Articles

‘Flex’ sector set to continue as experts

The phenomenal growth of the ‘flex’ sector is set to continue apace in years to come, with flexible workspace in EMEA grow by over 50% by 2022 and the number of office workers occupying this space growing to 750,000 across the region. That’s according to global real estate advisor, Colliers International, which released its “Flexible Workspace Outlook Report 2019”.

Valuation - not always a routine and repetitiveness. interview with Co-Head of Valuation at Cresa Poland

Property valuations are often perceived as a standardized “commodity” on the real estate advisory services market. Is it true in your opinion? Arkadiusz Bielecki, Co-Head of Valuation at Cresa Poland: To some extent yes. For example, bank or accounting valuations are often called “the last missing link” in the process of securing financing or closing accounting books – such valuations fulfil formal requirements then. They are a rough confirmation of what is stated in a loan application or of the property value in the previous accounting period. In other cases, valuation reports may be fundamental to entire processes, for example in negotiations, arbitration and litigation, calculation of land usufruct fees or compensation for expropriated properties, valuation for tax purposes, and so forth. In other words, in all cases where real money is at stake and where clients can increase their income or decrease costs (liabilities) just because the valuer has done a great job. And real money is tangible - not in the valuation report but in the client’s bank account. That’s where we often step in with “transactional valuations”. What do you mean by “tangible money”? For example, if an asset is worth EUR 10m, a difference of 2-3% (or EUR 200,000-300,000 in nominal terms) would be minor and negligible from the perspective of a balance sheet valuation. But if you are to save (lower costs) or get the same amount in real cash into your bank account (higher income), i.e. pay a lower annual RPU fee or achieve a better price than offered when you sell your property for a public road extension, this makes a real and tangible difference. This is real money and a real value for the client arising from a good and defendable valuation report. What are “transactional valuations” about? To put it briefly, a valuation report of this kind should defend itself against the other party’s strong arguments. Therefore, consistency, logic, detailed calculations and market references throughout the document wherever possible are the key. For instance, you can’t incorporate such statements as “based on the valuer’s experience”, because the other party’s lawyer would have an easy job challenging your valuation. When it comes to difficult “transactional valuations”, clients really listen to the valuer and are interested not only in the final value but also in methodology applied. Regarding bank or accounting valuations, corporate clients typically know the approximate value of an asset even before the valuer starts his job as they usually have valuation reports dated a few months or a year back, and your valuation would be on top of several others on the client’s desk. As regards “transactional valuations” for the above “special purposes”, the valuer needs to respect relevant legal regulations, and therefore the property value and the valuation approach you apply are not so obvious for clients at all. In such cases, clients usually read valuation reports very carefully. And last but not least, before engaging in such valuation projects, conflicts of interests should be thoroughly investigated for the valuer’s previous and potential future relationships with clients; confidentiality is also a key issue here. “Transactional valuations” are usually strictly confidential, especially if intended for litigation or arbitration. And therefore, for the sake of confidentiality, it is better if only a few people in the valuer’s company know that a valuation is carried out (the valuer, the head of valuation and the CEO). Valuers working with such mandates should form “a team within the team” that works separately from other valuers. From what you have said I assume that it is a lengthy process to prepare such a valuation? Yes it is. First, you need to prepare the valuation report and then to defend it and support the client during the following stages when the valuation report is presented in court, to national/local authorities or to parties in the course of negotiations. Then the valuer can truly prove how much he/she is worth professionally. I can assure you that even the most demanding bank “grills” the valuer just 10% of what the other party’s lawyers or governmental authorities do when the valuation report supporting your client’s view opposes their view. The most important thing is to make sure that the addressees of your strong and well-founded valuation report, i.e. the parties whose interest is contrary to that of your client accept and cannot fundamentally challenge your report. Estimation of the value is just the first step. The next step, which is more important, is to convince the other party that your report is credible and reliable. Do you mean to say that the valuer acts as a client’s advocate? Not exactly. The lawyer is always to defend a client’s view within the boundaries of the law. The valuer’s job is to prepare a professional and market justified opinion on the value. Such an opinion would often support the client’s view and interest, but in some cases not. The valuation report we prepare as professionals will not always align with the client’s opinion and expectations. In the latter case the valuation job is usually finished at the very beginning of the process, i.e. when we already have preliminary values and such values are inconsistent with the client’s views or expectations. Is there demand for such “non-standard valuation reports”? There is and in my opinion it will grow as the market matures. A leading developer has recently told me that the times when site acquisition and projects were easy are over, because the market has matured and is more demanding now. I can’t see any reason why valuations should not be more complicated and demanding in such market circumstances. Or to be more precise, new technologies will soon proceed with easy and repeatable valuations. The valuer will be necessary for difficult valuations where machines or Automated Valuation Models are not clever enough. I would conclude that if you are a property owner holding a portfolio of about ten assets, either you will need a “transactional valuation” within next 12 months or you needed one in the preceding 12 months – I am 90% sure. Regarding technology, what has changed in your profession over last 10-15 years? In general, access to information is much easier now. You can browse mortgage registers online, check official site plans, zoning plans and in some regions of Poland get access to comparable market transactions. Valuation methods and techniques have remained largely unchanged. Have you been recently involved in such “transactional valuations”? Yes, in addition to standard commercial property valuations, at Cresa we have recently prepared a few reports to decrease RPU fees. We also helped a client who was offered a very low compensation for the compulsory buyout of a site for Warsaw’s Southern Ring Road. We advised on the estimation of a fee to be paid for the establishment of road easement as well as the valuation of sites neighbouring shopping centres to be acquired from local authorities. You seem to be passionate about these “specialised valuations”. You are right. Having worked in the valuation industry for almost 20 years, you just can’t find much excitement in rents and yields even when you can see transactional yields for office buildings in Warsaw with a four at the front. More complicated and non-standard instructions expand your knowledge and give you much more satisfaction when your client and your valuation win in an administration or court battle. Then, after a few months or even years you can tell yourself: “Yes, I did a good job.” Source: Cresa

Where to rent an office: in a townhouse or in a new office block ? Pros and cons.

Warsaw is still the main investment destination in the sector of office properties in Poland. In the blink of an eye, the view of the city gains new skyscrapers and there are plenty of people willing to rent office space. According to reports on the development of the real estate market in Poland at the end of 2018, there were over 5.4 million sq m of modern office space in Warsaw. It is hard to estimate accurately the number of offices created in townhouses and private apartments while many enterprises decide to do so. Why? Let's think about it! OFFICE IN KAMIENICA IN WARSAW – COST-BENEFIT ANALYSIS Undoubtedly, renting an office in an old tenement house has its advantages. In addition, if it is a renovated building, the great advantage is certainly the atmosphere that working in an apartment with history brings. Small and medium-sized companies also focus on the financial aspect - renting an office in a tenement house is a much smaller burden on the company's budget. The decisive advantages are also uncomplicated lease agreements, low deposits and rental for an indefinite period with the possibility of termination without any contractual penalties. Another advantage is the convenient location of the office. Usually old tenement houses are located in the most attractive places in the city – e.g. in the Old Town, where our eye will not notice modern office towers. However, it is also worth considering the disadvantages of renting offices in a tenement house. The biggest loss of such a solution is the problem with parking spaces. There are few or none at all and they are reserved for residents of the building. This is the biggest loss compared to the office in a modern office building, which has an underground car park. Another shortage when renting an office in a tenement house is often the lack of air conditioning, no possibility of adjusting the layout of the rooms according to own preferences as well as lack of protection and supervision of the building. Also, the downside is often a lower standard of the building itself and the problem with organizing renovation. Thus, does renting space in an office building have only advantages? OFFICE IN A MODERN TOWER IN WARSAW Naturally, renting an office in a modern skyscraper brings a great number of advantages. The largest ones are not only safe contracts without the possibility of termination overnight, but also the possibility of arranging office space in accordance with your preferences. For the first tenants there is often a chance to consult with the investment designer and change the location of the rooms as well as an opportunity to determine their size. Large companies choosing a long lease period also have the chance to negotiate an attractive period of the so-called “free lease”. Additionally, the office buildings have 24/7 security, monitoring, reception, service, cleaning and organization of repairs outside working hours. Another strength is the space for employees, the possibility of creating open space or large conference rooms with good acoustics and audio equipment. Many companies also value having neighboring businesses of which services they can use immediately. Obviously, you can find cons in each solution. The main disadvantages of renting an office in an office building include very high guarantee fees (bails), which often amount to no less than three month’s rent with additional operating costs and parking charges. For some companies, the financial challenge may also turn out to be contracts that are signed for longer periods - it's often at least 3 or 5 years. In connection with penalties for breaking contracts, it sometimes happens that a company deciding to rent space in an office building must show financial stability. One thing is clear, both dynamically emerging office buildings and historical Warsaw tenements find their supporters. With appropriate arrangement and adaptation of the rooms, both types of buildings can turn out to be a great place to work. Source: Forbis Group

Mixed-use complexes conquer the market with a variety of services

New complexes are now designed mainly for users' convenience. Tenants' comfort is a primary indicator in the process of preparing commercial investments. – Today, market belongs to projects offering various functions, with well-designed common areas, using not only the latest technological solutions, but also the potential of public space - informs Bartłomiej Zagrodnik, Managing Partner at Walter Herz. Among the new ventures, there are many large, compound investments with an area around the buildings managed in such a way that the facility is as attractive as possible for employees and local residents. - Office building is not only a place of work, but also a place to relax and spend free time in. The multifunctional nature of the emerging facilities is undoubtedly much more attractive to tenants than just office projects. The more functions and practical amenities located in and around the property, the more interesting location for companies looking for offices - explains Bartłomiej Zagrodnik. Warsaw Spire was first Ghelamco company is a precursor of implementation of sustainable development principles in their projects. The company’s main investment Warsaw Spire has become one of the most well-known facilities in Warsaw. The focal point of the project located near the Daszyńskiego Roundabout is Plac Europejski square, a high-quality open outdoor public space with restaurants, cafes and an art gallery. The demand for mixed-use complexes and their competitive advantage on the market can be demonstrated by the success of the capital Koneser and Browary Warszawskie facilities. But also the decline in interest in the mono-office Służewiec Przemysłowy district, which is now heading towards expanding the range of services and functions, to bring tenants back to their office offer. A similar trend can also be observed on the residential market, where real estate offering co-living solutions, including multifunctional common space, rank the highest among tenants. Office buildings and a brewery Echo Investment specializes in developing vast areas located in city centers and creating integrated urban fabric. The company is currently implementing a multifunctional Browary Warszawskie facility. The offices will constitute about 50 per cent of space created in the investment. The complex is to include four office buildings, five residential buildings, over 8 thousand sq m. of space intended for services, retail and gastronomy, as well as public space with urban squares, intimate streets and greenery. Whereas, Biura przy Bramie office building which was leased and completed at the end of last year, has already been sold by the developer. Nowadays, the implementation of more office buildings in the quarter of Grzybowska, Krochmalna, Wronia and Chłodna streets is under way. Biura przy Willi and Biura przy Warzelni complexes will be located in the immediate vicinity of the historic Warzelnia brewhouse, which will become a restaurant and a brewery. The architecture of Biura przy Warzelni facility allows for a direct passageway to the 19th century Piwnice Czasu, which will become an intimate gastronomic complex with about a dozen restaurants, cafes and pubs. The place will also provide Ogród Centralny garden, and one of the crossings will connect Rynek Warzelni Square with Plac Dolny Square. A place to work and live The investor is also preparing the construction of the multifunctional Towarowa 22 investment in Warsaw. Whereas in Łódź, the company is planning to develop an almost 8-hectare area of the former Karol Scheibler factory, with 90 thousand sq m. of residential, office and retail space, as well as gastronomic, commercial and cultural facilities. 20 buildings will be erected in Łódź’s investment at Tymienieckiego Street, and a historic power plant will be located in its heart. The complex will offer apartments, offices, shops, gastronomic establishments and cultural facilities. It will also include squares, common spaces and green areas, a total of 40 thousand sq m. There will also be parking spaces for car sharing, bicycle paths and bike service stations. The facility will become a place of work and life for about 6 thousand people. Towarowa 22 is also a city-forming investment. The developer emphasizes that it will be a commercial project focused on people, because in the office surroundings people need a place to spend time together. 230 thousand sq m. of modern space will be built in the area of 6.5 ha, in the center of Warsaw. In the central part of the complex will include Plac Kazimierza Wielkiego square with the renovated pavilion of Dom Słowa Polskiego and the reconstructed Wronia Street covered with a glass roof. 25 per cent of buildings in the investment will be designated for retail and the same amount of office space, as well as a hotel, flats, a theater, a festival cinema and a two-hectare green square. Retail concept, with 70 thousand sq m of space, will be created in a completely new manner than a traditional mall. Its central element will constitute a shopping street filled with boutiques, restaurants and services. Offices, services, retail, entertainment and culture Sustainable development is also a part of the investment based on the revitalization of the buildings of the former Norblin factory, the implementation which started last year. The project, which the Capital Park Group is implementing on over 2 hectares of land between Prosta, Łucka and Żelazna streets, will bring Warsaw over 64 thousand sq m. of modern space, including 39 thousand sq m. of office space, arranged in a post-industrial, loft character and 24 thousand sq m. dedicated to the entertainment and service, commercial and cultural functions. This place will be an open mini-district with about a dozen buildings located among the inner streets. Elektrownia Powiśle project was also arranged in accordance with the trend related to spending time in the spirit of slow life. The investment will be delivered soon. Three office buildings, offering nearly 22 thousand sq m. are almost completely leased. The investment located in Warsaw's Powiśle also includes luxurious apartments for rent and a boutique hotel. The offer will be complemented by exclusive boutiques and a food court that will combine open space and traditional restaurants. It will include several dozen different culinary concepts. Beauty Hall with 1500 sq m. of space will combine comprehensive beauty and wellness services. Varso Place investment located near the Warsaw Central Railway Station will provide a variety of functions. The HB Reavis’ project will include Varso Tower office building, as well as Varso 1 and Varso 2, with, among others, the first NYX design hotel in Poland, belonging to the Leonardo Hotels chain. The investment will bring a total of 144 thousand sq m. of space for lease. In addition to the modern office space, there will also be a public passageway with shops, restaurants, cafes and commercial premises. The 53-storey high tower will bring a unique attraction to the city in just two years. It will house a panoramic restaurant and a bar as well as a terrace open to the public, located at 230 meters. Panoramic terraces and Spanish stairs Olivia Star, the tallest building in Northern Poland, which is a part of Olivia Business Center complex will soon offer space that will integrate both residents, tourists, business people and lovers of prestigious events. The building will provide a terrace at an altitude of 150 meters, with a view of the Gulf of Gdańsk, Gdynia, Gdańsk and Sopot and the Tri-City Landscape Park. In addition to the overlook, the new space will provide an attractive culinary offer. A restaurant, which is to open on the 33rd floor, will be run by one of the most successful chefs in the world. Moreover, a conference center space will be arranged on the top floors. The project also includes an intimate exhibition space, where various types of meetings are to take place. Large "Spanish stairs", designed in the Roman style, located in the lobby of the Warsaw Skyliner office building by Karimpol company, will provide a place for meetings. The glass entrance hall of a 195-meter-tall high rise building at the Daszyńskiego roundabout will be surrounded by a colonnade of 16-meter high poles. The impressive stairs that will be located in it will connect the interior of the hall with an external public passage. The lobby, depending on the needs, will become a place of a spectacular fashion show, an auditorium for a theatrical event, a cinema show, or an art gallery. The design of this investment also provides a whole range of public services. At 30 levels, the building will house offices, and 4 storeys will be used for retail and service purposes. Over 3 thousand sq m. of space will include shops, restaurants, cafes, and fitness. The tower will also offer a two-level Skybar with a panoramic view of the city, located at 165 meters. Smartphones and artificial intelligence Nowadays, the office buildings themselves are also interactive. They offer useful facilities, and common areas and co-working areas located in them facilitate the establishment of relationships and exchange of ideas, which favors the development of business. The use of conference rooms, a car park, a reception lobby to register guests or office equipment is already possible using applications supported by smartphones. Functionality of the buildings is constantly being improved thanks to the latest technologies. Recently, Microsoft and Skanska office company have signed an agreement on strategic PropTech cooperation. It includes an exchange of knowledge and the use of solutions in the field of advanced data analytics, AI mechanisms and cloud computing to create breakthrough innovations for the office real estate industry. As a result, it will allow to obtain in-depth conclusions on the use of the buildings. Data collected from hundreds of sensors and building systems will allow to analyze many parameters, including the way of using common parts and workspace, to understand the needs of tenants and the most effective use of space. Subsequently, it will be possible to adapt the space to the users' requirements, for example through its rearrangement or change of utility functions. Which ultimately leads to the fact that intelligent buildings will create and adapt their spaces to the tenants’ preferences. Source: Walter Herz

Real estate investments in Q1 2019: Last Year's trends on the Polish commercial property market gain momentum

Global real estate services firm Cushman & Wakefield presents commercial real estate investment volumes. Approximately EUR 754m was invested in Polish commercial property in the first quarter of 2019. The office sector turned over EUR 536m, accounting for more than 70% of the transaction volume; Demand for retail assets slowed down in Q1 2019; 2019’s investment volume is expected to be on par with that recorded in 2018. “The investment volume hit approximately EUR 754m in the first three months of 2019, of which over 70%, or EUR 536m, was invested in office assets. Although the first quarter’s result accounts for just a little more than one third of that recorded in the same period last year, the Polish market is likely to see an equally strong performance this year as in 2018 given pending transactions, the level of investment activity and asset availability,” says Marcin Kocerba, Associate, Capital Markets, Cushman & Wakefield. According to global real estate services firm Cushman & Wakefield, office and hospitality assets attracted the strongest investor interest. Hospitality investment volume hit more than EUR 143m, which represented more than a threefold increase on the same period last year (approximately EUR 43m). The office sector saw an almost fourfold increase with nearly EUR 536m traded in Q1 2019 compared to approximately EUR 142m in Q1 2018. Retail attracted only EUR 36m in Q1 2019. The investment activity in the industrial sector reached EUR 39m in the first three months of 2019, down from approximately EUR 135.2m recorded in Q1 2018. “Last year’s trends gained momentum in the first quarter of 2019 with high levels of investment activity on the office and industrial markets, and an increased interest in alternative assets such as hotels, PBSA and PRS. Investors are far more cautious about the retail sector with demand being highly selective,” says Marcin Kocerba. Source: Cushman & Wakefield

EPP and Echo Investment opened Galeria Młociny

EPP and Echo Investment opened Galeria Młociny in Warsaw today, to the delight of thousands of guests which thronged Warsaw’s hottest new destination. Galeria Młociny gives Warsaw residents access to more than 200 stores with a mix of quality brands that appeal to every budget alongside one of the city’s most ambitious food and beverage projects.

$It is official. Let’s walk together! Co\Walk HUB has been opened.$

It is official. Let’s walk together! Co\Walk HUB has been opened.

When Steve Jobs made key decisions for Apple, he took his colleagues for a walk. It is the active way of acting and the culture of cooperation that Co \ Walk HUB promotes - a new space for work, learning and development for freelancers, startups and young companies from the technology industry, which complemented the creative eco-system OFF Piotrkowska Center in Lodz.