Newmark Polska Sp. z o.o.: Workplace environment and ESG set to dominate in 2023


Piotr Kaszyński, Managing Partner, Newmark Polska, talks about the risks young professionals face working in isolation, the false economy of some occupier decisions, why 2022 was a good year and what will be the key driving force behind the growth of the industrial market in the months ahead.

What mood were the advisors of Newmark Polska in when they were bidding farewell to 2022?
Good. What I’m going to say may be unpopular, but 2022 was indeed a good year for us – complicated, unpredictable at times, but good overall. We advised on some of the most high-profile transactions. We grew and hired many top talents. The team of Newmark Polska has achieved many successes. We remain committed to further working and expanding our business, and we are indeed well-positioned to do so.

And what was 2022 like for the real estate market?

Good too, though not easy by any means. But the industrial market is still growing at full throttle. In 2022, we acted on leases for a combined area of over 500,000 sqm of industrial and warehouse space, placing us among the top real estate advisory firms in the market. And we would have brokered more had it not been for supply constraints. The market continues to power ahead – most companies are well-positioned to grow despite geopolitical and macroeconomic headwinds. To grow, however, they need more manufacturing and warehouse facilities.
Industrial rental growth significantly accelerated in the second quarter of the year, which made us pause for a brief moment to think of what would come next. However, companies accepted the new reality fairly quickly and contracted a total of close to 8.7 million sqm of logistics space last year.

Has the warehouse rental growth dented Poland’s competitiveness in Europe?

Poland is still competitive and offers some of the cheapest warehouses in Europe, no doubt about that. The industrial market is growing at a healthy pace, albeit developers are showing increased caution in terms of calculating warehouse sizes and rental rates for newly-built projects.
One of the key industrial market drivers in 2023 will be nearshoring production from Asia to locations closer to markets of consumption. According to Reuters’ latest report “A generational shift in sourcing strategy”, Poland will be among the main beneficiaries of this. E-commerce will continue to drive demand for warehouse space. And although its growth has somewhat stalled, its penetration rate is still relatively high at 8%. This trend will not reverse – a generational change is afoot, with 20- or 30-year-olds shopping mainly online.

And what about work? Do they also favour the online realm over in-office working?
Well, quite the opposite. Working in isolation – when you contact your colleagues by telephone or messaging apps only – is harmful to young professionals in particular. Unfortunately, to keep costs low, some companies will continue with the home office option in the coming months, causing huge damage – be it corporate, mental or cultural. Damage that you will need to repair later, anyway.
I have often said that the new office concept based on hybrid working is not for everyone. The lines have completely blurred between where we compete and work and where we rest and relax. It is unhealthy. Home should be home. Of course, there have always been first-class professionals who work independently, with concentration, and they don’t mind home office. However, all the others, especially the new generations of professionals, need to be in the same workspace together, no matter how you arrange it. Working in isolation is not good for them – they need to confer, discuss, be able to show their best. How is the new generation supposed to learn business skills and from whom? Via Teams or YouTube? No way.

You’ve mentioned office space arrangement. What will or should the new office look like?
The pandemic has undoubtedly forced companies to review their work models and organisation patterns. Office trends have been practically upended. For the five pre-Covid years, large corporations had viewed the office as an important element of employer branding. They organized games rooms, chillout zones, fruit Wednesdays or yoga classes on Thursdays. The concept of doing everything together: co-working, co-living, and co-eating did not stand the test of the pandemic. What’s the most important today is employee wellbeing, health and safety, as well as productivity and identification with a company. The challenge facing tenants today is how to flexibly manage office space; as a result, workplace advisory is gaining in importance.

What should the workplace environment be like?
We have advised tenants on this since we began our operations. However, in those early days it was mainly companies which were relocating or planning new office layouts that needed our assistance. Today, expert advice is also sought by organisations staying on in their current locations as they ask themselves such questions as: How big should the office be? How to arrange it? What functions should be included? How to provide a comfortable workplace for both those working in the office and those opting for a hybrid work setup? And how should they communicate with one another? The workplace environment and ESG will certainly be this year’s focal points for Newmark Polska.

The ESG reporting requirement is a new challenge facing market participants. Can tenants count on Newmark Polska to provide advice on this?
Yes, of course. ESG is also within our purview – we continue to expand our expertise and assist our clients in delivering reports. ESG awareness among entrepreneurs is growing, with green leases taking account of the sustainable performance of buildings already being signed. ESG-related challenges will also include upgrading older buildings – their adaptation, including air-conditioning improvements, the installation of motion sensors or LEDs, is already an item on the negotiation agenda of tenants and landlords.

Savings will be one of the buzzwords throughout 2023. Where will office, retail and warehouse tenants be looking for them? Where will they find them?
All the real estate sectors will face high service charges accounting for a growing proportion of all lease costs. Both tenants and developers are already taking a number of measures to reduce energy consumption. Due to higher rents in new office buildings – a consequence of high construction costs – some tenants will choose to stay on in their current locations and renegotiate their leases. Our research shows that this is already a notable trend – renegotiations saw their share of the total office take-up rise in 2022, reaching close to 40 percent in Warsaw.

What would you advise your clients in this situation?

Common sense is always recommended. It is rarely the case that a solution is either good or bad for everyone. Staying on in older buildings may not be the most economical option, because modern office buildings with green certificates may offer tenants up to 30 percent lower service charges. Another example of false economy could be a move to the city outskirts, to a less accessible location with fewer dining options for employees. A smaller office in a modern, green building in a prime location may be a sensible way forward in this case. Not for everyone though. That’s why when we advise our clients, we always take a case-by-case approach to comparing lease costs and other charges.

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