The three-year reconstruction of the Palladium shopping centre under the baton of Sentient has. been successfully completed.

The international consulting company Sentient is proud to have successfully managed the organization of a complex refit of the Palladium shopping centre in Prague. The total reconstruction of the common areas was carried out from the beginning of 2020 while the shopping centre was in full operation so as to minimize interventions and the impact on existing tenants and customers.

Reconstruction under full operation

The reconstruction and refit included, among other things, the construction of a new floor behind the main entrance together with a new reception and distinctive anodized elements hiding the technology leading to the roof; unification and replacement of awnings on both historically protected entrances to the shopping centre; modifications of the facade to match the new design of the shopping centre; full replacement of common area lighting with remote control and monitoring, including the installation of Preciosa designer lighting fixtures in the entrances; a new programmable LED tunnel around the main escalator to the food court, as well as a total reconstruction of the food court floor. All of this was achieved without any interruption to the operation of retail and restaurant units.

The visitors did not notice anything

“The owner of the building put great emphasis on architectural detail and the quality of the execution of all of the work. Most of the construction activities took place at night, and during the reconstruction period it was necessary to deal with a whole series of organizationally and technically demanding tasks as a result of working during the full operation of the centre. It was crucial to phase each stage of the project so that all the retail units could remain open the whole time, and the customers would ideally not even notice that anything is going on. Furthermore, the project was affected by complications related to the coronavirus pandemic, which, among other things, brought significant pressure on our ability to keep sufficient workforce on the construction site and the subsequent extreme increase in construction costs. Nevertheless, all phases of the reconstruction were completed to the required standard, in accordance with the planned time schedule and within the approved investor’s budget,” says Martin Scheuch, Director of the international consulting firm Sentient, which provided the services of project and cost management, quality control, technical tenant coordination and health and safety coordination on the project.

The organization of similar complex reconstructions and refits is one of the long-term specializations of Sentient, which provides a wide range of consulting services across the CEE region. The first significant projects of this type include the reconstruction and extension of The Mark hotel (formerly the Kempinski Hotel Prague), the reconstruction of the Škoda Palace, and especially the reconstruction and expansion of the Černý Most shopping centre. In recent years, the same approach was used during the completion of the reconstruction and refit of the Myslbek and Karviná shopping centres and during the ongoing reconstruction and extension of the Grand Hotel Evropa on Wenceslas Square, which is being transformed to the first W Hotel by Marriott in the Czech Republic.

About half a year ago, Development News reported on the reconstruction of the department store Máj situated on the corner of Národní třída and Spálená Street in Prague. The construction work has, meanwhile, progressed significantly.

We discussed the progress with the brothers Václav and Martin Klán, the representatives of Amadeus Real Estate a. s., which is implementing this complex reconstruction in the centre of Prague.

How has the reconstruction of the department store Máj progressed since our last interview some six months ago?

Václav: What has fundamentally changed since our last meeting is that the reconstruction of Máj was physically started. The building was taken over by the construction company Metrostav, with which we cooperate very well in all of our activities. Demolition work is currently underway and according to the schedule, it will be completed at the beginning of next year. Then we should start with HVAC and other related activities.

What has been, so far, the most challenging?

Martin: What is the most demanding on the entire reconstruction is the location in the very centre of Prague. It means to perfectly match the logistics – material transport and waste removal, which is very challenging. The temporary installation of a mammoth crane on Národní třída or other necessary occupations that required the complete closure of the entire street alone was very complicated to organize, but we have, so far, been managing it perfectly with Metrostav.

How does cooperation with a construction company in such a complicated area work?

Václav: We are naturally in daily contact, we have work meetings once a week and regular inspection days at the construction site, but physically, we are permanently on the construction site every day, when we check the scope and quality of the work. The cooperation works very well on this basis.

You are currently completing the demolition of the interior, which means the removal of waste material directly from the centre. How is it going?

Václav: There is a large amount of construction debris and other waste that needs to be removed from there. What really helped us there were the original car lifts that were installed in times Máj was built (1972–75, author’s note) and which were really oversized. This really helped us with the removal, because we can’t even imagine how we would manage to remove the construction waste without the car lifts – and the construction would also be certainly prolonged by several months.

How are you managing to stick to your financial plan in these, shall we say, difficult times? 

Martin: What we perceive very positively is that even now – with regard to the increase in the prices of materials and construction work, the financial plan remains in its original setting, that is the total costs will be CZK 4 billion once the reconstruction is completed. We naturally expect that there will be some additional work, but that happens on every construction site. However, we still stick to the set budget.

Have there been, so far, any cosmetic changes to the overall appearance of the building during the reconstruction?

Václav: We still stick to the original concept – there will be a supermarket on the underground floors, and shops on the ground floor and first floors – the so-called impulsive shopping. People who pass through the department store will be able to buy coffee across the street, to get something from a bakery, newsagent, flower shop, pharmacy, perfumery… Several tens of thousands of people will pass through the department store every day.

Have you mapped out the frequency of people in the given location? 

Martin: About 90,000 people pass through the junction by Máj every day, and around 45,000 people pass through the shopping arcades at Máj. We do not anticipate large purchases, but rather something on a daily basis. Máj will be linked with Quadrio on three levels. The gastro zone situated one floor higher will be extended in order to satisfy the enormous demand, because such a concentrated range of restaurants in one place is barely to be found in Prague. It will basically represent an expansion of the food court range in Quadrio. On the upper floors, we plan entertainment for families with children. By the way, the upper floors will provide visitors with a wonderful panoramic view of Prague.

This prompts the question as to how is your cooperation with the neighbouring Quadrio going?

Martin: The buildings are connected on three levels. We work together and we must work together, and I would like to point out that our relations work very well. Once the department store Máj is completed, we want to create a large location where many visitors will not even notice whether they are in Máj or Quadrio just because of passing through a passage. In no way do we feel that we should compete with each other.

What do you consider to be the biggest crowd-puller compared to the competition?

Václav: Probably only few people know that there are breathtaking views from the terrace of Máj that have not yet been made accessible. In the past, there were technologies, which are already outlived by their dimensions. Today, they are more modern, smaller and also more economical. And since it would be a shame not to make the upper floors accessible to visitors, we decided to place the technology in the basement and thus offer people really beautiful views of Prague. We believe that they will like to spend time there and enjoy the view of the panorama of Hradčany.

Martin: I would like to add that the original Máj had six accessible floors, but after the reconstruction, there will be nine of them available to the public. The mass and size of the object remains the same, but the point is that the technologies were at the inaccessible upper levels.

 

Let’s get back to the technology. What are your plans in this regard?

Václav: It is a big topic for tenants today! Common operating costs are also important to us because we look at it from a long-term perspective. The goal is, of course, savings on the operation of the building for both us and the tenant. That is why we looked at the certifications we can achieve. And since we are located in the centre of Prague, we only have certain limited options as to how to achieve the certifications. We cannot, for instance, have solar panels on the roof of the building, use grey water and such things that we can afford in our other projects. However, it is not possible in this case because we are in a conservation area. And that is why we decided on the BREEAM certification, which is not quite the standard in the case of a listed building. But we have decided that this is a certain direction to take, and of course, we want to achieve the greatest possible financial savings and positively influence the surrounding environment.

How do you want to solve the distribution of goods in such an exposed location in the centre?

Martin: By keeping the original car lifts, we have a huge added value in terms of supply. Despite the fact that we are in the centre of Prague, the supply will be relatively simple and very comfortable: A lorry will arrive at the car lift, go to the appropriate floor and unload the goods.

In parallel, you certainly have to continue communicating with tenants. How are you doing there? 

Václav: First of all, we keep to the deadline for the completion of the reconstruction that is March 2024. We are in daily contact with future tenants, we finalize contracts and continue negotiations with some of them. We expect that some will come at the last minute, because for some it is a long time. We know that we have another challenging period ahead of us in this regard, which is not unusual. But we still proceed according to the schedule and do not deviate in any fundamental way.

Martin: Regarding the fact that we are actually a new department store in the centre, tenants are showing great interest. Most of the contracts are currently signed and we are negotiating with other interested parties, so we still have a few units for rent. At this moment, we can reveal that some new brands that have not yet been in the Czech Republic will come to us and are planning to expand there.

How does the cooperation with preservationists work? 

Martin: Every week, we consult the current reconstruction process, material solutions or perhaps the reflectivity of the facade lights. We should achieve a design that will be as similar as possible to the original building. That means that we are not changing the size and appearance of the building fundamentally, and the materials will basically be a replica of the original ones. But we are planning to change certain details, such as the entrance to the building in the parterre from Spálená Street or the relocation of the front soffit onto the street line in Národní třída. We have to keep the exterior appearance, but we can afford some changes in the interior. I will introduce a new interesting feature – an opening in the ceilings towards the gastro zone, which will help to open up the space more. This will result in making the customer more comfortable for the opening will give him greater clarity of the space and at the same time, it will entice him to visit the upper floors. I would also like to point out that we invited the original authors, architects Martin Rajniš and John Eisler, to the reconstruction. Cooperation with them is extremely interesting for us. Both architects still have incredible energy, and they are incredibly enthusiastic about the reconstruction that we are implementing together. And we really sincerely appreciate that.

Arnošt Wagner | Photo: author and archive of Amadeus Real

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.