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50 Years of Pioneering Added Value
50 YEARS OF PIONEERING ADDED VALUE Even amid the turmoil and confusion of the coronavirus outbreak, international developer Codic Group, which celebrates its 50th anniversary this year, says it has kept its projects on track in Hungary.
Christophe Boving
“The immediate effect of the COVID-19 pandemic on our industry has been immense, although it appears to be less worse in Budapest than in Western Europe,” Christophe Boving, general manager of Codic Hungary tells Real Estate REview.
“As has happened with all of us, our business has continued from home working.” Contact has been maintained with tenants and investors, but operating practices have had to be amended.
Progress at Green Court Office, Codic’s 20,200 sqm project on Dózsa György út, just off the Váci út Corridor, has continued. A deal was signed with a major anchor client in December, which means 65% of the project, due for delivery in Q1 2022, is now pre-leased.
“It is clear COVID-19 has put a sudden halt on the leasing market,” Boving says. That was understandable, he adds; as the crisis unfolded, companies had to focus on more immediate demands, looking after their own staff and working out how they were going to function.
Despite that, work on actual construction was able to continue after Codic’s general contractor
introduced health and safety measures such as extra disinfectant points. Fortunately, the project is at such a stage structurally that it does not require large numbers of people in close quarters.
There has been much talk about the future requirements from offices once the pandemic passes. Boving says flexibility is the key. “We already like to integrate in our planning anything that offers very varied and safe work spaces. Many things will happen after this crisis that could be for the better; offices will have much less dense occupancy and will be more about the quality. Basically, as a developer, you have to adapt to the human factor.”
For Hungary at least, Boving believes this crisis could resolve much quicker compared to the global financial crisis in 2008. “The fundamentals prior to the pandemic were much better. I do not think it will develop in the longterm into a negative spiral. But it is going to be a very difficult economic period and will take time for the financials to recover.”
Green Court Offices is not the only development Codic has ongoing in Budapest. It is part of a bigger mixeduse office and residential project with some retail and services. Green Court Residences was started in 2017 and is planned for delivery this year.
“Sales reached 95% at the end of last year. Even under the present conditions, we have been selling shop units and client services; there has been no problem in that respect. We expect to hand over on site in the next two months.”
CODIC DOING ITS HOMEWORK
There is a third boutique development which was launched last year, called HomeWork. The name is a play on the history of the site; the project includes the renovation and repurposing of one of the capital’s first school buildings. Overall, the building will offer 3,600 sqm of premium offices, 15 high-end apartments and 126 sqm of prime retail space at the corner of Margit körút and Rómer Flóris utca, mixing classical and contemporary architecture.
Given the historical nature of the building, and the location of the site itself, getting all the necessary permissions has taken more than a little time. Work, not least on the restoration and expansion of the square Codic will maintain to “give back some splendor” as a public space for tenants and the neighborhood, is
finally visible. “We will come to market in the next few months with delivery not before two years.”
For now, Codic Hungary has more than enough on its hands dealing with these projects and the next on the drawing board, the V48 building, which will offer class “A” office space with some retail and service outlets, right at the start of the Váci út Corridor.
As Budapest develops, is it getting harder to find good development plots? Somewhat, Boving says, but all is not lost for a developer with ambition.
“There are still quite good opportunities for brownfield development. Margaret corner, the HomeWork site, is a good example. The difficulty is you must make your business model work. The more central a plot,
HIRDETÉS
the higher the costs all round, including the construction costs.”
But Codic has been taking those challenges in its stride for 50 years. Similarly, it has long been committed to BREEAM environmental certification, with its Atlantis building in Brussels the first to be certified in Europe for Access and Bridge buildings, under the “BREEAM Europe for Offices 2008” method.
Such determination surely should be celebrated, though Boving
admits current circumstances will make that more of a challenge. “For our 40th and 45th anniversaries there was each time a gala event in Brussels for all our international partners. This year, considering the epidemic, I do not yet know what we will do. We have to think of the best way to celebrate it as it deserves.”
According to the Hungarian Green Building Council (HuGBC), it reflects the importance of interior design and property management that around 10 projects are in the process of assessment for WELL precertification or certification. The wellness of workforce and staff retention for a longer period has become a central concern for building owners, and this involves the provision of a healthy and esthetically appealing working atmosphere, according to Zsombor Barta, president of HuGBC.
Kalaus of Cresa says that office tenants have become significantly more educated and demanding over the few past years. According to this argument, office space has become a major HR-tool to retain and attract talents, so the requirements have changed drastically. The key is flexibility and high quality to foster creativity, team-work and productivity in the office. The interior design and the atmosphere have to reflect clearly what the company is all about. Again, flexibility is key, having multifunctional areas where people can work effectively
Analysts see the necessity for changes in the organization of the office, spacing and lay out as a consequence of the long-term impact of the current health crisis. “In the current situation, almost every company has been forced to reorganize or re-plan their business. While a significant portion of office workers are now working from
Liberty interior by Wing.
home, many companies are looking to the flex office market to provide temporary quiet accommodation in individual or small team offices in a bid to maintain employee productivity. We have also seen a number of major occupiers turn to the flex office market to support their business continuity plans,” says Hubert Abt, CEO of New Work, one of the major providers of serviced office space in Hungary and Central Europe.
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THE AIR WE BREATHE
“In the medium- and long-term, we certainly expect a change in the use of office premises, becoming more like social places where employees can meet and collaborate. This will put emphasis on the services provided by the building itself so, for example, the already ongoing trend of WELL certifications will become even more common. Health and safety will remain an issue of key importance in every sense, from the food provided in the canteen not till the quality of air breathed in by employees,” says Peter Würsching, head of leasing at JLL Hungary, with regard to the impact of the coronavirus on sustainability issues in the office market.
Against this background of a growing complexity of demands
from tenants and staff, total fit-out costs (including soft and additional costs) are rising. The hard fit-out cost elements are generally split 80-20% between the developer and tenant, according to CBRE. On top of this, the remaining cost elements (such as furniture and various soft costs) are covered by the tenant. This requires PM and FM systems and professionals that are able to adapt to sustainability requirements. PM is the operation, control and oversight of real estate management while FM is a professional management discipline, focused on the efficient and effective delivery of support services for the organization it serves according to Barta.
More duties, more responsibilities and more liabilities are to be expected for PM/FM staff. For
Balance Hall atrium by CPI.
example, Legionnaires’ disease (legionella) is an issue which many asset FM mangers are facing already due to the lack of regular water system operations in the buildings. The same applies for humidification systems or air conditioning equipment as well, but the simple drink water pipelines are also affected. Further, strategies are being developed by PM/FM for the future to manage and mitigate pandemic situations properly. This is seen as bringing more responsibility, and more duties for PM/FM.
“We are already experiencing some tenant interest related to fit-out corresponding to social distancing, especially in the social areas of an office space, so this pandemic will influence design and fit-out. Naturally PM and FM have to adapt and we have to ensure that
building systems, especially air handling, and operational processes correspond to a higher level of health and safety requirements,” said Mátyás Gereben.
In this way, PM is seen as facing fresh challenges as staff return to new circumstances, due to the impact of the coronavirus. Some of this will fall to the PM experts, but from the tenant perspective, a change in the behavior of staff is also needed. The questions remain as to how we will react to the changed circumstances and how interior design can support changed habits and needs, in the view of Barta.
KNOWLEDGE TRANSFER
“We see how many aspects need to be taken into account when creating a strategy for buildings to meet the social distancing measures and cleaning requirements,” comments international consultancy Frank Knight, which is working on transferring the experiences of the company in Asia to Europe.
“It is not just about keeping the right distance between people or providing the right disinfection regime, but above all changing the behavior of the people as they return to a very different workplace,” the consultancy adds.
The safety of employees who are already gradually returning to their offices and the adaptation of buildings and office spaces to new requirements is seen as one of the key topics for discussion across Europe. This issue will inevitably continue to impact on costs, as one of the key challenges of property managers is to optimize the management of their operating budget so as to achieve savings while ensuring that the property functions properly.
The coronavirus and subsequent lockdown have initiated a debate
on the merits of office-based work and working from home from the perspective of company budget, productivity and the convenience and retention of staff. However, the evidence is that staff are returning to company offices. “Although it is too early to assess the impact of COVID-19 on market trends, I think that employees have gained a greater appreciation for the value of collaborative work in an office environment and the creative process of teamwork,” concludes Noah Steinberg, CEO and president of Wing Zrt.
myHive interior by Immofinanz.
