Development News | 11/2021 (article from page 26)

They are no longer somewhere that needs to be visited daily and somewhere to provide an effective performance, they are now  also a place for gatherings and motivation. We asked Pavel Novák, Savills’ Head of Office Agency for the Czech and Slovak Republics, about changes in clients‘ requirements regarding office location, equipment, facilities and availability.

Do you consider development in the real estate construction market forces developers to alter their approach to office leases? If so, then how?

Yes, indeed, and there are more factors. From how people work, through planning options to construction costs as the premises are, as standard offered in either open space or shell & core. The interior is completed in accordance with tenants’ requirements, at their expense and often with the assistance of the landlord at the time of moving. Rising prices for construction work and the availability of supplies complicates moving to new premises. It is too expensive for many companies and it pays them to remain where they are. Some owners therefore raise the standard of supply, so that landlords carry out part of the work on their own account and at their own expense in order to reduce tenants’ costs. In some cases, we also encounter speculative fit-outs carried out by the owner in accordance with general trends, this would  previously have been unthinkable.

Can you specify that?

That means that some owners build interiors to suit without knowing their end user. The point is that it is better to rent a trendy furnished office than a shell & core or white wall unfurnished space, which will need to be furnished later by the company itself. Of course, this does not apply to everyone in general, especially not to large companies, but it is very welcome today for the so-called middle stream. 

Companies probably do not want to conclude long-term contracts having learnt from the situation of recent years… 

Yes, it is more difficult for companies today to approach long-term commitments - and if so, then at least with a high degree of flexibility. This is a consequence of more complex planning and uncertainty regarding future needs, but also due to the transition to a hybrid form of work, especially in connection with partial home office, which was introduced in more conservative companies.

Are companies more inclined to rent premises rather than to buy? Is the Czech desire to ‘own’ receding into the background?

On the contrary, certain companies are interested in owning offices. This ‘go into one’s own’ option shows an ideal form of investment and financial depositing, especially for privately-owned companies that have sufficient capital. That means buying one’s own administrative building or premises and paying the rent to themselves. However, finding a building that would provide the relevant offices that a company needs for their operation – and that would be at the same time for sale – is virtually impossible. Most offices are offered for rent. 

Do you sometimes encounter specific client requirements that are almost impossible to be implemented?

Yes, quite often. If I omit the aforementioned form of ownership, it is the need of capacity. Companies need to increase their parking spaces - employees have become accustomed to driving more by car during the pandemic and so - in order to attract people back to their offices – they want to rent them more parking spaces, which are just not available. I believe this trend is not sustainable in the long-term. Parking is therefore rather a short-term trend as a preference  for shared means of transport or the return to public transport is likely to increase in the future. There will also be more companies that will require a combination of offices and warehouse or production premises – there is a minimal amount of these premises, let alone those in premium locations. Nevertheless, we are aware of some.

Is it also necessary to change the overall layout of the office space? 

The hybrid model of work is a game-changer. Even conservative companies are moving to a certain level of home office working. For this model, it is simply inefficient for those who do not make full use of the office to have a fixed workplace.. On the contrary, there is a growing need for more social areas in which people in offices can  communicate and interact. Nowadays these are  being adjusted to a particular position, style and purpose of work. The premises are adjusted according to that which the individual needs, not the other way round. This trend was also confirmed by Savills’  Office FiT programme, which was created on the basis of more than 100,000 interviews with owners and tenants in the EMEA region and the UK.

Do you believe offices will be used full time again?

Personally, I don’t think so. In short, the general trend is towards providing offices as a service for companies and people, which was previously the domain of serviced office operators and co-working premises only. So that a company can focus on its business without worries, and at the same time, people can work when and where it suits them. As Savills Office FiT programme mentioned above, which confirms all these trends. 

Which locations are the most attractive? 

These are usually city centres. As for Prague, the most sought-after areas are those of Karlín, Anděl and Pankrác. However, it can be stated that the revival of the office market within Prague 4 is the slowest in the Pankrác area. The reason may be a larger number of multinational companies are resuming the operation of their offices after the pandemic more prudently and conservatively. The same applies to other larger towns and cities such as Brno and Ostrava. The imaginary scissors between locations are very open. Demand in Karlín is greater than the supply; as for the peripheral locations, it is exactly the opposite. At the same time, the differences between rental conditions are increasing.

What further development in the market do you anticipate? 

It is clear that office premises have coped with Covid and confirmed their role despite all the lockdowns. People will remain in their offices, but their utilization will be a little different than before. They will not only be premises where one just goes to work, but rather a place for effective work and community gatherings. What will be key is both mutual cooperation and a place for focused work.