The change in trends on the commercial real estate market is determined by the dynamically changing environment and habits of people, both in the context of work and private life. Older office buildings often do not meet the requirements of modern users of space and market conditions such as: the size of the demand for office space from companies, the presence of complementary functions such as retail, restaurant, entertainment or service functions, the quality of space, including the quality of common areas, or requirements related to ESG. Due to market changes and the shape of demand for offices, the approach of financing institutions is also evolving: downtown, well-thought-out mixed-use projects can count on financing on attractive terms.
Discovering the potential of real estate
Older office properties often have a common denominator: a convenient location. They were built in the years when car transport was key for tenants, and the poorly developed public transport at that time did not guarantee an easy way to the office. However, times have changed. Alternative forms of transport have also become popular, such as city bikes or electric scooters, which on the one hand free cities from crowds and traffic jams, and on the other: do not emit exhaust fumes. The increasingly dense network of public transport makes individual locations more attractive, which are increasingly easier to reach in a shorter time.
Older office properties and the development of urban microlocations
“From the perspective of the value of real estate, the office function in many cases cannot be the only function of a given building, also due to the changing demand from companies for commercial space in large cities. The conversion of part of the internal and external areas of some buildings and the introduction of commercial and service functions, as well as a larger share of restaurant space, is in many cases essential if the owner plans to maintain or increase the value of the property. In the case of some older buildings, such conversion will not have an economic justification due to their technical condition, increasingly higher ESG requirements and other market conditions. Their very good location justifies their demolition and the construction of real estate with other functions in their place, as we can see in Warsaw’s Służewiec, where, among other things, the Curtis Plaza office building is being demolished on Wołoska Street. In recent days, a transaction was also announced regarding the sale of office buildings by Immofinanz that are part of the Empark complex. The buyer is the developer Archicom. In their place, residential development is to be built,” says Robert Borowicz from CERES Management Services, a company that deals with the leasing of commercial space, asset and property management.
“However, many older office properties still represent great value. Many companies are looking for office space of a good standard and in a well-connected location that will provide efficient workspace. Also in this case, it is important for the building to have functions that provide added value, such as catering, fitness, medical or commercial functions, which will satisfy not only the needs of office space tenants, but also the needs of local communities. Hence, in the Trinity One building in Warsaw’s Mokotów district, for the commercialization of which we were responsible, one of the largest medical centers Lux Med in Poland was opened on an area of over 3,300 sq m. Polcast Media, the owner of Polonia 1 television, which previously had offices in Curtis Plaza, moved into 500 sq m. Nutri Catering also moved in, which has its offices and warehouse space in the building, and occupies a total of about 600 sq m. For some time now, there has also been an ATM, parcel lockers, and we have also been preparing space for tenants looking for offices for long-term lease, but in a smaller format,” lists Robert Borowicz from CERES.
Mixed-use: office buildings not only for office tenants
“Of course, older office buildings pose a challenge for owners and companies managing and commercializing. The challenge is the economic calculation and the high costs associated with building improvements and tenant improvements, i.e. budgets earmarked for improving the condition of the entire property, including common areas and the condition of the areas occupied by individual tenants, but not only. In order to effectively position the property in a new form, a business plan must be developed that takes into account the needs of, among others, current tenants, local communities, their purchasing power and preferences, as well as proposes solutions that respond to changing market business conditions,” emphasizes Robert Borowicz from CERES Management Services.