Article published in Development News, 07/2020

The property market in the Czech Republic may have been effectively shut for the last three months, with many building owners and operators looking to defer investment and conserve cash by, for example, introducing only reactive maintenance measures. Some have, however, decided to use this lockdown time to invest in their assets to improve standards, upgrade facilities and implement planned preventative maintenance (PPM) programmes.

This makes sense on several levels. Rising vacancies and tenants not using the buildings so intensively have opened up a time window to make these repairs and quality improvements, meaning there will be less disruption when things return to normal over the coming months. Also, the temporary overall halt of the investment market has meant landlords are likely to have to hold assets for longer than they had maybe envisaged, making a PPM programme all the more important, since as well as preserving the value of a building, it should also deliver significant financial benefits by recovering and reducing costs through planning efficiencies and economies of scale.

EXPANSION AND REFURBISHMENT OF PRAGUE MARRIOTT HOTEL

One of these busy operators is Marriott. Working with the owner, a fund managed by Aventicum Real Estate, the hotel chain has continued the expansion and refurbishment works at its Prague Marriott Hotel on V Celnici St., Prague 1, which commenced in mid-2019 and are designed to maintain its position on the market as a top 5* hotel in the heart of the Czech capital.
Czech hotels were closed in March as part of restrictions put in place to contain the spread of the coronavirus pandemic, with the government allowing their reopening from 25th May as it eased those restrictions. The pandemic also caused problems with the supply chain for the on-going refurbishment, with programming of works having to change and an extension to the completion being required. During the next months the extension of the Hotel into part of the former office premises at Millennium will be completed, adding 124 new rooms to take the total count to 416. The owner is also preparing to revamp the ground floor retail gallery in the Millennium building.

Savills Building Project Consultancy continues to support Česká spořitelna in a bank monitoring role on both the Hotel expansion and refurbishment works and retail gallery works, which should commence later this year. “The hospitality business is globally undergoing difficult times and we are happy to help clients like the team behind this repositioning to face these challenges and to get back to full speed as quickly as possible,” says Martin Schindler, Associate Director, Building & Project Consultancy at Savills.

TIMELESS ARCHITECTURE, THE BLOX OFFICE BUILDING

Another landlord using the lockdown period to improve its asset is real estate company Českomoravská Nemovitostní, which owns the BLOX building in the Prague 6 district of Dejvice. This was a new addition to Českomoravská Nemovitostní’s portfolio when the real estate investor bought the office building in September 2019 from CFH in a transaction valued at over CZK 2 billion.

The quality of its real estate is the company’s No.1 priority. This is demonstrated by its strategy of planning repairs with the general contractor at the moment of acquiring a building. The BLOX building works are related to repairs under a major warranty claim with the general contractor and includes the complete refurbishment of 1,350 sq m of superior terrazzo flooring on the ground floor. Savills is undertaking the technical supervision and partial project management of the works at the BLOX building.
“Marriott and Českomoravská Nemovitostní are examples of two landlords that have taken a deeper look at their buildings by carrying out high-level planned preventative maintenance overviews, then decided to take advantage of this government-imposed lockdown to carry out necessary work that has been pending, whilst also looking to invest in improving some aspects of their buildings,” says Jan Jurčíček, Head of Building & Project Consultancy at Savills.