The coronavirus pandemic of 2020 and 2021 drove workers from offices to home offices. Some temporarily, others for longer, and others got used to combining work at home and in the office.
Developers, architects and administrators reacted to this with a new solution for working spaces for companies, modernization of buildings, energy management or improvement of intelligent management. The situation for landlords is complicated by double-digit inflation and rising interest rates in banks. In general, the office building is no longer such a "gold mine" as it was five years ago.
Certification also plays an important role
"Environmentally friendly solutions are becoming more and more requested by both tenants and owners of office buildings. The certification of a green and sustainable building is one of the important facts for tenants when choosing new premises and therefore no longer serves only as a marketing tool for owners, but becomes an integral part of commercial real estate", says Veronika Špániková, head of the project management and construction services department in Cushman&Wakefield in Slovakia.
In total, there are almost 723,302 m2 of office space in Bratislava with a valid green/sustainable building certificate. It is 36% of the total volume of office space in the capital, or 40 out of 274 buildings. Of the offer, 63% of buildings have BREEAM certification, 4% BREEAM/WELL GOLD combination and 33% LEED.
"Only two buildings in Bratislava have the highest BREEAM Outstanding rating - Twin City Tower and Pradiareň 1900. In the case of LEED Platinum, these are the buildings Digital Park I-III and Ein Park Offices," states the Bratislava Research Forum in its report for the first quarter of 2023.
Tenants are not only interested in offices
The quality of the interior environment, including the materials used, economy, international certification of the building, sustainability, and various services that tenants can use came to the fore. The proximity of the transport hub and the natural environment is no exception, which increases the attractiveness of the office project in the eyes of a prospective tenant. This is the only way to impress highly demanding domestic and foreign customers.
Einpark Offices | Source: Corwin
Examples of advanced solutions are, for example, Einpark Offices in the Petržalka district (Corwin), Jurkovičova Tepláreň (Sky Park Offices, Alto Real Estate), the construction of the Lakeside Park complex (WOOD & Company, Immocap) in Bratislava's Nové Mesto near the Nové Mesto railway station and Lake Kuchajda or office premises in EUROVEA (JTRE) near the Danube, which are within easy walking distance of the bus station in Niva and Mosta Apollo.
The Immocap developer is preparing the construction of the new Istropolis, including the office part at the Trnavské mýto transport hub. Part of the "old" Istropolis was a high-rise administrative building that no longer met the requirements of the time. An administrative building is under construction in the Obchodná location in Žilina.
Lakeside Park in Bratislava. | Source: IMMOCAP
Few new office projects will enter the market
According to the NBS, among the challenges for the commercial real estate market is the rise in interest rates. Commercial real estate is more sensitive to interest rate increases compared to other industries because the industry has a larger share of interest expense. Another challenge is the risk of the building vacancy rate increasing after the pandemic.
"Furthermore, due to supply and labor issues, several projects scheduled for completion in 2022 have been pushed back to 2023, which will put further pressure on the office vacancy rate," the NBS report states. To illustrate, according to the Bratislava Research Forum, during the first quarter of 2023, the Nové Apollo office building (48,000 m²) and the NIDO2 building (3,436 m²) were added to the offer.
Samuel Šporka, head of the office real estate leasing department of the real estate consulting company JLL, responded that the risk limit is for properties of categories B and C, where the main share of the total vacancy will be transferred.
"The vacancy rate of category A and A+ properties is and will remain at good numbers," he said. Most major developers have reassessed their further construction in the past year, with very little new office space coming in the next two years. The price of construction and refinancing is the reason why many have changed their plans and preferred housing over offices. Residential construction is more liquid, although it has also been affected by rising interest rates.
Currently, the so-called hybrid system. Jurkovičova teplarň, DF CREATIV GROUP | Source: DF CREATIVE GROUP
Indexation will cover part of the losses
Šporka from JLL added that buildings that are standing and have signed leases almost always have rent indexation. And it is with the increased rent that they can compensate for a significant part of the losses incurred at higher interest rates or at the next refinancing, if they had fixed interest rates.
In connection with older buildings, it is necessary to think about their complete renewal, as happened with the Polus Tower building, currently myhive Vajnorská (Immof