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.

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.

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.

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.

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.