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What's behind the boom in Polish office construction?

The most recent statistics from Poland have shown that the nation is on track to potentially see a record year in 2016, as its office construction industry is forecast to grow to a value of more than 3.6 billion zloty (over $961 million). 

The nation's commercial construction sector has seen a two-year slump in which there has been a definite decline in the number of building projects undertaken. However, the latest data shows that the industry's fortunes have reversed.

This has surprised some analysts, but will be obvious to anyone who has spent any time in Warsaw. Poland's capital - which is also the largest city in the country - has seen a huge number of construction projects begin in the past few months, many of which are offices and other commercial buildings.

In fact, Warsaw has been the beneficiary of most of Poland's boom in office construction. But what has caused this sudden increase in commercial buildings, especially in the capital? Here are some of the main reasons:


The size of the boom

Before looking into what has caused the boom, it is necessary to understand its scale. The number of offices being constructed in Poland declined both in 2013 and 2014, but current forecasts show that this trend is set to reverse this year. In fact, research company PMR predicts that the industry will continue growing well into 2016.

The firm's figures show that the value of the office construction industry in Poland will grow to 3.6 billion Polish zloty in 2015. This is close to the record amount set in 2012, when this section of the building industry was valued at around 3.8 billion zloty.

Between 2015 and 2020, it is estimated that Poland will see 5.5 million sq m of office space constructed. The vast majority of this - around four million sq m, according to PMR - will be built in Warsaw and other major regional cities. The capital was the fourth most active office development market in Europe in 2014, behind London, Paris and Moscow.

Furthermore, the growth of this sector looks set to continue into 2016. PMR is confident of this trend due to the data it has uncovered regarding building permits. While 2014 saw a drop in the number of office buildings constructed - down to 750 from 772 in 2013 - the number of building permits granted that year shot up to 1,537, from just 945 the year before.



So why has Polish office construction grown so rapidly, especially in Warsaw? One potential reason is the growth in international companies outsourcing parts of their business to Poland. While this particular industry was once thought to be made up largely of call centres, it has now grown into a thriving business services sector.

Currently, over 600 Polish companies are part of this industry, which employs around 150,000 people. This has more than tripled since 2006, when around 43,000 people worked in the sector.

These firms have almost all formed in the last ten years, and this trend is continuing with more and more businesses moving elements of their organisations to Poland. International consultant McKinsey estimates Poland's business services industry will have grown to employ over 200,000 people by 2017.


Increasing investment

Another key reason for this growth has been the increasing investment in Poland and the surrounding region by international firms. There is much more money available for construction projects, which has now led to more businesses commissioning buildings, especially in Warsaw.

Almost $8.4 billion worth of investment went into the property sector in central and eastern Europe last year alone, according to global real estate firm Jones Lang LaSalle. Speaking to the Financial Times, Hadley Dean - managing partner for eastern Europe at Colliers International - said: "There is loads and loads of money coming in, and it is all desperate to find a home."
Bartlomiej Sosna, PMR's head construction analyst, also pointed out that the decision to extend Poland's special economic zones until 2026 has also played a part in the increase in office construction. He pointed out that many business services firms have set up in these areas, in addition to manufacturing companies.

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