Office buildings increasingly commercial

Already 64% of Warsaw office buildings offer at least one retail and service unit, according to the "Retail @ Office" report prepared by experts from the international consulting firm Cushman & Wakefield. The low supply of new, typically retail space in Warsaw is prompting retail chains and service providers to look for alternative locations. At the same time, recent years have brought many changes in users' preferences in the use of office space and the type of services available in office buildings. According to analysis by Cushman & Wakefield:

• 6% of the space - this is how much on average in Warsaw is occupied by retail and service units in office buildings.
• 87% of retail and service units are located on the first floor, highlighting their strategic location for maximum visibility and accessibility.
• 390,000 sqm in 1,400 units in more than 360 locations - this is the stock of retail and service space in office buildings in Warsaw as of the end of 2023.
• The Center and the Central Business District (COB) together concentrate more than half of all retail units in office buildings, with the COB having the highest saturation of retail and service space in office buildings - more than 1.5 sqm per person.

Retail and service space in office buildings is growing in popularity, accounting for up to 7% of the total floor area of the latest office projects. This growth is being driven by the changing urban landscape associated with the evolving needs of office users and Warsaw inhabitants, the trend towards building multifunctional spaces and the shrinking pool of land in key business locations.

Warsaw’s retail stock, excluding standalone retail warehouses and retail floorspace in shopping centres anchored by large hypermarkets, stands at 1.2 million sq m in 45 locations. Of that total, only 37,000 sq m of new retail space was delivered to the market in the last two years.

“Faced with the shortage of space in shopping centres, retailers are looking for alternative locations and shifting their focus towards units in office and residential buildings. Retail and service zones which are mostly located on the ground floor of office buildings are increasingly attracting external footfall. Our analysis of retail in office locations focuses on A- and B-class buildings, and excludes mixed-use schemes that are slightly different in nature,” explains Ewelina Staruch, Retail Market Analyst, Cushman & Wakefield.

Everything is close by

Fundamental changes in working patterns in the capital and in other cities have transformed user preferences regarding office use and amenities available in office buildings. Cushman & Wakefield’s report “Office or Home? What Attracts Polish Workers to the Office” presents the findings of a survey into users’ practical behaviours and expectations about workplace design. 

“The survey has revealed that 45% of respondents use F&B facilities in an office building at least once a month, a third opt for services, with nearly 30% going to fitness clubs. In addition, 36% of respondents use breakout spaces such as gardens, benches or deckchairs, the survey found,” says Ewa Derlatka-Chilewicz, Head of Research, Cushman & Wakefield.

These findings are in line with the results of a 2022 survey carried out by Cushman & Wakefield among office managers, with 67% naming the restaurant/canteen as the single most important amenity, ahead of an ATM (43%), a grocery (30%), a café (21%) and parcel lockers (19%).

“All the above choices appear to indicate a direction in which office landlords should go in order to gain a competitive advantage and to create a vibrant office building accommodating plenty of tenants,” adds Ewa Derlatka-Chilewicz. 

55,000 sq m for rent

Although retail and service space accounts on average for 6% of a typical office building’s area in Warsaw, this ratio is higher at 7% for office projects completed in the last 10 years. At the end of 2023, 64% of office buildings had retail and service units, up from 60% in 2013. Looking ahead, Cushman & Wakefield expects this proportion to grow.

“The highest concentration of retail space in office hubs is the CBD, Służewiec and the City Centre. However, retail stores in the City Core are also the smallest, averaging just over 200 sq m. The largest units of around 400 sq m on average are in the West office zone,” explains Magdalena Gniazdowska, Leasing Manager, Retail Agency, Cushman & Wakefield.

Warsaw’s office buildings currently have 257 unoccupied retail and service units with a combined area of 53,000 sq m, equating to 18.2% of total stock. By comparison, the vacancy rate for shopping centres and retail parks stands at 9.3%. Interestingly, the highest retail and service vacancy rates are in the most recent office completions, i.e. buildings delivered in 2020-2024. There are as many as 157 units to let sized between 100-500 sq m – too small to attract a wider range of prospective tenants though. 

“A vast majority of units for rent are less than 500 sq m in size. A major challenge facing office landlords is how to respond to tenants’ needs and to ease the shortage of large premises. Retailers actively looking for units of more than 500 sq m have a very limited choice due to constrained supply and high occupancy levels, and subsequently low vacancy rates. Only 8% of unoccupied units can be classified as large or very large, i.e. more than 500 sq m in size,” adds Ewelina Staruch.

The highest vacancy rates are in the East and Służewiec - 28.4% and 21.9% respectively. 

Office buildings as an extension of high streets

Retail in office buildings is dominated by F&B (26%) and services (22%), reveals the report from Cushman & Wakefield. Interestingly, office locations are also popular with healthcare providers (105 medical centres, or 9%) and grocery retailers (7%).

“There is some synergy between the offers of business districts and shopping centres. The latter are, however, mostly anchored by fashion, health and beauty, homeware and electronics retailers. Such tenants generally require larger units than those available in office buildings and are after higher footfall levels also - or perhaps above all - at the weekend,” says Ewa Derlatka-Chilewicz.

Report authors note that there are currently 806 unique retail brands operating in Warsaw office buildings; the TOP 6 with the highest number of units are: Żabka, Gorąco Polecam, Zdrofit, Green Caffe Nero, Rossmann and Lux Med.

“Retail evolution is happening in large cities, particularly in Warsaw. We are also seeing interest in high streets pick up momentum. Retail and service space in office buildings constitutes an extension of or an addition to high street retailing. It is also worth noting that market rents for such space in prime office buildings stand at EUR 50-60 per sq m, compared to EUR 150-170 in shopping centres. There are, of course, some drawbacks to retailing in office buildings such as lower weekend turnover levels, the lack of large spaces and difficulties with maintaining an aesthetic compromise between office and retail buildings. However, these disadvantages appear to be well compensated by a convenient location and a customer profile,” concludes Magdalena Gniazdowska.