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Office sector – to return or not to the offices?

In H1 2020, there was a record low rate of office space vacancy - less than 5%

Colliers International Croatia, Slovenia & BiH has begun with a new cycle of presenting the real estate market to a wide audience. In a slightly different format than the summer roundtables with renowned market players, these 6 webinars are held each Monday at 10 AM. They last for 30 minutes and are jointly referred to "2020 - what impact has it had on the market and what else can we expect?".

Nuccia Basanić, Senior Consultant from Commercial Real Estate Advisory and Brokerage Services department and Nikola Arambašić, Workplace Solutions and Project Management Associate, presented how the office sector adjusted to the circumstances accelerated by the global lockdown and work from home.

Demand and supply

In H1 2020, there was a record low rate of office space vacancy - less than 5%. The average rents in buildings class A were 12.50 €/sq m, and if you wanted to lease an office premise in a building class B you would have to pay an average monthly rent from 7 to 10 €/sq m, prime rents range between 14 and 15 €/sq m/month. Under construction is business complex KFK Tehnika (15,600 sq m) in Buzin and the new Infobip HQ of 10,500 sq m. In H1 2020 we saw the completion of GTC's Matrix B building (10,700 sq m).

Besides the COVID-19 pandemic, in March 2020, Zagreb was hit by an earthquake, which led to a new dynamic in Zagreb real estate market. Employees of companies that used their business premises in Zagreb city center worked from home due to lockdown anyway, so they continued their work smoothly during the renovation of their premises or relocation. Some companies have opted for more flexible offices and have relocated their businesses to coworking spaces. Some tenants considered short-term incentive measures, such as rent reduction either through short term rent discount or rent-free period, a temporary deferral of the lease payment with the repayment plan through the period of business stabilization.

 

There is no unique solution applicable to everyone

 

Depending on the activity and size of the company, different work continuity models were introduced. During the lockdown, the most prevalent was work from home (WFH), and with the ease of restrictions, some companies organized employees into two teams that took turns to avoid spreading the infection, while some reorganized the office space completely to assure social distancing between employees' workstations. Reputable global companies, such as Google and Twitter, have even introduced a permanent work-from-home model until further notice. "Global research shows that employees would like to return to offices, but keep the possibility of working from home at least one day a week. The research shows that long-term or permanent work from home affects the employees negatively and can cause a sense of isolation because of a lack of social interaction with colleagues. Furthermore, some employees find it difficult to separate working hours from personal time, which can also be perceived as a negative effect of the WFH model." explained Nuccia Basanic, Senior Consultant from Commercial Real Estate Advisory and Brokerage Services department

 

Unlike expected, trends have not changed with the emerging pandemic circumstances but have only accelerated. One of the popular trends that existed before is a common area for collaboration and communication that has become one of the main reasons for returning to the offices. The trend of compressing the number of workspaces to 0.8-0.9 workstations/employee began with the growth of spaces for meetings, or informal socializing started even before the pandemic due to some employees working in the field or from home and do not acquire permanent office space. This kind of thinking has increased so-called flexible working spaces compared to fixed working spaces.

 

"A key factor in reorganizing office spaces is employees' wellbeing, including hygiene and health care. For a long time, the focus has been on proper premises, especially in older buildings where older systems are detected, so-called "sick building". Increased interest and emphasis is expected on ventilation and air conditioning systems." explained the market conditions Nikola Arambašić, Workplace Solutions and Project Management Associate.

 

A strategy for returning to offices needs to be implemented

 

Many companies still take the "wait and see" approach. However, the strategy to return to offices needs to be conducted and implemented as soon as possible, as it is unknown how long the uncertain circumstances will last. Colliers advises that companies establish new behavioral and moving around office protocols, such as arrivals and departures, the use of common areas and elevators, and adherence to epidemiological measures by the Government and Committee. Including new hygiene and spatial standards, such as personal hygiene maintenance, disinfection and ventilation of workplaces and common areas. One of the essentials is defining phases of returning employees to offices. Also, employees who remain working from home need to have the proper technology and work environment prerequisites and defined working hours as well as communication with managers. One of the key factors is also to establish adequate ways of communicating through digital platforms.

 

"We expect the offices to remain important factors in organizing the work and preserving a company's identity and image. In fact, while working in offices, employees have a greater sense of belonging and we believe that awareness of the high quality of working in offices, as opposed to home, will increase." Arambašić concluded.

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Nuccia Basanic

Senior Consultant

Zagreb

As a Senior Consultant in the Commercial Real Estate Advisory and Agency Services department, Nuccia is focused on tenant and landlord representation and agency services in the office, retail and industrial/logistics market segment. Since joining Colliers in 2016, she has developed relationships with numerous respectable Clients.

Nuccia’s everyday activities include key client communication with the purpose of developing long term business relationships, presentation of investment projects as well as acquiring tenant and landlord representation projects. She has developed and manages strong working relationships with local and international Clients across various industry sectors such as Microsoft, Atos, Cisco Systems, NOKIA, Centrice, Electrolux, Australian Embassy, Dogus Group and many more.

Since joining Colliers, Nuccia was engaged on various projects whereas she gained great experience through mentorship program, by learning from one of the greatest British experts for shopping centres concept development and property management. She gathered valuable knowledge and working experience which enables her to consult every client on optimal space in order to accelerate their success by choosing the right strategy, starting with the best location.

Her dedication to each task supported with great knowledge of real estate market ensures best-in-class service for every client.

Prior to joining Colliers, Nuccia gained valuable experience in the real estate industry by having spent more than four years working on projects related to high end second homes, residential properties and land development projects in Istria.

Nuccia graduated from the Rochester Institute of Technology and holds a dual degree (American and Croatian). Nuccia is also a licensed real estate agent certified from the Croatian Chamber of Economy.

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Nikola Arambasic

Workplace Solutions and Project Management Associate

Zagreb

Licensed architect and interior designer.

Interested in complex spatial and organizational problems and strategies in design of large office spaces, medical facilities or high-end residence spaces.

Joined Colliers team as WPS associate focused on Design and Project Management of office spaces for corporate clients. Aims to offer "next" step in Colliers palette of services, meaning  guide Clients through the process of new office space fit out from first shecth to final move-in.

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