2004 and the 'no frills' office
Other insurance firms, such as the Allianz Group's Euler Hermes and Compensa, after its merger with Heros, are already following suit.
A recent McKinsey & Company report focused on the potential Poland has for attracting Business Process Offshoring (BPO) activities to its cities. The high levels of education and professional and language skills that Poles can offer potential employers, as well as their comparatively low salary expectations, were cited in the report as reasons why many western companies might be drawn here to establish their 'back office' operations. Indeed, Dutch electronics firm Philips announced in recent weeks that it was moving its accountancy services center from Dublin to Łódź. According to David Charlesworth, Managing Director of Philips Semiconductors Commercial Activities in the UK, the company is currently negotiating to buy a property in the central Polish city, and has plans to move its accounting operation there by the end of June. As with other companies which have already moved their BPO activities to Poland, such as Kraków-based Airline Accounting Center (AAC), (responsible for the financial accounting and sales accounting tasks of the Lufthansa Passenger Airline and other Lufthansa Group companies throughout Europe, with the exception of Germany), Warsaw, let alone its CBD, does not figure in Philips' plans. Low labor costs and rents explain the provincial choice. But to what extent does this new trend and insurance companies' restlessness represent a threat to occupancy in Warsaw's CBD?
Alan Colquhoun of DTZ doesn't believe that 2003's large pre-lease deals at the Ghelamco Group's properties, (at Crown Point and Crown Tower) represent a sea-change of any sort, holding that as a market matures, it's natural for some firms to move out-of-the CBD, as has been happening in Western Europe for some time now. In the mid to late nineties, companies "felt safer in the city center" but since 2000 to 2001, "more schemes have been coming out of town", so for him there is little particularly new about the recent moves. Citing take-up statistics for the last quarter of 2003, which include lease renewals, he points out that the CBD has in fact fared better than the outer lying districts of the city, with 47,000 square meters in the former, as opposed to 42,700 in the latter. Although the CBD figure was inflated by TP SA's move into 28,000 square meters, as a trend it in fact suggested that the city center was faring better than in previous years. In the whole of 2002, for example, leases in the CBD came to 20 percent of the city's total: in 2003 that figure was 37 percent.
For Colquhoun, Commercial Union's move was "more a statement about Warsaw's geography" which, because of its history, doesn't contain the same high concentration of businesses in its center as capital cities in the West. The Warsaw Research Forum places the area around Prosta Street just outside the CBD: "on the fringes, one street away" in the words of Bartosz Mierzwiak of Jones Lang LaSalle.
"Land is cheaper at the fringes and landlords are able to be more aggressive when it comes to effective prices," says Hadley Dean of Colliers International, with the Ghelamco projects in mind.
In his view, the latter developer is setting new standards for leasing in the city because of the rapidity with which it puts up its buildings, which means it can pass on the savings it makes on labor costs and building materials to its tenants: "It's like Mecano," he says, adding that rather than in the fifteen or so months other developers take to build, "Ghelamco gets a building up in eleven months and in the end other developers will have to follow suit. Their buildings may not be Saskis or Metropolitans, but the quality they offer is perfectly acceptable to the majority of tenants."
Should Ghelamco indeed be pioneering a new 'no frills' approach to development for the Warsaw market, on cheaper plots just beyond the city center, then perhaps talk of some geographical shift away from the CBD isn't so idle after all. In Hadley Dean's view, high profile buildings in the center, such as Saski Crescent and Metropolitan, may offer 10 to 15 percent more in terms of technical specifications than Ghelamco's developments but, "as long as a building has got raised floors, air conditioning which genuinely works and looks representative, it doesn't really matter about anything else - though it does have to stand there for thirty years, of course."
Whether the BPO trickle to Poland will eventually become a flood is debatable, as some western firms have discovered that their outsourcing operations in India have proved more complicated than just saving money on salaries. But those firms that do come to Poland's regional cities will also, in all likelihood, be on the lookout for less than spectacular premises to work from. "Outsourcing centers tend to be quite dense," says Hadley Dean. "We're not talking about one person per thirteen square meters, we're talking more about one to eight: quite dense buildings but also quite efficient. They'll be an H-grid, a T-grid or an L-grid: rectangular, no curves. They'll need to have good ventilation, okay natural light but be cheap and cheerful to get up."
Airline Accounting Center in Kraków occupies 1,000 square meters and Bartosz Mierzwiak of Jones Lang LaSalle believes outsourcing offices will take up a maximum of 2,000 square meters.
A recent McKinsey & Company report focused on the potential Poland has for attracting Business Process Offshoring (BPO) activities to its cities. The high levels of education and professional and language skills that Poles can offer potential employers, as well as their comparatively low salary expectations, were cited in the report as reasons why many western companies might be drawn here to establish their 'back office' operations. Indeed, Dutch electronics firm Philips announced in recent weeks that it was moving its accountancy services center from Dublin to Łódź. According to David Charlesworth, Managing Director of Philips Semiconductors Commercial Activities in the UK, the company is currently negotiating to buy a property in the central Polish city, and has plans to move its accounting operation there by the end of June. As with other companies which have already moved their BPO activities to Poland, such as Kraków-based Airline Accounting Center (AAC), (responsible for the financial accounting and sales accounting tasks of the Lufthansa Passenger Airline and other Lufthansa Group companies throughout Europe, with the exception of Germany), Warsaw, let alone its CBD, does not figure in Philips' plans. Low labor costs and rents explain the provincial choice. But to what extent does this new trend and insurance companies' restlessness represent a threat to occupancy in Warsaw's CBD?
Alan Colquhoun of DTZ doesn't believe that 2003's large pre-lease deals at the Ghelamco Group's properties, (at Crown Point and Crown Tower) represent a sea-change of any sort, holding that as a market matures, it's natural for some firms to move out-of-the CBD, as has been happening in Western Europe for some time now. In the mid to late nineties, companies "felt safer in the city center" but since 2000 to 2001, "more schemes have been coming out of town", so for him there is little particularly new about the recent moves. Citing take-up statistics for the last quarter of 2003, which include lease renewals, he points out that the CBD has in fact fared better than the outer lying districts of the city, with 47,000 square meters in the former, as opposed to 42,700 in the latter. Although the CBD figure was inflated by TP SA's move into 28,000 square meters, as a trend it in fact suggested that the city center was faring better than in previous years. In the whole of 2002, for example, leases in the CBD came to 20 percent of the city's total: in 2003 that figure was 37 percent.
For Colquhoun, Commercial Union's move was "more a statement about Warsaw's geography" which, because of its history, doesn't contain the same high concentration of businesses in its center as capital cities in the West. The Warsaw Research Forum places the area around Prosta Street just outside the CBD: "on the fringes, one street away" in the words of Bartosz Mierzwiak of Jones Lang LaSalle.
"Land is cheaper at the fringes and landlords are able to be more aggressive when it comes to effective prices," says Hadley Dean of Colliers International, with the Ghelamco projects in mind.
In his view, the latter developer is setting new standards for leasing in the city because of the rapidity with which it puts up its buildings, which means it can pass on the savings it makes on labor costs and building materials to its tenants: "It's like Mecano," he says, adding that rather than in the fifteen or so months other developers take to build, "Ghelamco gets a building up in eleven months and in the end other developers will have to follow suit. Their buildings may not be Saskis or Metropolitans, but the quality they offer is perfectly acceptable to the majority of tenants."
Should Ghelamco indeed be pioneering a new 'no frills' approach to development for the Warsaw market, on cheaper plots just beyond the city center, then perhaps talk of some geographical shift away from the CBD isn't so idle after all. In Hadley Dean's view, high profile buildings in the center, such as Saski Crescent and Metropolitan, may offer 10 to 15 percent more in terms of technical specifications than Ghelamco's developments but, "as long as a building has got raised floors, air conditioning which genuinely works and looks representative, it doesn't really matter about anything else - though it does have to stand there for thirty years, of course."
Whether the BPO trickle to Poland will eventually become a flood is debatable, as some western firms have discovered that their outsourcing operations in India have proved more complicated than just saving money on salaries. But those firms that do come to Poland's regional cities will also, in all likelihood, be on the lookout for less than spectacular premises to work from. "Outsourcing centers tend to be quite dense," says Hadley Dean. "We're not talking about one person per thirteen square meters, we're talking more about one to eight: quite dense buildings but also quite efficient. They'll be an H-grid, a T-grid or an L-grid: rectangular, no curves. They'll need to have good ventilation, okay natural light but be cheap and cheerful to get up."
Airline Accounting Center in Kraków occupies 1,000 square meters and Bartosz Mierzwiak of Jones Lang LaSalle believes outsourcing offices will take up a maximum of 2,000 square meters.
