How would you describe the presence of public institutions in today’s office market?

 

MK: It is clear that year after year public institutions are becoming more active in this market. Over the past five years, they have leased more than 400,000 sqm of office space, mainly in Warsaw. This is a significant scale, showing how important they have become as tenants. However, it should be emphasized that offices operate differently than private companies – their selection and negotiation process is longer and more complex.

 

What is their main focus when signing lease agreements?

 

MK: The key issue is a clear definition of what exactly the tenant is paying for and how individual costs will be settled. It is also important to foresee possible scenarios that may occur during a multi-year lease and to properly secure the office’s interests. Of course, it is impossible to include everything in the contract, but experience with this type of transaction allows us to identify the clauses of greatest importance.

 

Rent in euros or in zloty? Is this one of the more difficult negotiation points?

 

MK: Yes, it is a very common point of contention. Landlords, especially those whose buildings are financed with euro-denominated loans, expect rent to be set in that currency. Public institutions, however, prefer zloty – it is simpler and eliminates exchange-rate risk. It is worth recalling that the principle of currency denomination, which once required settlements in PLN, ceased to apply in 2009.

 

There are several solutions that make compromise possible. One common practice is introducing a so-called currency cap, i.e. a contract clause setting limits within which the exchange rate may fluctuate. If the rate exceeds the set limits, the surplus is not taken into account when settling payments.

 

Another solution is to stipulate rent in euros but convert it into zloty each time based on the exchange rate from the day before the invoice is issued. This way, payment is made in PLN while the landlord retains reference to the euro value.

 

Sometimes rent is calculated using the average exchange rate from the past 12 months, and the resulting amount in zloty is written into the contract. This stabilizes the rent level and eliminates the risk of sudden currency swings.

 

How do institutions secure themselves with regard to lease length?

 

MK: The vast majority try to include a break option in the contract – the possibility of terminating the lease earlier. In agreements signed for 7–10 years, this is a very important clause.

 

From the landlord’s perspective, it is not easy to accept, as they finance the office fit-out and such expenditures are amortized over the entire lease term. Therefore, provisions are often introduced requiring the institution to reimburse unamortized costs, or contractual penalties are applied, usually amounting to several months’ rent.

 

The exception is statutory liquidation of an institution. In such cases, the landlord agrees to early termination, as the guarantor of the lease is the State Treasury.

 

How is the issue of service charges controlled?

 

MK: This is a very sensitive subject. Service charges cover many costs, and the catalogue of these items is open, which means landlords can add new elements depending on changes in law or market conditions. Recent years have shown how significantly these costs can rise.

That is why we recommend clauses that limit such increases – for example, to a maximum of 5% annually or to average rates in comparable buildings in the given city.

Additionally, we prepare annexes to contracts that precisely indicate which costs cannot be included in service charges – for instance, expenses related to building investments should always remain on the landlord’s side.

 

Do public institutions also negotiate additional services?

 

MK:Absolutely. Offices want not only to meet technical standards but also to provide comfort. Therefore, contracts increasingly include clauses covering moving costs, cleaning, coffee service, furniture, or even IT installations.

Landlords usually rely on subcontractors, and we as advisors help select the best offers, keeping in mind that for institutions, not only price but also service quality matters. Those landlords who can offer such a package gain a competitive advantage.

 

How would you summarize the process of securing offices for public institutions?

 

MK: It is a process that requires thorough analysis, deep market knowledge, and skillful negotiation. Every lease agreement should be tailored to the needs of the specific institution while also protecting the landlord’s interests. When a balance is found, public offices gain safe and comfortable workplaces, and landlords secure stable tenants for years.

 

Marcin Kowal, Associate Director in the Office Agency at Newmark Polska