A launch pad into the market
The business center or serviced office is still an undeveloped phenomenon in Poland but some hope its day will come soon with all the foreign direct investment (FDI) they expect is about to wash over the land.
Foras Management Poland, (100 percent owned by the Danish-based Foras Holding A/S), is well known in this market for its activities in the retail sector and it has developed a handful of shopping centers around the country over the past few years. Reduta, its flagship center which is currently being extended on Al Jerozolimskie in Warsaw, clearly has not had much trouble attracting retailers to its units but up on the second floor of the existing center, which is made up entirely of office space, it has been faced with something of a dilemma.
Just over two months ago, the property developer TK Development moved out of its premises on the top level of Reduta, to take up space at the nearby Decathlon building, which left Foras wondering what to do with the vacant space left behind. Occupancy rates in Warsaw's office buildings are in need of a boost, to say the least, and it must be particularly galling to have to contend with the frustrations of that sector, when you have, as Foras have, been sailing along nicely in quite another. And how many companies, in a tenants' market, are going to think immediately about transferring their office staff to the top floor of a shopping center?
"There's a lot of unleased office space in Warsaw," acknowledges John Kristensen, project manager of Reduta Business Center, "so we started to think about how to make ours different to the rest and how at the same time use the fact that we're at the top of a shopping center to our advantage."
Reduta Business Center is the outcome of Foras' deliberations and it will be marketing itself as the first port of call Scandinavian firms can make before embarking on more concerted incursions into the Polish market. With its obvious contacts in that region, as well as its current base in Poland, it believes that it can act as a pole of attraction for what Kristensen holds, is significant current interest in this market from firms based further north: "The membership of the Scandinavian-Polish Chamber of Commerce has increased by 20-25 percent since May 1st this year," he says, adding that "the Danish Embassy has experienced a huge increase in requests for information, both from companies who see the possibility of selling something in Poland and also those who want to outsource because of the lower costs."
The culture clash that any new Scandinavian company will have to negotiate on entry to Poland, Foras believes, will best be eased if they first make a temporary home in Reduta Business Center, where they will be able to share experiences and knowledge with their compatriots in a atmosphere of mutual understanding. Though per square meter they will have to pay more rent for the privilege of the flexibility afforded by their use of their 'work station' at the business center, the confidence they will gain by being there will more than pay off. That's the theory anyway, and the Reduta Business Center concept, serviced offices atop a shopping mall, is most certainly untried in this country. The retail factor, however, maintains Kristensen, is one that can be harnessed to the benefit of the short term offices on Reduta's second floor. The new chains, he says, that are interested in taking up space in the new extension at the shopping center, could well be drawn to the business center, which could cater for their initial office needs before they spread their wings elsewhere in the market. He wouldn't, however, divulge which chains these might be.
Some real estate experts believe that when an office sector is in a healthy state and space is hard to come by, business centers can find their niche quite easily. They thrive in western Europe for example. When, on the other hand, there's vacancy all over the place, serviced offices have to be run very carefully to achieve the maximum flexibility for their clients and will generally have to market themselves towards tenants with smaller requirements, and not established corporations, for instance. In a high vacancy situation, as with Warsaw at the moment, the bigger companies will anyway have their pick of the crop and serviced centers will have their work cut out appealing to them.
DTZ's Alan Colquhoun recognizes that serviced offices are "a very good concept" as tenants are always keen to maximize the flexibility of their office space but adds that because "'real estate' is by its nature quite fixed and in some languages the term indeed refers to its 'immobility' [as in Lokale Immobilia], there is a limit to how accommodating it can be." Whoever is offering 'flexibility', such as serviced office providers, for example, will have to "factor in for when demand begins to fluctuate," says Colquhoun, adding that "when FDI is on the up demand is great" for serviced offices. "That's why they're a premium occupancy," he explains. The tide of inward investment many are hoping for in Poland has, however, yet to materialize and we might have to wait some time before it does.
Reduta Business Center would do well to heed the example of the German-based Excellent Business Center (EBC), it seems, which entered the Polish market in 2002, only to leave it, bankrupt, a year later. It too was established in Warsaw with the purpose of providing a launch pad for compatriot businesses seeking success further east. Colquhoun, whose DTZ negotiated the lease for the firm at Atrium Plaza where it based its operation, believes that it came unstuck because it was "under-capitalized, over-stretched and badly-timed." Pre-EU accession and caught in a general economic slump, EBC was forced to try and undercut the competition, which proved fatal because serviced offices are by nature expensive and their rivals in this market were represented most powerfully by Regus, who to date, have had a seven year foothold in Warsaw.
On being informed of Foras' intention to open a business center in Warsaw, Regus' Copenhagen-based sales and marketing manager for Central and Easter Europe, Ivan Hamilton, responded that he welcomed the news. "It will help publicize the practice of leasing space the way we do," he said. With three centers currently in Warsaw: in Wiśniowy Business Park, Warsaw Financial Center, and the Sheraton Hotel, Regus can claim a high, centrally-based profile as well as longevity on the Polish market. Until late 2002 it also ran serviced office space in Atrium Plaza but departed abruptly in somewhat controversial circumstances. The vacancy left at that building was immediately taken up by Excellent Business Center, which went on to falter so dramatically. Perhaps that turn of events can be read as a subliminal invitation by Regus to its German competitor to "go ahead and do what we do more effectively." That it didn't is surely an ominous lesson for Foras.
Foras Management Poland, (100 percent owned by the Danish-based Foras Holding A/S), is well known in this market for its activities in the retail sector and it has developed a handful of shopping centers around the country over the past few years. Reduta, its flagship center which is currently being extended on Al Jerozolimskie in Warsaw, clearly has not had much trouble attracting retailers to its units but up on the second floor of the existing center, which is made up entirely of office space, it has been faced with something of a dilemma.
Just over two months ago, the property developer TK Development moved out of its premises on the top level of Reduta, to take up space at the nearby Decathlon building, which left Foras wondering what to do with the vacant space left behind. Occupancy rates in Warsaw's office buildings are in need of a boost, to say the least, and it must be particularly galling to have to contend with the frustrations of that sector, when you have, as Foras have, been sailing along nicely in quite another. And how many companies, in a tenants' market, are going to think immediately about transferring their office staff to the top floor of a shopping center?
"There's a lot of unleased office space in Warsaw," acknowledges John Kristensen, project manager of Reduta Business Center, "so we started to think about how to make ours different to the rest and how at the same time use the fact that we're at the top of a shopping center to our advantage."
Reduta Business Center is the outcome of Foras' deliberations and it will be marketing itself as the first port of call Scandinavian firms can make before embarking on more concerted incursions into the Polish market. With its obvious contacts in that region, as well as its current base in Poland, it believes that it can act as a pole of attraction for what Kristensen holds, is significant current interest in this market from firms based further north: "The membership of the Scandinavian-Polish Chamber of Commerce has increased by 20-25 percent since May 1st this year," he says, adding that "the Danish Embassy has experienced a huge increase in requests for information, both from companies who see the possibility of selling something in Poland and also those who want to outsource because of the lower costs."
The culture clash that any new Scandinavian company will have to negotiate on entry to Poland, Foras believes, will best be eased if they first make a temporary home in Reduta Business Center, where they will be able to share experiences and knowledge with their compatriots in a atmosphere of mutual understanding. Though per square meter they will have to pay more rent for the privilege of the flexibility afforded by their use of their 'work station' at the business center, the confidence they will gain by being there will more than pay off. That's the theory anyway, and the Reduta Business Center concept, serviced offices atop a shopping mall, is most certainly untried in this country. The retail factor, however, maintains Kristensen, is one that can be harnessed to the benefit of the short term offices on Reduta's second floor. The new chains, he says, that are interested in taking up space in the new extension at the shopping center, could well be drawn to the business center, which could cater for their initial office needs before they spread their wings elsewhere in the market. He wouldn't, however, divulge which chains these might be.
Some real estate experts believe that when an office sector is in a healthy state and space is hard to come by, business centers can find their niche quite easily. They thrive in western Europe for example. When, on the other hand, there's vacancy all over the place, serviced offices have to be run very carefully to achieve the maximum flexibility for their clients and will generally have to market themselves towards tenants with smaller requirements, and not established corporations, for instance. In a high vacancy situation, as with Warsaw at the moment, the bigger companies will anyway have their pick of the crop and serviced centers will have their work cut out appealing to them.
DTZ's Alan Colquhoun recognizes that serviced offices are "a very good concept" as tenants are always keen to maximize the flexibility of their office space but adds that because "'real estate' is by its nature quite fixed and in some languages the term indeed refers to its 'immobility' [as in Lokale Immobilia], there is a limit to how accommodating it can be." Whoever is offering 'flexibility', such as serviced office providers, for example, will have to "factor in for when demand begins to fluctuate," says Colquhoun, adding that "when FDI is on the up demand is great" for serviced offices. "That's why they're a premium occupancy," he explains. The tide of inward investment many are hoping for in Poland has, however, yet to materialize and we might have to wait some time before it does.
Reduta Business Center would do well to heed the example of the German-based Excellent Business Center (EBC), it seems, which entered the Polish market in 2002, only to leave it, bankrupt, a year later. It too was established in Warsaw with the purpose of providing a launch pad for compatriot businesses seeking success further east. Colquhoun, whose DTZ negotiated the lease for the firm at Atrium Plaza where it based its operation, believes that it came unstuck because it was "under-capitalized, over-stretched and badly-timed." Pre-EU accession and caught in a general economic slump, EBC was forced to try and undercut the competition, which proved fatal because serviced offices are by nature expensive and their rivals in this market were represented most powerfully by Regus, who to date, have had a seven year foothold in Warsaw.
On being informed of Foras' intention to open a business center in Warsaw, Regus' Copenhagen-based sales and marketing manager for Central and Easter Europe, Ivan Hamilton, responded that he welcomed the news. "It will help publicize the practice of leasing space the way we do," he said. With three centers currently in Warsaw: in Wiśniowy Business Park, Warsaw Financial Center, and the Sheraton Hotel, Regus can claim a high, centrally-based profile as well as longevity on the Polish market. Until late 2002 it also ran serviced office space in Atrium Plaza but departed abruptly in somewhat controversial circumstances. The vacancy left at that building was immediately taken up by Excellent Business Center, which went on to falter so dramatically. Perhaps that turn of events can be read as a subliminal invitation by Regus to its German competitor to "go ahead and do what we do more effectively." That it didn't is surely an ominous lesson for Foras.
