieszka Orłowska, ABSL Vice President, ESG, says: "The implementation of smart building solutions is essential to meet the latest requirements for office spaces. The use of modern and energy-efficient wireless technologies allows for more accurate monitoring and analysis of building usage data than ever before. Landlords will therefore have the opportunity to conduct their operations in line with ESG requirements, reducing both emissions and operating costs. In addition to meeting the goals of the Energy Performance of Buildings Directive, tenants will also facilitate the preparation of non-financial reports themselves, which will encourage companies to lease space specifically in their buildings."

Sustaining demand
In 2023, office demand was five percent lower than in the record-breaking year of 2019. Renegotiations accounted for 42 percent of all lease agreements concluded. Relocations and new contracts remain in first place, making up 49 percent of the market's deals. The total volume of lease transactions amounted to just under 1.5 million square meters. After a slowdown in supply in 2023, more than 630,000 square meters were under construction at the beginning of 2024.

The best time to look at the organization's operations in the coming years in relation to the work model adopted and adaptation to EU sustainability requirements is at the end of a lease. Companies then have the opportunity to re-arrange their space combined sometimes with a reduction in square meters. If this solution is not possible in the leased space, the possibility of relocation remains an option.

Download the report: Modern business services sector in Poland 2024