Assessing real estate from a technical point of view, green certification, co-operation with developers and investors – these are trends that real estate consulting services are currently going for. Having learnt from the pandemic, clients are placing more and more emphasis on planning and appropriate consulting services.
And it was these topics that we discussed with Jan Jurčíček, head of the building and project consultancy department at Savills, who clearly comments on market trends. According to him, the fundamental change compared to the situation two years ago is the fear of risk and long-term planning.
The real estate advisory company Savills is represented internationally, focusing on all key real estate sectors. What is your strongest point?
We operate internationally and I see one of the biggest benefits of our company in the possibility of providing comprehensive services, including technical consulting services. Synergies of various services are very welcome by our clients. However, our strengths include the provision of services in the area of property management, investment consultancy and technical consultancy regarding acquisitions.
How would you rate overall market conditions in 2021?
Definitely full of challenges. The market has changed considerably. The volume of Technical Due Diligence (TDD) decreased due to the smaller volume of transactions. However, our department has now increased the share of project management and development monitoring services. At the same time, we must respond to the change in the ratio of foreign and domestic capital. Domestic capital replaced the outflow of foreign investment to a significant extent. The main priority of the market is efficient operation with an emphasis on costs.
Will you please explain the concept of TDD to a layman. What does it involve?
It is a commercial-technical analysis of risks arising from the condition of the building. The main trend is a clear focus on the client’s needs and a strong emphasis put on accurate calculation of capital costs. From our point of view, the TDD service has a clearly defined core scope of work, however, adjusting our assessment is key for clients, it must correspond to their investment strategy, expected future utilization of the building and the way of management and easements to possible renovations. More than before, we have control of legal documents in the sense of permits and servitudes in the scope of our services, because we have discovered key omissions of crucial importance for our clients in several recent projects. ESG and environmental impact assessments become an integral part of due diligence provided by Savills. ESG criteria assess how a given property and the services it provides contribute to sustainable development from the point of view of the environment and social responsibility, their users and in accordance with valid legislation. This trend clearly reflects clients’ commitment to change and improve the long-term impact of their activities and the product they create.
What does your cooperation with developers and investors look like?
Today, significantly more pressure is put on the identification of risks, or more precisely the optimization of the project already in its preparatory phase. We definitely perceive an increased demand for feasibility studies, whether it is a new construction or a study on the repositioning of a building due to the change of its use. This work also includes technical audits with a specialization, which was previously perceived primarily as an acquisition tool. Today, they are used in the sense of preparation for reconstruction when the tenants order TDD in order to determine the suitability of their selected buildings, etc.
How has the attitude of most developers changed?
They focus on more thorough preparation and engagement of external consultants, which Savills also belongs to. Developers have independent reviews prepared more often and calculate construction costs more than they did. We have also noticed new ways of construction financing. One can generally say that they take a more responsible approach to risk.
How do investors approach assets?
It is certainly more thorough, with more emphasis put on optimal operation and streamlining of OPEX costs and service fees. The goal is to get the most out of assets, which is created by the pressure put on returns in real estate transactions. The pandemic led to huge concerns among developers regarding tenants’ payment morale, but gradually it transpired that the fears were not justified and, fortunately, did not materialize, and this period was overcome without significant losses. However, the whole situation led again to a reassessment of costs, ‘investment versus yield’. We have noted a greater emphasis on more accurate long-term planning.
What role does green certification play in your projects? Do you think that its importance is still growing?
There is more and more emphasis put on green certification and, in the case of new buildings, it already represents a standard part of project preparation. At Savills, we started providing green certifications to our key clients about a year ago. We currently perceive the trend of certification of existing administrative buildings – we have not encountered these requirements so often before. The goal of the owners is to improve the buildings as much as possible and to better present them in the market – and this is one of the possible ways. However, certification is not the only tool – quite the contrary. A much more fundamental trend is to assess the carbon footprint and prepare a strategy for its reduction. This and other solutions are also reflected in the overall assessment of ESG, which has become significantly more important in recent months, as I mentioned earlier.
Due to the current shortage of apartments, the market is talking about the repositioning of some buildings, for instance into the residential sector. Have you encountered this?
Yes, within our department we have recently addressed the feasibility of one such project, however, the technical and technological complexity of such projects makes certain scenarios unrealistic.
What are your current most important projects?
There are quite a few. First of all, there is a commercial fit-out of 3,000 sq m in the centre of Prague, where we are currently in the phase of choosing from two buildings. This will be followed by the lease of premises and their construction. The overall project management of investment projects in the City Empiria building for our long-term client PSN is also underway. We also provide acquisition technical consultancy on several major acquisition projects in the Czech and Slovak Republics and we are dealing with the BREEAM certification of a portfolio of three administrative buildings in Prague. And I must not fail to mention the project supervision of one of the largest hotel reconstructions in the very centre of Prague.