The Slatina complex in the largest industrial zone Černovická terasa, Brno, provides leases of commercial premises, especially offices, storage facilities and outdoor areas, including comprehensive services and facility backgrounds.
Now there are 12 rental buildings for administration, storage, light industry, retail and services. Nearby the D1 motorway, there is a carpark for approximately 1,100 cars, a petrol station and several smaller buildings. In total, there are some 23,000 sq m of offices, 16,000 sq m of warehouses and 36,000 sq m of outdoor areas leased. Ing. Luděk Beneš, a member of the Board of AREAL SLATINA, a.s., with whom we last spoke at the beginning of this year, answered our questions.
When we last met, nobody had the slightest idea that the economy would be slowed down by the COVID-19 pandemics. How did it influence your plans?
The existing building GREEN BUILDING (hereafter referred to as GB I) remains stably occupied, reaching, by 1st December, coincidentally 99.8% occupancy yet again. The second building GREEN BUILDING II (furthermore referred to as GB II) will undergo final building approval on 10th December. This does correspond with the original plan from September 2019 but the meeting of this deadline required, and still requires, using our team’s and supplier’s total strength. I must also point out a very forthcoming and flexible approach from the workers of the financing bank, Sberbank CZ, a.s. considering the fact that the completion of GB II was fully commenced this year, on 2nd March. The projects, co-ordination, financing, supply of equipment and work were all negotiated and agreed prior to this date. We did account with reserves in the schedule of the development but not with the coronavirus pandemic. What caused us most problems in the spring stage were delayed supplies of equipment from abroad. The building’s technically and technologically advanced level that depend on units and components from Finland, Italy, Germany, France, Switzerland and the USA delayed the schedule of the development. This time delay was biggest in May, arriving at a five-week delay. Thanks to increased contractor capacity, we managed to balance the schedule of the development but not completely. What was, however, encouraging was that all the supplies from abroad were here with us or at suppliers’ in the Czech Republic. When the second wave of the pandemic hit, it had a considerable influence on labour. As at the end of September, the construction is managed operatively, literally from day to day, according to the availability of the individual professions.
Did you consider stopping the construction or to postpone the final building approval?
It is certain that if the situation associated with the coronavirus epidemic required it, we would have no other option. Nevertheless, we have taken many organizational and material measures so that we didn’t have to stop or considerably restrict construction via the infection. But we did not discuss the ceasing of the construction or the postponing of the deadline.
Did clients’ requirements regarding the size or layout of the offices or common areas change due to the pandemic?
Yes, they did. There are no requirements for large open office areas. The layout and sizes negotiated last year changed due to the pandemic. The smaller open areas partitioned with screens, cupboards, partition walls and flowers turned into fully-fledged offices. The requirements for common relaxation areas also reduced considerably.
What development do you expect? They speak of the option that many companies will continue to place some or part of their employees (20–25%) to a home office…
We don’t arrive at these ideas with our clients, perhaps because our clients are often companies from the area of mechanical engineering, civil engineering, TZB, logistics and state administration institutions.
To what extent can the demands or requirements for space be changed operatively and to what extent are you prepared to do so?
Our buildings are designed in modules with practically the largest possible level of segmentation without the need to increase costs for safety, servicing, heating, cooling, air exchange, lighting, regulation, control and cabling. This excellent segmentation allows for the creation of individual 17-sq m units. So, we are prepared for it.
With regards to the unclear future of the administrative market: are you planning to continue designing buildings as administrative or is there also a possibility of another variant?
We haven’t dealt with this issue yet. We have contracts for the leasing of 62% of rental area in the GB II building, so there is still a lot of work awaiting us in the following period. It won’t be until years to come that we will see what the future of the administrative market is or isn’t. I believe that the trend will be rectified downwards but only within percentage units.
The Slatina Complex project became known to the public due to the broad utilization of ‘green technologies’. Nevertheless, the development progresses very fast. What do you think can still be improved?
Every solution or detail can still be improved. But if we are to remain in the level of economic return, then the varying of GB II from GB I brought us to the top of the reversal curve. With the minimalization of the overall carbon footprint, energy efficiency and water management and the current level of technology and their costs, it is impossible to achieve any further improvement. We see large reserves in the utilization of renewable resources in combination with energy storing. Under our conditions, it is mainly about locating solar panels above parking places or carports and about small vertical wind power stations. We have accounted with carports from the beginning but this unique solution has no support in comparison with other locations of photovoltaic panels.
Today’s clients are more demanding. They put more emphasis on particular bonuses. In the first building, you provided the tenants with further services via catering establishments and others. What can tenants of the new building expect?
There will be an extended range of services available for tenants from GB II, GB I and other premises, as well as visitors to the whole of the Slatina Complex. The number of public transport routes, which stop in front of the main entrance to the complex, was extended to eight lines. We responded to the increasing interest in online sales via Zásilkovna’s hand out place and an Alzabox. In January 2021, Tesco will open the grocery’s Žabka. A GP’s surgery and surgeries of specialist doctors and two cafes will be set up here during the first half of next year. One of the three main gastronomic operations, including an outdoor seating area with fast-food stand will be considerably expanded. We will also increase the number of charging stations for electric cars to six.
What is the situation with rental prices in Brno? Has there been some progress?
We naturally monitor the competition’s prices but we don’t know the exact price inclusive of all allowances and incentives. A significant aspect lies in location, realization, quality, transportation services and preferences. On our behalf I can confirm that A class administrative premises in our part of Brno do have clients. Our concept of buildings, which puts the emphasis on the quality of the interior environment, space variability, ecology, sufficient number of parking places and services will allow us to increase rental prices in GB II on average by 6% in comparison with GB I.
The impact of the first wave of the pandemic can be fully seen within the real estate market now. Is it possible to define the trends that will show up in months to come?
We can see that the administrative market froze. The market of office rents will not begin until the pandemic is supressed and the economy is fully functional. The situation will gradually return to normal. Home offices will play a more significant role in some segments but administrative work will continue being mainly done in offices. Working and social contact is important in order to achieve excellent team work results. Moreover, home offices require a certain type of environment and background which not every employee has.
The moving of Czechs into rental housing is a current trend. Isn’t it an opportunity for its development? How do you see the current situation?
Development of residential housing is very attractive these days. We are also considering complementing our portfolio with rental housing but we consider it a natural part of space where one lives, works and relaxes. Space for living.