The Tri-City makeover

The landscape of the Tri-City has seen some serious changes over the past few years. As developers increase the agglomeration’s office stock, authorities are helping to attract new investors. Will the Tri-City maintain its momentum? By Beata Socha Being an important seaport and trade hub, Gdańsk was, for the better part of its 1000-year-long history, a bone of contention mainly between Polish and Prussian interests. Over the centuries, it changed hands more than a dozen times, eventually becoming the main Polish seaport and shipbuilding center after WWII. Once the shipbuilding industry closed down in the 1990s, Gdańsk, as well as its neighboring cities, Gdynia and Sopot, altogether forming the Tri-City, went through a period of uncertainty and had to look for alternative ways to develop. Over the past few years, the Tri-City has managed to establish itself as a major BPO destination and office market, overtaking several other regional cities. Thanks to strong developer activity over the past five years, the Tri-City has risen in the ranks to become the fourth largest office market in Poland, falling behind only the well-established markets of Warsaw, Kraków and Wrocław. The total office supply in the Tri-City stands at 526,000 sqm, according to the latest JLL report. Another 130,000 sqm of office space is under construction with 100,000 sqm of this stock set to be commissioned for use by the end of H1 2016. Local brands Developers are eager to build there, given the continually low vacancy rate of 10.6 percent, according to Colliers International surpassed only by Kraków (4.1 percent) and Łódź (8.1 percent), as well as solid demand figures (52,800 sqm in H1 2015, which is the second-best score among regional markets, after Kraków). The office stock of the Tri-City has thus far been developed mainly by local players. Olivia Business Center’s eponymous project, launched in 2010 and scheduled for completion in 2017, will offer a total of over 100,000 sqm. Thus far, the developer has added 73,000 sqm to the market within five buildings. Meanwhile, Alchemia, by another local developer Torus, will feature 80,000 sqm of office space once fully delivered in 2017. The third phase (out of a total of four stages) of the complex has recently been launched. Both projects are located within a kilometer of each other, in the Oliwa district of Gdańsk. [caption id="attachment_77282" align="aligncenter" width="640"] Image:Torus[/caption] Gdańsk’s new City With two major office investments located there, Oliwa, which for years remained largely neglected, has now become the new office hub for the Tri-City area. “Gdańsk’s Oliwa district is becoming an undisputed business center. … It is where nearly a third of the Tri-City’s total office stock is situated. Importantly, these investments are located in an area which, despite being close to the main thoroughfare connecting Gdańsk, Gdynia and Sopot, was hardly the city’s showpiece only a few years ago,” said Edyta Korycka, director responsible for investment planning at Torus. Now, it is a bustling area with more development underway. But does the Tri-City really need more office space, given how much stock has been delivered recently? Data would suggest it does. The market has seen a number of new tenants enter the market over the past few years, with more expected to come. “Forecasts remain optimistic, as evidenced by the recently announced investment in Gdańsk by a company called State Street, which is looking to hire some 1,200 people. It leased over 14,000 sqm of office space in the Alchemia complex, in the largest transaction the Tri-City has ever seen and one of the largest deals in Poland this year,” explained Korycka. The Gdańsk office, whose lease was announced in late July, will be the second location for the US-based State Street, a financial services firm. It already has an office in Kraków, employing 2,000 people. Three cities – one policy One of the things that has helped establish the Tri-City as an investment destination for international BPO/SSC companies was a cohesive urban and investment policy of all the municipalities forming the agglomeration. But it wasn’t always this way. Katarzyna Gruszecka-Spychała, the deputy mayor of Gdynia, admitted that for many years, Gdynia’s biggest competitor in attracting new investors was in fact its closest neighbor, Gdańsk. “We’re finished with the sort of cannibalistic competition. We started an initiative ‘Invest in Pomerania.’ Now, the offer an investor gets is identical in every city [within the Tri-City area],” she explained during a conference held by Urban Land Institute back in May. She also admitted that reaching a compromise to establish a common policy for the entire Tri-City area wasn’t an easy feat. “But it works. Now, Kraków, Wrocław and Poznań are our competitors,” she added. Not only offices However, it is not only office space that investors, as well as Tri-City residents, need and value. In order to bring in new companies, the location needs to be attractive on all fronts, also providing convenience and comfort of living. “The supply of sports and recreation facilities is insufficient in the Tri-City, as is the case in most Polish cities. It was one of the reasons why Torus decided to build the largest publicly accessible sports and recreation center in the Tri-City within the first stage of the Alchemia scheme. … It features swimming pools, saunas, a fitness club and a climbing wall,” said Korecka. It was a smart move on the part of the developer, one that was immediately appreciated by the city’s residents. Until recently, the agglomeration had only a handful of swimming facilities that were often inaccessible for much of the day due to schools’ occupying the premises for swimming lessons. Gdańsk’s residents who were looking to have a swim had to take a train to get to the nearest public aquapark in Sopot. “The situation improved with the construction of a fitness center with swimming pools in the Alchemia office building, but the demand for recreation facilities remains unsatisfied,” said Urszula Sawicka, an IT professional from Gdańsk, currently working in Warsaw. Ground to cover Despite having undergone significant urban renewal, the Tri-City still has a number of neighborhoods in dire need of a makeover. Even Oliwa, and particularly its older parts, has streets that make passers-by cringe at the sight. “You can see an old tram depot with boarded up windows and adjacent houses in danger of collapsing,” said Sawicka. She also pointed to Gdańsk’s outskirts, including Orunia and Chełm, where few dare to venture after dark. Fortunately, developers are aided in their ventures by city authorities, which are well aware of the need to create a more cohesive city fabric. Recently, Gdańsk’s authorities completed the renovation of an entire district, called Dolne Miasto, a project which cost some PLN 24 million to complete over a period of two years. The city is now targeting its port area. Last year, it held a competition to select the best design for the makeover. Meanwhile, developers Immobel and Multibud have recently launched a public-private partnership with the city to redevelop the Spichrzów Island in the very heart of Gdańsk. The project has been scheduled to begin in 2017 and finish in 2023, delivering 58,700 sqm of multi-functional space and creating a new, hip location on Gdańsk’s map. Hopefully, as developers and city authorities join forces in revamping the Tri-City, more companies will decide to locate their business in the area, bringing in more jobs and funds to make the Tri-City an even more desirable place to live and work. u