One step ahead: navigating challenges in the evolving office property market

In light of the current macroeconomic conditions affecting the real estate market, it is cruicial for companies to take proactive measures to address the challenges at hand and adapt to evolving client demands. Artur Sutor, CEO of ITRA Polska, a consultancy specializing in representing office tenants, offers valuable insights on effectively meeting these changing expectations.

FOCUS ON Business: The pandemic and then the war in Ukraine have rattled the real estate market. How has the perspective changed?

Artur Sutor, ITRA Polska: The events of the last two years have affected everyone severely. During the pandemic, many companies faced the difficult task of reorganising the work system for their teams. Most opted for the hybrid model, which is incidentally already reflected in the Labour Code. Initially, all moves were fast and improvised, with employers being forced to react without preparation or keep up with the changes that were taking place before their eyes. Consequently, return to office involved space optimisation aligned with the new work strategy and expectations of employees,

who started to treat the office differently — more as a place to build and strengthen ties within the organisation. This has increased the need for a diverse office fit-out that supports integration and a less formal mode of collaboration. Conscious employers who want to retain the best employees try to meet these expectations, which is not easy amid an overall increase in costs.

At the beginning of the year, tenants had to face an unprecedented rent indexation. A very sharp hike in energy prices and an increase in minimum wages have also significantly increased office operating expenditures. The galloping inflation means that companies that plan to relocate have to reckon with higher finishing and fit-out costs. Today, both renegotiating the existing lease and searching for a new office is a demanding task that calls for hiring a professional and objective advisor.

So when times are tough, the role of an advisor becomes more important. Who would you characterize as a perfect advisor?

It is someone who has a firm grasp of the market, understands the nature of the client’s business and can propose a solution that will pay off in the future. And someone who is a great negotiator, naturally. This is one of the key characteristics of this profession. I believe that the role of an expert who combines all these skills cannot be overestimated. I am very lucky because these are the people I chose to build our team with.

What do companies pay the most attention to when looking for an office today?

Our clients are not always looking for a new office, but they are increasingly looking for savings and a way to ride out the recession. Many decided to renegotiate and renew their current lease. Controlling and finding the most effective ways to reduce office rental costs became a priority for many companies at the beginning of the year. To compensate for the increases, which were very painful for tenants, the costs associated with the conversion and fit-out of office space are still often covered by the building owners, although this is an increasing burden for them as well.

However, this usually comes with the proposal to sign a longer lease, not ‘for a while’ as was customary during the pandemic, but for 5 to 7 or even 10 years.

With the unstable macroeconomic environment, there are relatively few companies that can afford to sign a 10-year contract without fear. Tenants expect greater contract flexibility that will allow them to adapt to rapidly changing market conditions. This determines the lease market, which currently sees more renegotiations than relocations.

Are you looking for ways for customers to optimise costs in difficult times?

We are forward-looking and always try to be one step ahead. We want them to feel that they have advisors at their side who will stick with them through thick and thin and that their lease agreements are designed to benefit them financially and offer flexibility when needed. When talking to potential clients, it often turns out that they lack sufficient expertise to objectively assess whether their lease is optimal. In the current climate, especially in the most demanding markets and given the evolving work models, companies need support when analysing possible scenarios involving relocation or staying. This is why, especially with this group of clients in mind, we decided to introduce a new service, RentCheck. It is free, with no strings attached.

The service allows you to review your workspace lease agreement in four areas: operating expenditures; technological solutions available in the building; legal aspects of the agreement, and work environment strategy analysis. Once we identify the main parameters of the office a company uses and review its needs for the coming years, we present the clients with an analysis of the salient points of the lease and guidance on how to optimise it and generate measurable savings. Importantly, we can perform the review at any time during the current lease. This is the first professional service in Poland to provide clients with an objective and impartial review of their current lease, e.g. before they set about renegotiating it or searching for a new office or before they hire a consulting firm, if any.

How many companies choose this kind of support?

The service is new; we launched it this summer, yet we are getting more and more requests, even from companies whose lease ends in five or more years. This only goes to show how much needed this service is. Tenants want to make sure that their lease is tailored to their business needs or want to explore which areas need to change. In fact, it was after talking to some tenants that we decided to take this step. It is a response to the real challenges faced by commercial space users today.

I have been watching the market for twenty years, which is why I am convinced that its popularity will only grow. Clients are concerned about the future, spiralling inflation and more price hikes. Until recently, the rent indexa tion was symbolic, and now it can go up to 10% year on year. Add to that the operating expenditures that grew in some locations even by 50% per 1 sq ma month, a noticeable change in office maintenance costs. For tenants who want to look for some savings, the end of the year will be very difficult. This will make them value our helping hand and professional assistance even more.

Given that your service is free, how does it help you pursue your own business goals?

I realise that our experts devote their time and expertise to helping other companies, and some of them will not work with us further for various reasons. However, I believe that this approach to business earns trust and helps build rewarding long-term relationships with clients. Transparency and the principle of treating others the way you want to be treated are at the heart of our brand.

Thank you for the interview.

This article comes from magazine:
FOCUS ON Business #12 September-October (5/2023)