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edition 10 (214)
October 2016
Office & mixed-use development

The odd 10 pct

Individual offices for sale

Anna Pakulniewicz

The odd 10 pct

Once standard practice, BUT nowadays, a rather peculiar idea. Most market representatives would say that once an office building is ready, sell THE WHOLE THING and then forget about it as quickly as possible. At least that’s what MOST of them do. However, there are still developers brave enough to face the challenge of making a profit from selling individual offices within a building

In Poland there are only a few buildings in which developers intend to sell offices to individual tenants. This year we have spoken to many representatives of office developers representatives and asked for their views on this. “That’s not our cup of tea. Our goal is to sell the whole building at once, with no unnecessary hassle,” some have responded. Others want to make a profit from leasing, thus keeping control of the building as a whole. “The market is dominated by leasing offers, and only about 10 pct of the space is available for sale. Companies prefer leasing office space and are accustomed to doing business like that; they prefer to remain flexible. Moreover, companies simply might not have the available funds to buy an office,” says Ron Ben Shahar, a partner of Angel Poland Group, one of the investors behind the Ovo Wrocław project.

And yet...

What is then the advantage of such a scheme? “It is a profitable long-term project for investors with funds to purchase an office,” admits Ron Ben Shahar. Ovo Wrocław is one such building that offers offices for sale. However, it is a multi-functional building that also contains apartments, a hotel and retail space. “In Ovo Wrocław we offer offices both for sale and lease. However, the majority of customers – around 80 pct – are investors. They decide to buy an office and then lease it to companies,” says Ewa Omasta, the sales and marketing director of Ovo Wrocław. The Ovo Wrocław project comprises offices with, among other, a separate lobby and staircase, conference centre rooms, as well as access to the services of a DoubleTree by Hilton hotel located in the same building and to other parts of the building, such as the swimming pool, a fitness club and a spa. “The office lobby will be located next to the hotel reception. We also provide concierge services that can be used by office owners, employees and company partners,” says Ewa Omasta. By mid-September, ten out of the 23 office units had been sold, while six has been reserved. The total space available in Ovo comes to 3,850 sqm.

An office facing a playground

You can buy an office for a small company in a few mixed-use buildings. These are mainly apartment buildings that offer office space on one or two floors. The office floors often have a separate staircase, which has its advantages. “In Warsaw examples of such schemes are Rezydencja Piękna Nova (developed by Magnus), Na Romera (Matexi), Solec Residence (Sawa Apartments), Szucha Residence (Dor Group), Apartamenty Marymont (Matexi), Manhattan Place (5th Avenue Holding), Metropolitan Apartments (N1), Koszykowa 49a, Hoża 50 and Noakowskiego 16 (Fenix Group),” relates Łukasz Zajdel a broker at Commerson, the company responsible for commercialising all this space. Experts claim that one of the advantages of combining office and residential space in a building is the opportunity to live and work in the same place. They explain that the owners of the companies located there often buy apartments in the same building for themselves as well as for visitors and prospective business partners.

Early doors

“As I see it, this market is in its initial stages,” says Jakub Budych of Cushman & Wakefield’s valuation and advisory department. “In Poznań, there is currently office space available for sale in such projects as: K9 office building, which is located on ul. Krysiewicza, and in Quadro Office by Monday Development. In Ataner’s building on ul. Bożnicza there is now only one office left. Additionally, Ataner used to sell offices in its retail and residential project on ul. Kutrzeby. In Półwiejska 47, a project at the junction of ul. Półwiejska and ul. Królowej Jadwigi, there was also space available for conversion into offices. All the units have been sold in this project. In a residential project by Agrobex on ul. Wojskowa in Poznań, a number of apartments operate as offices. Some of office space were offered by developers with already signed lease agreement and their purchase is an investment nature,” adds Jakub Budych.

The Quadro Office building in Poznań, developed by Monday Development, is one of the very few new buildings, if not the only one, to exclusively offer individual offices for sale. “We spotted a niche on the commercial real estate market, which offered very little office space targeted directly at small businesses, and we decided to go for it. We sell office space to individual investors and we offer them, on the one hand, an alternative to a long-term lease, which in the long run translates into substantial savings for the company, and on the other, we offer them another investment opportunity,” says Piotr Kasprowicz, the vice-president of the board of Monday Development, part of the Unidevelopment group. “Our customers include both companies that have bought offices for their own use and companies that have purchased office space as an investment,” he adds. Offices in Quadro Office are available to buy from PLN 8,200 per sqm. “In order to manage a building effectively we usually outsource to a specialist company selected through a competitive tender,” says Piotr Kasprowicz. As soon as all the office space is sold, an owners’ association is formed that will then decide whether to continue working with the given management or not. In the future Monday Development is planning more projects like the one in Poznań; at the moment, however, these are only at the conceptual stage.

A similar concept has been created for the Pileckiego office and retail project, developed by Arche Group – a single three-floor building at Pileckiego 67 in Warsaw. Originally, the project was supposed to obtain an occupancy permit in September 2014. However, it is only now that the first tenants have begun their operations in it. “The ground floor and part of the first floor have been leased. The company is in the middle of advanced negotiations to commercialise the second and the third floors. As well as that, we also have 750 sqm to lease on the first floor,” says Dariusz Fudali of Arche. Each floor measures 1,160 sqm. According to Arche, the owners and the tenants are from the financial consulting, IT and telecoms sectors. Both tenants and owners decorate the offices themselves, but turn-key completion is also available. Arche will remain the manager of the building for a year from the moment the first tenants move in and maintenance fees are collected. “After this period the property will be transferred to a management company chosen by the owners and tenants,” says Dariusz Fudali.

As the market representatives claim, the market could be split. Minor players may opt to buy, whereas major players think this is unnecessary. But who knows what the future holds...?

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