Nina Wiater talks to Marta Wiewiórowska - Kudła, Leasing Manager at Hines Polska Sp. z o.o. about the changes in the office space market after the coronavirus pandemic, the transformation of the labor market and the role of modern technologies.
NW: The portfolio of Hines includes an extensive range of office and warehouse investments. Are there any plans to develop the portfolio with other investments of this type?
MW-K: At the moment, the portfolio of Hines Polska includes office buildings, warehouses and housing estates located throughout the country. We are constantly looking for interesting investment options and business development opportunities. Such processes require time and appropriate conditions. At the beginning of this year, we finalized the purchase of Wola Center office property in Warsaw which has a total area of approx. 34,000 sq m.
NW: We are currently undergoing an economic de-freezing resulting from the COVID-19 pandemic lockdown. How do you think the office market will change after the pandemic?
MW-K: In Q1, tenant activity remained high. In Q2, however, we observed an extension of the process of searching for office space. It is difficult to predict the repercussions in the long run. The current situation related to the pandemic raises many open-ended questions. As far as the choice of the office is concerned, I think that location will remain the main determining factor. However, modern technologies and solutions in terms of space arrangement and management in office buildings and procedures that affect both comfort and safety will play an increasingly important role. Examples of these include remote-controlled devices, strict access controls, limits on the number of people who can stay in a given place at any one time, zones for couriers, where they can leave the parcel on a non-contact basis, etc. The importance of effective partnerships between building managers and tenants will also increase.
NW: Until now, there have been extensive discussions about Poland’s job market being an employee market. Might the current situation accelerate changes in this area? Will we undergo a transformation and see the emergence of an employer market?
MW-K: As a developer and investor in the real estate industry we closely observe the labor market, because the changes that take place here influence the way office space is planned and designed. For example, in recent years, employers have started to pay more and more attention to the comfort of their employees, which is why the offices have been equipped with relaxation zones and elements of home interiors. In addition, factors such as the proximity of green areas, availability of services and infrastructure for parents with children have been taken into account when choosing a location. The pandemic will surely cause a shift of this emphasis towards safety and greater flexibility of work. I expect that offices will now include more hot desks, open spaces and separate zones for project groups instead of specific departments.
The approach to remote working will probably change as well. Previously it was perceived as a desirable employee benefit, yet it has suddenly become a necessity for many as a result of the pandemic. Some people have found it very useful, others have appreciated the advantages of working in the office - in this respect, a lot depends on the individual ability to focus on the tasks to be performed and the organization of time, as well as working conditions at home. We can now see that some people are returning to their offices, but we expect that many will still remain at home for some time, with companies introducing a work rota. In the long term, such a solution may prove beneficial for both employees and employers.
It is not clear whether it will be either an employee or an employer market, as this may vary from industry to industry. In industries that are experiencing difficulties due to the lack of opportunities to operate with current and future restrictions, it is the employer who will be in the driving seat. On the other hand, we see that many companies are looking for opportunities to expand their operations because they have found out that not all employees have to be in the same place - this is the case, for example, in IT. For various players, it may be an opportunity to gain new customers from other regions of the world and to use the great potential and competences of the new technology industry in Poland. In such a situation, employers will want to find the best prospective employees possible.
NW: We are currently seeing a significant change in the role of technology. What kind of innovative technologies can we expect in the near future in the area of real estate?
MW-K: The pandemic caused both property managers and tenants to attach even greater importance to safety. The priority will, therefore, be to implement solutions to improve it, both in the area of management and use of buildings, and in-person communication. We expect, above all, the development and growing popularity of touchless solutions. It can be expected that the area of virtual communication will develop at a rapid pace because there is a great need to replace physical meetings, which cannot take place due to the restriction in international air traffic. For now, the sound and image from the camera on a monitor are enough, but I suspect that we will soon see more advanced solutions in our conference rooms. 3D printers, which will be able to print product prototypes or sales samples, may also become standard equipment for many offices. As an alternative, rooms with projectors may be used to show visualizations of products. In the office buildings, updates of BMS systems will be implemented more often so as to enable effective and more economical management of the entire facility from one location. It will be necessary to use intelligent infrastructure that will regularly report even the slightest deviations from the standard. There will probably be deeper analyses of modern air filtration equipment along with the installation of special sensors that has the chance to detect a potential viral threat and disinfect the space accordingly.
NW: What solutions are being introduced in office buildings in Hines’ portfolio for employees returning to their offices?
MW-K: In the case of the office buildings in our portfolio, we managed to react very quickly to the pandemic. We had already taken preventive actions at the beginning of March. In order to improve the safety of users in communal areas, we increased the frequency and scope of work conducted by cleaning companies. Building services employees were equipped with masks, visors and gloves, and then trained in new procedures. A special emphasis was placed on regular disinfection of elements such as handles, handrails, buttons, taps and touch panels. Disinfectants are always available at the main reception, in the cloakrooms for cyclists, toilets, as well as at entrances from the car park. Tenants have also received a letter from us with instructions on how to proceed in case of a suspected coronavirus infection of one of their employees. At the same time, we have prepared a separate room in each building to isolate people with symptoms of COVID-19. We have also increased the emphasis on two-way communication. The guiding principle of these new procedures is the full commitment of all persons to be responsible for ensuring the safe use of the building. In order to reach a wider audience, we have diversified our communication channels - in addition to e-mail and telephone, we have used monitors in the building lobby to display messages. Additionally, in June we introduced the daily disinfection of lifts operating in our office buildings. We have also adjusted air conditioning settings and ventilation devices to the prevailing conditions to ensure an improvement in air quality. In addition, the windows in the buildings can be opened, allowing tenants to ventilate the rooms.
NW: What occupancy rates do you expect in the first weeks after your employees return to the offices?
MW-K: We expect occupancy to be around 30%. Some companies have already returned to their offices, while others are preparing to reopen. The vast majority (if not all) are planning a shift system in order to reduce the number of employees present in the office space at any one time, as well as to secure specialists so that they can continue working freely, replacing each other if or when necessary. Return is usually voluntary, so offices are open to those who want to work there. We must remember that the educational institutions have not recently been open and the beginning of the next school year is still in question. In addition, the coronavirus still poses a great threat, which is of particular concern to people from high-risk groups. Additionally, we hear about the possibility of a second wave of infections. All this affects the number of employees returning to the office and forces companies to approach the opening of office spaces in a cautious and gradual manner.
NW: What significant changes may occur in lease agreements as a result of the current COVID-19 pandemic situation?
MW-K: Legal provisions directly referring to the pandemic have already started appearing in lease agreements. For example, the definition of force majeure has been extended to include an epidemic or pandemic, during which certain regulations or technical standards do not allow for certain types of work. Building regulations, which are an integral part of such contracts, are being modified as well. I think that the current situation in the long term will not affect the lease period for new contracts. An agreement for several years is the basis for a stable business - it allows for negotiating much better financial conditions, while in the case of shorter terms, the lessor has limited possibilities to participate in expenditures on office space arrangements.
NW: Is there a touchless future waiting for us? Are we ready to implement such solutions in Poland?
MW-K: Touchless solutions are not something that is completely new. In many office buildings, such entrance gates or faucets in washbasins have been standard for several years. In some buildings, we can find more advanced technologies, such as automatic access to the garage through license plate recognition. As I have already mentioned, I expect that the epidemic situation will contribute to the increased popularity of touchless solutions and their further development - for example, with voice-controlled lifts. So you can imagine a way to the office where, without touching anything, we will get to our workplace, then start up the coffee machine by voice and sit with our guest in the conference room, previously booked through a mobile application.
NW: Finally, moving away from the subject of real estate, I would like to ask you what you do in your free time?
MW-K: Privately, I am an active mother of three. I cannot imagine life without my beloved ones, but also without sport, travel and a good book. In the summer I mainly go jogging, while in the winter I have to go skiing, preferably to a new place. I am fascinated by faraway countries, there is still a lot to see on my list. In my memories I always go back to climbing a volcano in Indonesia, crossing the jungle in Colombia or yoga classes in India. Rallies in the Bieszczady Mountains or homemade blueberry dumplings in Wetlin are also great!
NW: Thank you very much for the interview.