BNP Paribas Real Estate’s Research & Consulting team in cooperation with Office Agency department prepared a special report: Standing out from the Crowd. A Breath of Life for Boutique Office Buildings within Warsaw City Centre, which analyses the existing and planned supply of modernised boutique office buildings in the selected clusters of Warsaw city centre and the Old Town.
The purpose of the report was the deep analysis of boutique office market considering provision of stock, profile of occupiers, level of rents and vacancy rate. Apart from quantitive assessment, the report provides qualitative review of assets. It also examines key differentiating factors of this type of offices and informs about ownership structure.
The total stock of 73 analysed buildings has been estimated at 310,700 sqm, of which 250,300 is dedicated for pure office functions, while the remaining space serves as ground floor retail and services.
Most of boutique buildings (30 schemes) fall within 2,001 – 5,000 sqm range but in terms of market share in supply the bulk of stock (46%) is located in offices from 5,001 to 10 000 sqm. Apart from few large schemes, which are mainly historical palaces, the vast majority of boutique offices have floor plates of 300-500 sqm. It should be noted that this type of projects offer high quality of fit-out materials (wood, marble, sandstone). Additionally, boutique offices attract a very specific group of occupiers . These recruit mainly from Business Services sector (36% of tenant pool), especially law firms and financial advisory companies. Boutique offices are also popular FIRE sector (finance, insurance, real estate), constituting 15% market share – comments Anna Staniszewska, Director, Research & Consluting CEE, BNP Paribas Real Estate.
Boutique office buildings are also attractive investment assets. While prime headline rents for standard modern office buildings in Warsaw are in the range of €22-24 per sqm/month, the best boutique schemes quote from €23 to 26 per sqm/month (10 buildings fall within that category). When it comest to effective rents for larger occupiers, boutique offices lower the headline rents by no more than 10-15%, whereas the standard modern schemes have to decrease the headlines by 20-25%.
Boutique office buildings are not only pleasant to look at as architectural masterpieces, but they are also sound allocation of capital, which gives sustainable level of return in the long-run, with yields for prime assets higher by 0.25 p.p. compared with standard modern office buildings. With rents approx. 10% higher than for traditional office space, the best schemes offer exquisite quality of fit-out, top management services as well as high sense of identity to their occupiers, which are key reasons for high tenant retention rate recorded.”– adds Anna Staniszewska.
When considering increase of pipeline supply in Warsaw, it is not surprising that boutique office buildings become increasingly attractive for both investors as well as occupiers. For investors they offer steady investment, more resistant to market fluctuations and at the same time reaching lower yields. For tenants, who wish to confirm their identity, and reinforce image, these buildings are a proper alternative to typical glazed office buildings. Therefore when refurbishing or designing boutique offices it is important to consider coherent vision for the interior as well as exterior of the project – comments Michał Orłowski, Director, Landlord Representation, BNP Paribas Real Estate.
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