The dispersed working environment with the satellite office system that COVID brings creates an excellent prospect for corporate rental of flats and apartments
Unprofitable bank deposits are being liquidated en masse today and the billions being withdrawn from them have been going into the housing market for many weeks. People looking for a safe investment haven are choosing property to protect their savings. If their purchase is well thought out, the value of the investment increases in the long run. It is also known fact that a property intended for rent becomes a source of regular income. It can bring a return of even 7 percent annually. However, it is necessary to skillfully invest and prepare the property for a specific tenant.
The prospect of studying and working remotely has caused some students and tenants working away from home to leave the rental market. However, students make up a small group of tenants, which, depending on the city, amounts to about 10-25 percent. This gap in the rental market will now be filled by people who have problems with obtaining a loan for a flat. And they are many, because banks are now scrupulously analysing the situation of those applying for financing, completely excluding applicants who represent certain sectors of the economy. Loans are more expensive, and it is necessary to contribute twice as much of one’s own equity as before. Those who will have to give up on buying a flat are therefore left with renting.
Companies are looking for a new type of office
For property investors, however, the most optimistic signals come from the office market, which is undergoing rapid transformation. The situation created by the epidemic requires companies to implement completely new solutions and create different working environments. The virus has changed the way we think about office space and the workplace, and the expectations of employees, who now demand greater flexibility from their employers. They want to be free to decide where they work. So, companies are making changes for their greater convenience.
Work is no longer concentrated in headquarters located in major office hubs. After introducing a system of rotating work, divided between remote and in-office work, companies are now preparing to implement dispersed work environments, based on grids of satellite offices and hybrid systems. Flexibility in the approach to the way work is provided does not entail giving up offices but changing their form. After all, not all processes in companies can be carried out remotely. It has also turned out that people need contact with colleagues, and not everyone can work from home permanently. The creation of satellite office systems is also supported by work safety arguments.
Workplaces for dispersed teams
To operate efficiently, it is necessary to secure workplaces for dispersed teams. Companies are starting to appreciate locations outside city centres. They give up some of their spaces in large office buildings in favour of smaller spaces. They consist of work areas situated in different parts of the city. In locations which employees living in particular districts can easily reach. In the new working patterns, companies are combining home office with work at the head office and numerous smaller offices, which employees can use according to their needs.
The office “follows” the employee to their place of residence. And this opens much greater opportunities for corporate rentals than before. Everything points to the fact that companies will increasingly change their operating model from consolidated to dispersed, thus providing employees with the right infrastructure to attract the most talented people. Smaller offices will also be situated in residential developments, including locations well away from the centre and in suburban locations.
An upward trend
The evolution of the working environment, creating better prospects for the rental of flats and apartments for office use in Poland’s largest urban centres is great news for investors. For a company is the most stable and reliable tenant, guaranteeing the owner a long-term, regular income. This is nothing new, but in the covid reality the trend of placing offices in apartments is set to accelerate considerably.
Corporate rental has been used for years by companies that prefer to work in tenements and well-located residential buildings. This type of lease has developed to the largest extent in Warsaw. The most popular buildings among companies are those located, inter alia, on Krucza, Świętokrzyska, Grzybowska, Aleje Jerozolimskie or tenement houses near Zbawiciela Square and Trzech Krzyży Square. Often all units in buildings located in this area are rented out for business purposes.
In Trójmiasto, corporate leasing has so far developed mainly in the vicinity of business centres. In Gdańsk, the most attractive properties for companies were those found near Olivia Business Centre and in Przymorze, as well as new residential buildings near the Old Town, especially in buildings located along one of the main thoroughfares of Gdańsk, i.e., al. Grunwaldzka, and in the central part of the city in the so-called Young Town area. In Gdynia, the most popular areas were Śródmieście and Orłowo, while in Sopot the upper part of the resort is more popular.
Trójmiasto’s business potential
Not without significance is the fact that before the lockdown, in Trójmiasto, where LBC Invest has its headquarters, the lowest office vacancy rate in the country was recorded. There was a shortage of offices to rent. Trójmiasto is the fourth-largest business centre in the country. Office space is sought here by companies from the banking sector, transport, modern business services and new technologies, production centres, research and development centres, as well as companies operating in sea freight, which use the local maritime transshipment hub. In turn, the stability of Trójmiasto’s rental market may be evidenced by the fact that while during the past summer holidays rental rates fell throughout the country, in Gdynia they increased by approximately 8%.
Most of the apartments we have sought for our clients so far have been for residential purposes for the company’s expatriate employees. Now, renting apartments as offices is gaining the upper hand. In recent weeks we have been approached by several companies wishing to sign agreements on the lease of flats profiled for work purposes. We are also receiving enquiries from people interested in investing in real estate for corporate rental purposes. We are now finalising more such transactions than before.
We are looking for properties for a Norwegian client who intends to use them as offices for its employees. The flats will be provided on a turnkey basis and arranged for use as home offices. Other Scandinavian entrepreneurs are also interested in a similar solution in different locations.
LBC INVEST specialises in corporate rentals, which includes comprehensive services for both companies and property owners. On behalf of the buyer, our company deals not only with all the formalities connected with the selection and purchase of real estate, but also handles the complete preparation of the flat for rent, the selection and verification of potential tenants, providing the investor with a client, rental services, and the subsequent, possible sale of the property.
Short-term rental on the defensive
If we talk about Trójmiasto’s rental market, it is impossible not to mention short-term rentals, which until recently have been growing here extremely fast. The largest number of condohotels and buildings with flats for rent opened in Gdańsk. In 2019, new developments included, among others, an apartment building in the Granaria project on Wyspa Spichrzów, offering over 130 units, an apartment building in the Deo Plaza project with 120 units for rent, or Baltica Towers with over 130 apartments.
If the pandemic had not broken out this market segment in Trójmiasto would have rapidly increased its potential, although its offer was already so large that some investors even suffered losses on seasonal rentals. In the face of the blockade of tourist traffic and transport links, especially by air, the forecast for short-term rentals has changed dramatically. Investors who have purchased units in condohotels and residential units in holiday apartment buildings cannot now count on making a profit, nor can they change their form of tenancy, because the functional layouts of flats intended for short-term rentals are not suitable for long-term rentals. Developers, on the other hand, will put such projects on hold.
Author: Agata Karolina Lasota, Managing Director of LBC Invest
