Market predictability is essential
The Czech development group CRESTYL is one of the market leaders in building multi-purpose projects – residential, commercial and office real estate.
We spoke with Viktor Peška, Chief Commercial Officer at Crestyl, not only about how a successful developer is doing in these turbulent times but how much the real estate market has changed in 2020.
We meet at a time where people plan and life changes. At a time that mainly encourages one to balance things. What were your plans and expectations for Crestyl in 2020?
With regards to the fact that our business is built on three pillars, this issue needs to be addressed on three levels. From the perspective of the residential market, we planned to develop one already running project and commence the construction of two new projects. We planned to sell the remaining units at the Berounská Brána and Marina Boulevard projects. In the segment of lease of office space, we planned to complete the lease of the remaining premises in the DOCK IN FOUR building and start construction of the last stage in the DOCK IN complex – the DOCK IN FIVE building. As for retail projects, our plans were clearly focused on the successful pre-lease and lease of retail units in the NR7 and Savarin projects and in the Dornych project in Brno.
That sounds like a lot of work and investment. To what extent do your plans meet with reality?
In the residential segment, we initially experienced a temporary slowdown, but it really only shortly overawed us. Demand soon returned, but we suspected a change in clients’ priorities. The project in Vysoký Újezd, where we offer houses with gardens and plots, is experiencing a boom and there is also interest in luxury real estate in the Šárecký dvůr and Marina Boulevard projects; in both cases we are talking about apartments with larger layouts. This part of our activities went very well. I must admit that at the end of the summer, we reached sales numbers as planned and expected. What, however, slowed us down was the more complex financing negotiations. Discussions with banks are longer and more complicated. This factor is also reflected in the other two segments. With regards to the construction of offices, we were forced to postpone the start of construction of DOCK IN FIVE by several months due to Covid-19. The interest in administrative premises is generally smaller, but there is still great interest in new offices in DOCK IN. But the retail market shuffled its cards quite significantly. Despite all unforeseen events, we managed to complete the sale of the Central Kladno shopping centre, which is an incredible success. It should be noted that negotiations began before the coronavirus crisis and ended successfully after the first wave.
You mentioned that there is still a lot of interest in the DOCK IN FIVE project. What is its added value at a time when office rental costs are more of a burden for employers?
Its biggest advantage is, undoubtedly, the fact that construction is at the very end. The project is almost completed and apart from the infrastructure of shops and services, the DOCK IN location also provides a park and facilities for sports activities. The second important argument that plays into our hands is the dispositions. As one of the few, we are able to offer large areas on one floor. We are talking about A class offices, with the offer of which we target large and corporate companies.
What are your expectations in the coming months?
In months to come, we expect a certain slowdown in negotiations and agreements, as well as a growing interest in both luxury real estate and land.
Will you offer any new services or a new type of business in connection with this?
For us, the business model basically remains unchanged. We don’t belong amongst those developers who would minimize space and maximize profits. We have always had 10–15% larger apartments and higher standards. We believe that people will continue to demand larger apartments with terraces and/or gardens. In our case, it is not about adaptation to the situation or trend, but one of our main principles, with which we work on projects quite naturally. Worth mentioning is also the fact that after the successful and speedy sale of 32 family houses in Vysoký Újezd, we are launching a follow-up project with 54 spacious family houses and bungalows. As for the business and office unit projects, we look at developments over a longer period of four to five years. And we believe that at that time we will live completely normally again, without any major restrictions.
We talked about the residential and administrative markets, so, let’s move on to retail units. You are ahead of construction of, in many ways, truly exceptional and at the same time investment-intensive projects. What are the prospects?
The market will change considerably, not only next year, but especially within the horizon of the next few years. Standard sales will move more to online platforms and customers will expect much more from brick and mortar stores. Good traders will be forced to offer not only goods and services. It will be a game with emotions of experience and fun. We assume that stores will primarily turn into showrooms or concept stores and will perform a different function than before. This change will, of course, also affect the so far exclusive online retailers who will want to build a physical presence. The store will not serve a priori as a place where people leave with shopping bags. It will also serve as an exhibition and presentation of brands and companies. Having such premises will be a matter of prestige. The second trend that can be expected will be the emergence of multi-brand stores. Multi-branded retailers that still sell through separate retail units will more often go for a multi-brand showroom where they would sell more brands in one place, under a single identity. We, as a retail developer, must meet them halfway and build not shopping, but multi-purpose community centres, where a clearly defined purpose, public space and curation is to play a crucial role in shaping the destination. There will always be a very limited number of such places, and therefore will always be of interest among traders and tenants.
As a leader in the real estate market, you don’t need to worry about talking openly about opportunities these times offer…
What is being discussed a lot is the development of residential projects for rent. West of the Czech Republic, this form of business works quite well. It certainly has interesting potential in our country but we are not considering this business model in the near future. We still see real possibilities in multifunctional projects, which offer housing and premises for work and relaxation in one place. This helps the developer to increase the level and quality in a particular place much more as he is be able to invest in the surrounding infrastructure in co-operation with local administration and associations. As for the administrative and retail segments, emphasis will be put on the construction level, gadgets and technologies that were previously considered ‘nice to have’. Now they will become a matter of course.
Is there anything you would like to wish the development market and developers for 2021?
I wish everyone a more transparent future. At least to the extent where we can plan with more accuracy and security. This also applies to the building law and regulations.
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