The industrial real estate market continues to grow

The Czech industrial real estate market is growing despite problems in the construction industry and rising inflation. Apart from the expansion of existing operations, new operations are also being built and storage and production areas are being expanded.

The mark of 10 million sq m of premises was exceeded in the first half of 2022 and, according to forecasts, the market will surpass the mark of 11 million sq m by the middle of next year. The projects implemented by the consulting company Colliers also play a significant role in this.

Expansion of production of lift components in Ostrava

The effects of the Covid pandemic, the impact of the war in Ukraine, the growth of inflation and interest rates, or the lack of workers and materials in the construction industry have not yet had any negative impact on the industrial real estate market. On the contrary, the Czech market for modern industrial real estate is growing rapidly. In the first half of 2022, 1.3 million sq m of new premises were under construction, most of which should be completed this year. Thanks to that, the market will exceed 11 million sq m already in the middle of next year. The highest share of new premises fell to the Moravian-Silesian Region, followed, with a small distance, by the Olomouc Region and rounded out by the Central Bohemian Region. However, interesting projects were created across the whole of the Czech Republic.

In Ostrava, for instance, Colliers mediated the relocation and expansion of the production plant of Savera Components. This manufacturer of lift components, which has been operating in the Czech Republic since 2019 and employs approximately 80 employees, currently uses premises with an area of less than 5,000 sq m in the CTPark Ostrava Hrabová area. However, due to the impossibility of expanding their production and storage capacities in this area, they are now moving their production plant to the new CTPark Ostrava Poruba, where they will have a full area of 11,430 sq m at their disposal. These premises will allow the company to build new assembly lines and a paint shop, thus expanding their production capacity.

In 2019, Colliers already assisted this Spanish manufacturer in finding a suitable location for their first Central European production plant, and apart from advising on the selection of the site, they also negotiated the terms of the lease. Ostrava won in the competition of Polish and Slovak alternatives, mainly thanks to the availability of local labour, the long tradition of local metalworking and the availability of quality premises.

The last available unit in Logistika Park Pardubice

Small units are also in high demand. Experts from Colliers helped for instance, Foxconn CZ, with the search and negotiation for the lease of smaller warehouse space and the company occupied the last vacant unit with an area of 518 sq m in the Logistika Park Pardubice complex in Černá za Bory. Foxconn CZ intends to use these premises primarily for storage, sorting and packaging of finished products and for other services. The construction of the modern Logistika Park Pardubice was completed by Demaco in the spring of 2022. The entire complex with a leasable area of over 100,000 sq m owned by Star Capital Finance is now fully occupied.

A new hall for 700 workers near Plzeň

Another interesting project that Colliers mediated is the construction of a new production hall in Nýřany near Plzeň. The new premises with an area of 36,400 sq m will be custom-built for the American company Shape Corporation by the development company Panattoni. Due to the specific requirements of the customer, it is a technically very demanding project, which took both parties more than a year. Shape Corporation plans to move their operation from Borská pole to the new hall and also expects to expand the production of deformation zones. The production is to be commenced in the first half of 2023, where the full operation in Nýřany will include up to 700 employees. The complex is situated in the brownfield area of former black coal mines. The new production hall will meet the strict requirements of the BREEAM ecological certification, which is why the project’s carbon footprint has been accounted for since the beginning of the construction.

Demand for commercial real estate remains

Investors are currently in a rather complicated situation, which results from the relative geographic proximity of the war in Ukraine, its effects on fuel and energy prices, and other disruptions to supply chains. The development of macroeconomic and geopolitical trends is not very positive. However, these are not problems that would exclusively concern the region of Central and Eastern Europe or its individual countries. Investors can still find opportunities that they should consider accordingly there.

Green certifications are becoming part of the construction process

We continue to present the activities of the Savills office in Prague. This time, we are introducing the Building & Project Consultancy Department which provides construction consultancy and project management services for investors and occupiers of all sectors of real estate in Central Europe.

The Building & Project Consultancy department of Savills CZ has six members who work under the leadership of Jan Jurčíček, Head of BPC. He answered our questions together with Barbora Jansová, ESG Consultant and Project Manager.

The Savills Building & Project Consultancy department has a relatively wide range of activities. Could you introduce them, please? 

Jurčíček: Our department started building services on transactional technical consulting, that is technical audits aimed at identifying risks arising from real estate’s technical condition during transactions (technical due diligence). We not only examine the current state of the property or prepare a plan for the necessary capital investments in a horizon of for instance 10 years, but we also check the issued permits, proprietary relationships and the state of the technical documentation related to the building. This requires extensive experience with the process, for instance in aspects of cooperation with legal and commercial consultants. Other pillars that we have gradually started to add are project management, project monitoring especially for banking institutions, consulting in the field of sustainability and, of course, specific technical consulting and the preparation of feasibility studies based on the specific needs of our clients, which include investment groups, funds, multinational clients, developers, banking institutions, but also private individuals. The area of sustainability and ESG is a relatively new segment for us. We began to pay more attention to it in 2021, and with the recent arrival of Bára Jansová, this sector becomes even more important for Savills, as we want to expand our portfolio of services with detailed ESG assessments.

What do you consider to be the key activity? Or do all of them have the same importance?

Jurčíček: They all are not of the same importance. For me personally, the closest are the already mentioned technical audits, which I have attended to for over 10 years, and which have, for several years, formed the core of our activities. We are now doing well in diversifying services. Project management is very much on the rise – both in the case of commercial constructions and industrial buildings – and so is project monitoring for our clients. The spectrum of services is now spread out in a healthy way, which allows us to respond better to recent market fluctuations or even those that may emerge with persistent inflation and highly compressed transaction yields.

There are traditional activities, such as project management, but also ‘modern’ activities, including green certification or the more and more frequently mentioned ESG. What does ESG actually entail?

Jurčíček: I would like to say that ESG is not a new term. I see this area as a new approach to the overall evaluation of company processes – and in our segment also to the impact the construction and operation of commercial real estate have in several areas that were previously evaluated separately and without wider context.

Jansová: As Honza mentions above, ESG is basically a new name and concept for already existing initiatives and processes. At Savills, we see this as an opportunity to help our clients evaluate possible ESG risks in time, whether within the framework of individual buildings or the entire portfolio, set long-term ESG strategies, and help with the preparation of comprehensive and transparent reporting due to the growing requirements of ESG legislation and various ESG standards and principles. We believe that responsible investing or consideration of environmental, social and governance or corporate criteria (ESG) brings a long-term competitive position in the market, financial results and a positive social impact. Since we have many years of experience with green certifications and other green services, we are able to provide our clients with comprehensive advice that takes into account not only ESG but also other aspects in the field of sustainability.

Can you describe a specific project or situation?

Jurčíček: One of the main drivers is the financing of commercial projects. Retail investors and banks are increasingly aware and set incentives for financing sustainable projects, and that is why they use ESG metrics that derive from European legislation. A particular example is the situation of not only large players in the real estate market, who aim for preferential financing, and therefore implement green certification processes more often already in the construction process, not only as an evaluation of existing buildings, furthermore, it is an increased emphasis on operational savings forced by rising energy prices and pressure from tenants, who gradually refuse to rent uncertified, uneconomic premises with a high carbon footprint. All of these factors necessitate investment in optimising building envelopes, efficiency of heat and cold source technologies and considering other options such as photovoltaics.

You are active in various segments of property development – from residential to retail, from hotels and offices to industrial and logistics real estate. Which part do you focus on the most and in what respect? 

Jurčíček: You are right, we operate in all sectors, however, our focus is based on the most active sectors in the market, which are still offices and industrial real estate. The industrial real estate sector is, since Covid era, experiencing steeper growth than before and offices still represent a traditional target for our clients’ investments, just like in the neighbouring countries. The retail sector in the Czech Republic is relatively highly consolidated, which limits the demand for consultancy services, but the residential sector, for instance, is increasingly active and we manage to use partnership cooperation with Lexxus there.

Do you have a ‘flagship’ project, that is a project on which you have applied multiple activities?

Jurčíček: The DRN building is an ideal example. Four years ago, I led a technical team in the acquisition of the building. Savills now manages the building, leases it and our team now conducts an overall in-depth technical audit in order to identify warranty defects. DRN building has recently achieved Excellent rating in Asset Performance according to BREEAM In-Use v6 and Savills acted as an Assessor Company on this project supporting the Client in all aspects of the certification process. We also continue further discussions with the client to assess the ESG impacts of the building operation. It is a unique project in the Prague market and the building is also exceptional for the whole Savills team. We are very grateful to our client that he has entrusted us with the overall care of this building and that we can prepare such an extensive and comprehensive package of services for him.

The emphasis on energy-efficient buildings will increase

The energy efficiency of buildings will be an increasingly important topic in the future, this being due to the upcoming changes in the European requirements for new buildings.

 

Smart energy solution can also be a welcomed benefit for the end user of the building, whether it is logistics halls, warehouses, offices, or housing blocks and other residential projects. That is why development companies are increasingly interested in photovoltaics and other energy-efficient solutions.

Modern technologies bring savings

Photovoltaics, in combination with battery storage, represents an ideal solution for residential properties where rooftop installations provide the basis for daytime consumption and battery solutions supplement night-time operation. As for the industrial properties or retail centres, they reduce the overall energy consumption of buildings and improve their economic balance. A solar roof and appropriately solved energy storage will therefore represent lower operating costs in the future and thus increase the attractiveness of the entire building. Recently, this trend has also been significantly supported by rising energy prices.

Raiffeisen – Leasing has been following ESG for a long time, which is why we have, as one of the first financial institutions, already started financing solutions that lead to the reduction of emissions and the transition to renewable sources. We have a lot of experience in financing photovoltaic power plants from 2009–10, and at the turn of 2021/2022, we adjusted the conditions for a new type of financing without a guaranteed electricity purchase price.

Raiffeisen – Leasing offers a solution

Currently, we mainly offer financing for photovoltaic sources, this being from 5 million CZK (about 300 kWp). Along with financing, we offer comprehensive subsidy and technical consulting services. What is currently of particular interest are subsidized titles where the support reaches up to 50% of the purchase price. Our specialized subsidy team can provide all suitable options for subsidy support for each project and facilitate the entire administrative process for clients so that they have as little worries as possible when processing the subsidy application. Thanks to our experience in the construction of photovoltaics, we can also help find the most suitable installation suppliers.

At Raiffeisen – Leasing, we can offer financing for photovoltaics separately or together with the financing of the entire building. In addition to solar power plants, we can also finance other energy-saving solutions, such as coge-
neration units or heat pumps. These alternatives are usually welcomed especially in the case of industrial real estate; for instance, heat pumps are becoming more and more popular among developers of residential buildings. It is obvious that even the approach to development and construction has been changing in the long term, and the issue of energy efficiency will also be an essential part that the end users will look at. Raiffeisen – Leasing is a partner for all companies that provide financing not only for the real estate itself, but also for technological components enabling their economic and ecological operation.

MIROSLAV PATÁK, PROJECT MANAGER

Environment and flexibility matter

Successful companies are based where their employees like it. Modern offices cannot do without comprehensive civic amenities and a pleasant surrounding environment.

We discussed the situation in the Prague office market, future projects, news and social responsibility with Lenka Preslova, Sales Director at Passerinvest Group, a. s.

What is the current situation in terms of renting your office premises in existing buildings in Brumlovka and Nové Roztyly, Prague?

We see that the interest in office premises continues, and companies are trying to motivate their employees to return to the offices. However, it is clear that the covid period has brought fundamental changes to the way of work and many companies use the combination of physical presence in the office and home office. This also entails a change in the layout of the premises, sometimes even in their size. As the owner of most of the buildings in Brumlovka, we are able to accommodate the tenants as much as possible and find a suitable solution for their current needs, including a possible combination with a flexible solution in our own FLEKSI serviced office concept. Today, we already encounter cases where the client compares the alternatives of standard rent and serviced offices. The fact that we manage to deal with renegotiations of existing contracts successfully and that the tenants are satisfied there only proves that the energy and finances we invest in the continuous development of the area make sense. With regard to our other location in Nové Roztyly, in particular the administrative building Roztyly Plaza, which is currently under construction and will be available in the first quarter of 2024, we managed to secure a pre-lease of almost half of the building, which will be occupied by the successful Czech IT company SCS Software. With the construction of the Roztyly Plaza building, we are starting a development of an entire location in the neighbourhood of the Roztyly underground station, where there will be a new urban district in the territory of a former brownfield and is to combine offices, residences and civic amenities.

What do customers want most? What do they prioritize when making decisions? 

Apart from financial parameters, which are of course still very important for clients, there are other non-financial aspects that also play an increasingly important role. It is primarily about civic amenities within the building and the immediate vicinity, whether in the form of a shop, services, or an opportunity for sports and relaxation. One of the examples are roof terraces on buildings that are used for informal work or relaxation as well as for tenants’ corporate events. Another aspect that is gaining importance is the lessor himself. In the last two years, there has been a greater need for flexibility on the part of the tenants, both in terms of the size of the premises and the duration of the contract. Tenants often look for a partner who will be ready to deal with their requirements flexibly even in times of unexpected changes and meet them, perhaps even beyond the scope of concluded contracts, and assist them in looking for solutions that will help them keep their business as efficient as possible.

You have recently added shared offices to your portfolio of services. How is this project going and what do you currently offer?

We currently have a branch in Budova B building in Brumlovka, Prague 4, which is 100% occupied by Microsoft. This November, we are opening a second branch in the Beta building, and we already have many clients in negotiations and have even signed contracts with some of them. In the second quarter of next year, we will complement this with a third branch in the Philadelphie building. In total, Brumlovka will offer 10,000 sq m of serviced offices. We are convinced that this concept belongs in a complex like Brumlovka. Thanks to that, we can offer more of flexible alternatives in addition to the standard rent or attract new clients, who may eventually become our direct tenants.

What new projects are you planning, what would you personally recommend to a new client?

Next year, we are planning another construction in Brumlovka in Prague 4, specifically the HILA building. It will be unique thanks to the combination of offices, retail and rental housing all in one building. This project is a challenge for us especially from the point of view of future operation – we will manage not only the commercial part, but also the residential part. We believe that it is a project which combines multiple functions that has its future and follows the principles of the so-called city of short-distances. These are especially important from the point of view of long-term sustainability and reducing the traffic load in cities. As for the Nové Roztyly locality, we are planning a construction of the second Sequoia administrative building, which will be unique in its visibility thanks to its location in the neighbourhood of two important Prague traffic arteries – the arterial road and the South Connecting Road. In the meantime, we are also continuing preparations for the residential part of the project, which will offer a total of 600 residential units.

How do you see the frequently discussed topic of ESG in the real estate world? And how does it specifically affect your corporate projects? 

ESG is a topic that resonates increasingly through all disciplines. In the real estate world, they often talk about the environmental component, because the construction of buildings as well as their operation contributes significantly to the volume of emissions produced. However, as a developer and long-term investor of multifunctional premises, we see the equally important role of other parts of the agenda – social area and governance. LEED and/or BREEAM certifications are already the standard in our emerging and upcoming projects, and the entire outdoor area of Brumlovka is currently undergoing an assessment process as part of the Fitwel certification. A sustainable approach to development has been embedded in our company’s DNA for many years, which means that the ESG does not, in many ways, mean a fundamental change to our strategy. However, we perceive the tenants, banks and investors’ current requirements and implement them in our projects. Our main topics in the environmental area are, without a doubt, the reduction of the amount of emissions produced and the maximum efficiency of building operations, careful water and waste management, and the support of biodiversity in the areas where we build our projects. As for the social part of the agenda, we are dedicated to cooperation with local communities and above-standard care for our clients. Last but not least, an ethical approach to business and consideration of the ESG criteria when choosing our suppliers is also important to us.

Low-carbon glass was developed at Saint-Gobain Glass

Saint-Gobain Glass has come up with a ground-breaking technical innovation, thanks to which they launched onto the facade solutions market a new glass with, so far, the lowest carbon content.

This unique glass, which is developed through the combination of a high content of recycled glass (around 70% shards) and renewable energy, is the result of significant research and development efforts and the high expertise of our industrial teams.

Significant reduction of the carbon footprint  

Considering that facades represent up to 20% of a building’s carbon footprint, this innovation will bring about a significant reduction in the construction industry and accelerate the development of a circular economy.

The low-carbon glass follows on from Saint-Gobain Glass’ first carbon-neutral production completed in May 2022 at their Aniche factory in France. This enabled the company to significantly improve their production processes and gain expertise.

Saint-Gobain Glass now integrates low-carbon products into their portfolio of facade solutions, starting with the COOL-LITE® XTREME solar control glass line, without any compromises in terms of technical or aesthetic design.

The new products will use glass with an estimated carbon footprint of only 7 kg CO2 eq./sq m (using 4mm base glass). This new low-carbon glass will be combined with the existing COOL-LITE® XTREME coating technology, which already drastically reduces the carbon emissions generated by the energy consumption required for the use of the building thanks to its high performance in terms of daylight reception, solar protection and thermal insulation.

The resulting new product line will offer the lowest carbon footprint on the market with a reduction of approximately 40% compared to our initial European product.

Detailed data on environmental impacts will be documented through verified environmental product declarations given by a third-party – EPDs (or FDES in France) – which are currently in preparation and scheduled to be available in early 2023.

Orders from three main partners 

The enthusiasm in the market is demonstrated by orders from three major partners operating in the real estate market – Bouygues Immobilier, Icade Santé and Nexity, who have committed themselves to using COOL-LITE® XTREME low-carbon glass in their projects:

  • Bouygues Immobilier will install low-carbon glass on their Kalifornia office building (Hauts-de-Seine, France).
  • Icade Santé will use this ground-breaking glass on the Polyclinique du Parc building operated by the Elsan Group in Caen (Calvados, France).
  • Nexity will apply it within the Le Carré des Invalides reconstruction project (Paris, France). From an environmental point of view, these are undoubtedly extremely ambitious projects.

This ground-breaking initiative is the first step to expand the Saint-Gobain Glass’ offer of low-carbon solutions in various markets and is fully aligned with the Saint-Gobain Grow & Impact strategy, in particular with the plan to achieve carbon neutrality by 2050.

Further sale of apartments in Arcus City commenced

UBM Development Czechia is launching another sale of apartments in the central part of the Arcus City residential project in Prague – Řeporyje.

The offer includes 63 modern apartments as well as several commercial units suitable for small shops or services. The construction began in August 2022 and is to be completed in December 2024. The sale is handled by Lexxus Norton real estate agency.

The apartment building with three towers G, H and I provides a varied offer of apartments in layouts ranging from bedsit + kitchenette to 3-bedroom apartments and sizes from 38.9 to 101 sq m. Each unit comes with a spacious balcony, terrace or front garden. The apartments are equipped to a high standard with large wooden windows and wooden floors. Of course, there are cellars and a parking space in the basement of the building.

“Acquiring one’s own home is becoming more and more difficult for many due to the current situation associated with rising mortgage interest rates. Thanks to the cooperation with Hypoasistent, we have the opportunity to obtain financing for the purchase of an apartment on more favourable terms,” says Alice Slámová, Marketing and Sales Director of UBM Development Czechia, and adds: “To make important life decisions easier for our clients, we offer the option of using a payment schedule when buying real estate. The client pays 15% of the purchase price at the beginning, 5% in a year and 80% only after the apartment is finished, and all this without increasing the purchase price.”

During construction, UBM also pays attention to the environment and realizes the housing block with BREEAM ecological certification. The certification includes a standard of practice in the area of building design with an emphasis on sustainability and represents a practical benchmark for describing the impact the building has on the environment and energy savings. Only four of the 150 apartments of the first stage, whose final building approval is planned for the second half of 2023, remain in the offer. In the third stage, UBM will offer 62 apartments and 10 family houses, while the housing blocks will be built partly in a combination of wood and other building materials.

Each of our projects meets the highest quality criteria

GARBE has been operating in the Czech and Slovak markets for about two years. During that time, they have established themselves quite soundly here and are preparing three industrial parks, while the one in Piešťany belongs among the top ones in terms of sustainability.

Martin Polák, Director of GARBE for the region of Central and Eastern Europe, answered our questions.

Garbe entered the Czech market in 2020 – actually almost at the same time as covid. How has this pandemic affected your development?

The first negotiations about potential opportunities began in the spring of 2020, when we agreed on cooperation with the German headquarters. We officially started our activities with the acquisition of a brownfield in Chomutov. We announced this in October 2020. We revitalized the land and today, we are building a hall there for the important German company Fielmann that deals with optics. They signed a preliminary contract for the originally speculatively prepared premises with an area of 30,000 sq m. In this respect, we are very satisfied and consider our strategy a success. The pandemic has certainly affected our entry onto the market and in many ways, we had to be more proactive and adaptable. The markets were uncertain, some negotiations dragged on and one often couldn’t be sure what was coming. On the other hand, it also had advantages for us. We made it clear that we mean it. We are a small team and could, and still can, afford a great deal of flexibility.

How did Garbe entrench itself in the Czech and Slovak markets in those two years?

I think very well. We managed to buy land, start several projects, both turnkey and speculative, and conclude the first lease agreements. In Chomutov, Fielmann plans to build a fully automated production and distribution centre, which is associated with the creation of up to 500 jobs in the region and an investment worth EUR 65 million. In České Budějovice, we managed to acquire a lucrative plot of land with an area of almost 500,000 sq m. In June 2021, we entered Slovakia by acquiring a plot of land with an area of 70,000 sq m in Piešťany. Today, we are building a second building with an area of 18,000 sq m there. We managed to rent the first hall with an area of 8,000 sq m even before its completion. Our tenants are Inalfa and Naut s.r.o. We are also doing well in Poland, where we have an investment team that manages assets worth almost EUR 150 million.

The industrial park in Piešťany should meet all ‘green’ criteria. How far are you with it?

Yes, GARBE Green Park Piešťany is certainly, so far, our greenest park and is also one of the greenest industrial properties in the region. It is not dependent on gas, and both buildings are nearly carbon neutral in operation thanks to air-driven heat pumps and photovoltaic panels. The local source of water from its own well is connected to a circular system that ensures its optimal consumption and recycling. Operational costs will be minimal thanks to our own energy resources. When designing the project, we took into account the surrounding landscape, so the halls respect the surroundings. There was also a space for beekeeping set aside on the property, and we also preserved the original forest. The first building is already completed and leased. Recently, we have announced the start of the construction of the second hall. GARBE Green Park Piešťany is currently the only plot where it is possible to build logistics halls in the region. We can already see that there is also a lot of interest in the second sustainable building.

In the Czech Republic, you are preparing projects in Chomutov and Boršov near České Budějovice. Can you introduce them in more detail? What stage are they at?

Both projects are quite specific and are doing very well. Both are located in excellent locations. Chomutov is only 18 km from the German border. This is ideal for German companies operating there or for those looking to expand into Western Europe. The same applies to the project in South Bohemia. After the completion of the D3 motorway, this region will be ideal for distribution to the whole of Europe. The area of the land is unique, and we will be able to satisfy demand for areas of several tens of thousands of square metres. At the beginning of September, we received a building permit for a speculative construction of a 20,000 sq m hall, which enables us to provide our client – a logistic or manufacturing company – with a turnkey solution already in 2023. By the end of the year, we plan to obtain building permits for additional halls with a total area of 50,000 sq m.

To what extent will these spaces fulfil the conditions of sustainability?

Every project we build meets the highest quality criteria in our field in the market. Chomutov was originally an outdated building site and needed to be revitalized. Only then could we start with the construction. Just like in Piešťany, in České Budějovice we plan to recycle water sources or implement solar panels with the aim to reduce the carbon footprint to a minimum. Most parks are equipped with photovoltaic panels. Sustainability is a matter of choice, and we believe it to be the right way. Our head office in Germany sets a good example and we always agree on investments in sustainable solutions. GARBE Green Park in Piešťany can be considered our flagship. According to our clients’ reactions and with regard to the energy crisis, we definitely want to continue with this strategy.

Both of these parks are relatively strategically located near the main roads. What is the tenants’ interest in them?

In this respect, nothing changes, and when choosing new premises, location is still the most important criterion for our industry and the customer. Central and Eastern Europe is the heart of Europe, which makes the region a strategic location for distribution and logistics. It can also be seen in the fact that other players in the market are also doing well and most of the locations are occupied. It turns out that the winner is now the one who has a planning permit or has commenced speculative construction and can offer premises within six to nine months of demand. Another key element is the terms of the lease. Companies that previously only considered premises near large cities such as Prague, Brno and Pilsen, prefer to rent industrial halls even 50 km from the ‘ideal’ location, because the monthly rent for 1 sq m is proportionally 2–3 euros lower. That means that we will continue to look for locations that offer easy and convenient access to major motorways, but we are not averse to smaller towns either. Attributes such as sustainability, quality of the premises and services we provide the customers with are extra, but we cannot do without the right location.

Offices become a tool to attract employees

Savills was founded in 1855 in Great Britain and is now one of the world’s leading real estate and consultancy companies with more than 600 offices worldwide.

One of the areas of operation is also the office market, where Savills provides a wide range of services from advising on refurbishment and fit-out to offering a one-stop occupier services offering. Pavel Novák, Head of Office Agency, and Matěj Baranek, Associate Director, described the situation in this segment closer.

How busy are the offices now? How is the situation in our country and in Europe? Will employees return to offices?

  1. Novák: In general, it can be said that employees are gradually returning to offices, however, we still have not reached the pre-pandemic level and it is likely that we will never get there. Within Savills, we monitor the statistics of average occupancy of leased offices by employees during the working week on local and international level (based on anonymous data within building’s systems and surveys carried out among companies).
  2. Baranek: According to data from Savills, the average office occupancy rate in Europe was only 43% in the second quarter of this year, while in Prague it was only 38%. Office occupancy rate is more or less similar to the USA, but lags behind Asia, which will come as no surprise to many.

How was it before the pandemic? 

  1. Baranek: In 2019, the average office occupancy rate was still at the level of 70–75%, which reflects the optimal use of buildings: a higher occupancy of the premises would represent too intensive and therefore inconvenient use. Too low a level would represent insufficient use of premises. One can thus say that many offices are not optimally used now. This results in the necessity of transformation – companies generally pay rent for empty chairs, but at the same time, they lack spaces for meetings or video conferences.

Where do you see opportunities in the office segment today? And where are the pitfalls? 

  1. Baranek: The pitfalls are obvious – construction and operating costs (especially in the oncoming winter) but also inflation clauses in rental contracts. These are the parameters that will have a significant impact on the office market. Despite the negative economic outlook, the overheated situation on the labour market continues, which is also reflected in the office market – offices are becoming a tool to attract employees. We find that companies that look for a new impulse connect it precisely with new premises.
  2. Novák: For us, this represents more demanding work and more complex services – it is not enough just to find an office for the company and negotiate the terms of the lease. It is necessary to involve more experts throughout our company in order to be able to deal with possible risks, minimize costs – from construction technical consultants, work environment experts to real estate management from the point of view of operating costs to our new ESG department, which helps with possible savings as well as potential green certifications.

How far in advance do companies arrange for offices today when it is difficult to plan for future demands?

  1. Baranek: We recommend that companies with 50 to 100 employees arrange for offices 12 or 18 months in advance. When searching for new offices and renegotiating existing contracts, this brings the companies comfort in the form of a wide range of available premises and sufficient time to implement the entire project. It is very individual, and it also depends on the strategy of the particular company, but also on the limitations in the framework of company management, which we encounter especially in the case of centrally managed multinational companies. However, we are able to handle last-minute requests as well as more complex projects of companies with hundreds of employees, which have to look for new offices years in advance and often focus on projects that are only being prepared.

What about locations – where is the new centre today? Where do you see the future of city districts? 

  1. Baranek: If we use the underground station as the starting point of orientation, the new centre, or possibly the new administrative centre of Prague is being created between Náměstí Republiky and Křižíkova stations. This is due to the great popularity of this location, especially among tenants from IT and technology companies. They are the ones who set the pace and trends among office tenants today. Prague 4 is also still popular and continues to expand and develop, especially around the Roztyly underground station or prospectively around Nový Opatov. Another development area around Smíchov Station will be popular especially for residential users. The attractiveness of the location for office users will depend on the date of completion of the new headquarters of Česká spořitelna.

Don’t you think there are too many brokers and consultants in the market now? How difficult is it for you to stand out? 

  1. Novák: Yes, after all, it does not only apply to real estate. In general, there are too many different consultants or intermediaries in the Czech Republic, which is also due to the limited regulation by the state. However, the coming recession will lead to a clean-up, and we are also to expect some companies’ consolidation. Fortunately, we have a high rate of returning clientele, which means we are doing a good job. The reason for that is perhaps the fact that, even though we are part of a corporation, we do not try to propose unified solutions and we listen to our clients – they are with us because we know them, and we know how they work. Last but not least, we also have a strong background, thanks to which we can offer an adequate range of services. As a company listed on the London Stock Exchange and one of the largest global players, we can even invest in times of recession. After all, my team was also part of a strategic acquisition that was made during covid when many companies were looking for savings. After all, that is also why Savills managed to grow into one of the dominant players in the Czech Republic during just five years of operation.

A hall can no longer be rented without certification

The Belgian family company VGP – developer, manager and owner of top logistics and semi-industrial real estate – operates in 19 European countries and, since 1998, also in the Czech market. 

Thanks to a fully integrated business model, capabilities and many years of experience, the company is able to implement projects from the purchase of land to the construction and asset and real estate management. Originally a construction company, VGP now strategically focuses on the realization of large multi-tenant industrial parks. David Plzák, VGP Country Manager for the Czech Republic, answered Development News’ questions for us.

The interest in logistics and warehouse space has increased significantly due to the development of e-commerce during the Covid era. How did this period affect your business?

There has been a significant increase in demand for warehouse and industrial space and a corresponding increase in rental prices from the start of Covid until now. Which, on the one hand, brings an advantage when renting or renegotiating existing buildings, but on the other hand, it generates great pressure for the acquisition of new land. We can see a critical shortage of them in many locations, which causes a price rise for those still available. In the last year in particular, we have also registered an almost rocketing increase in prices of construction work compared to previous years, which forces us to be very cautious.

Is it still possible to find land for construction in attractive locations? And what locations do you find attractive?

VGP generally wants to have parks near motorway exits and near larger cities. The offer in the Czech Republic is already quite limited in such locations, and possible opportunities are associated with significant complications during preparation, either in terms of permitting processes or induced investments. Apart from that, we want to focus more and more on the revitalization and renewal of the territory, the so-called brownfields, where we can make use of the advantageous position inside the cities.

What is the occupancy rate in your properties? To what extent can you afford to build speculatively? And are clients actually interested in speculatively built halls that are without built-to-suit modifications?

The total occupancy of our parks in the Czech Republic is very close to 100%. We have potential applicants for the vacant spaces, and we expect that these will be filled soon. Our long-term strategy is not to implement halls purely speculatively; we always want to have a certain level of pre-letting. We register cases where the client rents the hall in order to be sure that he will not lose the premises, and only then deals with possible modifications. We therefore also register a great demand for halls without specific modifications.

How do you think have the standards of logistics and industrial objects changed in recent years? Is it still possible to build halls today without some kind of certification? Do you have experience with green roofs, or with rainwater collecting, etc.?

In recent years, certification (BREEAM, LEED, etc.) has become a necessity for new buildings. Without a certificate, such a building would be very difficult to rent. Many potential clients, especially larger international corporations, have certification requirements as part of the specification. All our new projects have a BREEAM certificate or are undergoing the approval process. In Germany and the Netherlands, for instance, where VGP has its parks, we implement green roofs and install solar panels on a large scale. We are also planning all this here in the Czech Republic.

How to successfully revitalize brownfields

Since 2009, Contera has been primarily involved in the implementation and leasing of industrial parks in the Czech and Slovak Republics, but the project that is more and more distinctively emerging on the former brownfield in the centre of Ostrava rather deviates from the current focus of this company.

The construction of the Organica administrative building was commenced last autumn, the underground work was completed this spring and the building began to grow up into the heights. Construction of the monolithic skeleton is currently in its second half.

Unique architectural solution

Organica is extraordinary for its architectural concept and gentle approach to ecology. The developer’s vision was realised by architects from Schindler Seko Architects. Administrative buildings usually have an orthogonal floor plan and use the division of space into right angles so that each employee gets a specific number of meters to work in. “When working on Organica, we were not bound in this way, and thanks to the circular shape, we were able to work with the interior space more freely. There is no similarly designed administrative building in the Czech Republic or Europe yet, it is an exceptional work,” says Ludvík Seko, a senior architect.

The project also meets the needs of Tietoevry, which will take roughly two thirds of the building upon its completion scheduled for the third quarter of 2023 and will use Organica as their new headquarters for Central Europe. The international IT corporation expects that some of their employees will work from there, some remotely and some jobs will be shared.

A building with intelligent systems

The concept of the building and its use can be considered timeless. The distribution of fresh air for employees will be controlled by an intelligent system, the building will manage its own heating and cooling according to the season and following the weather forecast thanks to its own weather station. Parking areas will provide charging stations for electric cars and electric bikes, and when looking for a parking space, one can use a mobile application. USB charging of mobile devices will be available on the benches located in the quiet area of the atrium. There is also a plan to use rainwater irrigation system and rooftop photovoltaic panels, thanks to which Organica will be partially self-sufficient in terms of energy.

“When we were dealing with the project at the time of its inception, we had a clear vision for Organica to be truly ‘user and eco-friendly’. How far-sighted it was can be seen now at the time of the incredible increase in energy prices, which have driven the costs of companies to ratio that no one would have believed a few years ago. The prestigious BREEAM Excellent certification, which was confirmed in the design stage,“  says Martin Budina, Project Director of Contera.

An industrial park in a brownfield

CONTERA PARK OSTRAVA D1 in the Hrušov district, Ostrava, is also prior its completion. It is situated in an area of approximately 35 ha and will offer about 151,000 sq m of industrial space, mainly for light industry, warehouses and production. The last industrial hall is currently being completed. The construction of the first expansion of the Sportisimo building will begin in the coming months, and a technology park that will serve scientific purposes is being prepared. CONTERA PARK D1 in Ostrava is currently 95% leased; large areas for rent and the total expanse of the park guarantee flexibility even in case of tenant development. The advantage of the park is in its excellent transport accessibility thanks to the proximity of the D1 motorway, and the railway also guarantees excellent connections to other regions of the Czech Republic, Poland and Slovakia. There are many industrial zones in Ostrava that are almost fully utilized, and CONTERA PARK OSTRAVA D1 thus represents a unique opportunity for further business growth in the city.

The Hrušov brownfield was once used to house workers from nearby businesses. In 1997, the entire area was flooded, followed by its devastation, gradual depopulation and the creation of the so-called social brownfield. Contera has been specializing in the revitalization of brownfields for 12 years, and 84% of the portfolio in the Czech Republic and Slovakia consists of similar projects, and the company wants to continue wending in this direction.

There are over 100 clients working in Contera’s logistics parks in the Czech Republic. Their portfolio is very balanced and is divided into five main sectors – manufacturing (Magna, Aludyne, Malfini, BMK, etc.), logistics (VAS Solutions, DB Schenker, Esa Logistika, DHL/PPL, etc.), distribution and e- commerce (Sportisimo, FAST ČR, AT Computers, Ikea, etc.) and retail (Planeo, Rossmann, Pepco, Spokojený pes, etc.).

Bold plans for the future

There are over 10 million sq m of industrial space in the Czech Republic, which represents approximately 1 sq m per inhabitant. This is a natural development of the market, which illustrates that the Czech Republic is an attractive country for investment and business. At the same time, it is necessary to take into account that the land in premium locations is more or less exhausted and further development can be expected in the regions.

The vast majority of Contera’s projects are in the field of logistics parks, but according to Laurent Jechoux, the Commercial Director of Contera, they are also preparing projects of a different type: “In the future, we plan to diversify our activities more, especially in the office and residential sectors. Organica, which we are currently building in Ostrava, is our pilot office project – and it certainly won’t be the last.”

For the near future, Contera plans to continue the construction of all projects so that new clients can move in on time. At the same time, they are preparing several new projects in the Czech Republic and Slovakia, which will soon be introduced to interested parties.