Following the extremely successful time experienced by the office sector between 2017 and 2019, the industry entered into 2020 with a high level of optimism as to the months to come. Alas, not only has the global COVID-19 pandemic, a textbook example of an unpredictable black swan event, tempered the prevailing enthusiasm, but it has also expediated the remodelling of the approach to space utilization, which will ultimately lead to a restructure of the office segment.
The increase in the vacancy rate recorded in 2020 was not a surprise for market experts. Our forecasts published several quarters ago, prior to the sinister name COVID-19 making its appearance, had predicted a rise in this parameter. Figures had shown for quite some time that the volume of new office space delivered to the market would reach its peak in the period between 2020 and 2021 and considerably more space would be available than between 2017 and 2019. Tenant interest in office space, which is currently lower due to the market turmoil caused by the pandemic, is an additional factor here. As a result of the drop in demand and the increase in the volume of vacant space, we expect to see rent adjustments, both with regard to base and effective rents, in the short term.
Małgorzata Fibakiewicz, Head of Office Sector & Strategic Projects at BNP Paribas Real Estate Poland
The drop in demand for new office space as recorded q-o-q in 2020 is not at all surprising given the unpredictability associated with the domestic and global situation caused by the pandemic as a result of which we’ve been locked us in our homes for 9 months now. Remote work, initially treated as a temporary solution, seems to be here to stay. This, is turn, led to only a small number of employees working from the office, which directly affected the volume of space taken-up. However, most tenants are starting to notice the negative effects of isolation while working from home, the decreasing efficiency, and the fact that their employees are becoming increasingly demotivated, thus we expect that a hybrid work model will be developed in the longer term. We are already hearing from many of our clients that they are planning a to gradually return to their offices mid-year. Remote work, today forced by restrictions and the individual responsibility of each of us for those around us, will remain a permanent element of everyday office life, although it will not be as popular as we initially assumed. This will affect demand, which, even if adjusted, combined with new standards in office design aimed at achieving employee biosafety, might be adjusted only symbolically.
Mikołaj Laskowski, Head of Office Agency at BNP Paribas Real Estate Poland