Remote work will reduce the demand for office space, and thus increase the number of vacancies. Until March this year. the situation on the market was still stable.
In Warsaw, the demand for office space in Q1 2020 was 138,900 sq m, and the vacancy rate was 7.48%. In the first quarter of 2019, the demand was 140,000 sq m and the vacancy rate – 8.5%. – We will see the real picture in the data for the second quarter. The pandemic will certainly have a negative impact on tenant activity. The amount of smaller office space available will increase, which is related both to the phenomenon of the collapse of small businesses and the need to ensure adequate distance between employees in offices. The importance of flex offices is also expected to increase, and will now become the optimal solution for most tenants. – says
Katarzyna Młynarczyk from the Analysis and Opinion Department of Lege Advisors.
Increasing the amount of available office space, suspending decision-making processes and optimizing the space occupied by tenants will result in changes in the level of rents. In Warsaw, the highest headline rents in Q1 2020 remained at the level of EUR 25 (1 sq m / 1 month) in the city center and EUR 15.5 (1 sq m / 1 month) outside the city center (according to the CBRE report). As expected, these rates will fall by 4-6% and will remain at this level for the next few quarters.
An important phenomenon on the office real estate market during the pandemic and after its termination is also the renegotiation of concluded lease agreements. – In many cases, they provide for the possibility of renegotiating certain conditions in the event of force majeure. The coronavirus outbreak is without a doubt. Renegotiations may concern both the duration of the contract and the amount of rent paid, as well as introduce “rental holidays” or the possibility of subletting currently unused space. – explains Katarzyna Bendowska from Lege Advisors.
The impact of remote work can also be found in the residential real estate segment. Working from home, you do not need to travel to another city to find a better paid job in a well-known company. So you don’t have to buy a flat for 500,000. PLN. in Warsaw, since in a smaller town you can buy the same flat for a much lower price. – This approach may result in a reduction of interest in apartments in large cities to the benefit of apartments in smaller towns. – explains Katarzyna Młynarczyk from Lege Advisors.