JPMorgan Chase, Citigroup, Goldman Sachs sign leases for blocks of office space in the former manufacturing district
A new business centre is blooming in Warsaw’s Wola district, an area best known until now for the infamous role it played during the city’s uprising in World War II.
Major multinational firms JPMorgan Chase & Co., Citigroup Inc., Goldman Sachs GroupInc., and Credit Suisse Group AG have leased big blocks of office space in the former manufacturing district in recent years. Other tenants include professional services firms Deloitte, Marsh & McLennan Co s., payments firm Mastercard Inc. and France’s BNP Paribas Securities Services.
In the next three years, around 420,000 square meters (4.5 million square feet) of new office space will be delivered in this area—around half of total new supply coming up in Warsaw, according to CBRE Group Inc., a real-estate services firm. “The expansion of the city centre might in the future lead to treating [this] region as the centre of Warsaw,” said Mikołaj Sznajder, a director at CBRE in Poland.
The building frenzy reflects the high demand for offices coming from international companies for information-technology, back-office and other operations for global clients.
Poland has long been a favourite for these operations, thanks to its relatively lower labour costs compared with Western Europe, availability of skilled talent and membership in the European Union. Until recently, most of the large shared services operations were set up mainly in small Polish cities, such as Kraków and Wrocław, which are even cheaper.
“Recently, Warsaw has become a very strong player in this,” said Arkadiusz Rudzki, managing director of the Poland office unit of Skanska AB, a Sweden-based construction major.
One reason for Warsaw’s recent popularity, said Mr Rudzki, is that banks and financial companies are looking for alternatives to diversify their operations away from London, following the U.K.’s vote to leave the European Union. “They’re saying, where can we move where the operation is still within this time zone and within three hours by flight” from London, he said.
Warsaw also comes up as a favourable alternative to attract specialized staff from other countries. “Companies are moving their employees from London, Frankfurt, Madrid and they are offering them a much higher quality of life,” Mr Rudzki said.
Developers have targeted Wola in recent years to build modern office space as Warsaw’s central business district has become more congested, and demand for office space has increased.
Historically a manufacturing hub, Wola in the Warsaw Uprising of 1944 was the site of a massacre of more than 40,000 Poles by German troops. A museum dedicated to the uprising is now situated in the area.
After the war, the area slowly returned to its manufacturing roots. In the late 1990s, some developers started buying land in Wola to build homes.
Later the area was discovered by office developers. In the five years ended 2017, around 220,000 square meters of office space was delivered in Wola, more than twice the amount delivered in the previous five years.
Most of the new construction is centred within a one-square-mile area around Rondo Daszyńskiego, a roundabout where a new metro line opened recently, providing more commuter access. More residential buildings are also being built in Wola, providing an option for office workers to live close by.
Both domestic and foreign developers are cashing in on the new demand. Skanska, based in Stockholm, currently has two large projects under construction in Wola—the Generation Park complex and Spark buildings—with more than 150,000 square meters of office space.
Last year, one of the buildings in the Generation Park complex was completed and Citigroup’s Citi Service Center Poland moved into it to occupy 19,000 square meters—5,000 square meters more than Citigroup had planned to lease a few months earlier.
Other Skanska tenants include a unit of Credit Suisse Group and multinational law firm DLA Piper. Skanska said rents in its offices have gone up by 10% to 15% in the past five years.
Meanwhile, vacancy rates have gone down. Wola’s vacancy rate is around 4%, compared with nearly 11% for Warsaw overall, according to CBRE.
Last fall, J.P. Morgan Chase leased 15,500 square meters in a building in Wola, for an operations centre that will employ more than 2,500 people. Also last year, Ernst & Young Global Delivery Services leased three floors in the 20,000-square-meter Proximo II, a new office building by American developer Hines. In February, developer Echo Investment SA said beauty company L’Oréal will take up 7,000 square meters in its coming office complex called Browary Warszawskie.
The Warsaw Spire, one of Poland’s tallest buildings at 220 meters (about 720 feet), was completed in Wola in 2016 by Belgian-Polish developer Ghelamco Group. Its tenants include Goldman Sachs and Samsung.
In April, a fund managed by Madison International Realty LLC, a New York-based investment firm, bought a 50% stake in the Warsaw Spire.
Ronald Dickerman, the founder of Madison International Realty, expects demand for office space to get stronger. Poland’s strong economy, positive demographics and low operating costs have created a “very favourable environment for operating businesses,” he said.