Quarantine changes the appearance of offices: it is as much about possible additional fees as different planning

Decide whether to postpone the development of the project

When asked by the director of the Lithuanian Real Estate Development Association, Mindaugas Statulevičius, how the real estate office market is doing today, he said that the projects that started before the quarantine and have financing are still being implemented. , and the tenants have not yet heard which contract will be terminated. .

However, according to him, the situation is somewhat different in terms of projects that were supposed to see the light of day in the near future, as planned.

“Decisions have been postponed due to new projects that had to be started. It has been announced that some companies are postponing decisions on the development of new projects for 3 months, which will likely see a clearer situation later. It will be decided what to do in general.

Some, in my opinion, will make the decision to develop offices in the Vilnius market, but they will postpone it, and when it comes to the Kaunas market, where supply is quite high and demand is not catching up, I think those who planned there they can postpone the decision. . It is difficult to talk about the suspension of construction, because today it will stop and change it in a few months, “he said, but in summary he said that things should improve in the market, making him more optimistic about the situation.

Mindaugas Kulbokas, head of the research and analysis services group at the international property consultancy Newsec in the Baltic States, also assessed the market situation in a similar way.

“Some whose projects were in the ‘paper’ stage decided to suspend them, others who have already begun work on stepping up construction negotiations and are taking advantage of the situation to continue to reduce the cost of the projects and make them even more attractive to tenants.” he said.

Prices may change, otherwise plan spaces

M. Statulevičius. Speaking of companies that rent offices, he said the most notable changes.

According to him, only after the announcement of the quarantine, the representatives of the companies considered that it would be necessary to reduce the area of ​​office rent, but emphasized that, as a general rule, it is not easy to terminate the leases.

“It is not Force Majeure situation, contracts must be honored, and with the gradual end of the quarantine situation where people have started to return to the offices, it can be seen that a person now physically needs more space, and there are some distance restrictions and so on when not everyone returns to work. So people started to think that space is not essential, “said M. Statulevičius, saying that one of the most important things and the most important changes today is that companies that rent office space strive for the relationship more flexible with owners.

“It is that if I wanted I could have a contract for a shorter period to be able to change the area and be offered it.” “All negotiations are about flexibility, companies want flexibility and the ability to react,” he said.

Also, as explained, there is a gradual move towards a shorter lease.

“It used to be 10 years, now it’s like 5 years, but we are moving towards 2-3 year contracts.” Of course, this is not a very easy situation for the owner, since it is necessary to make commitments with shareholders, financiers and long-term contracts are a very strong indicator of whether a project is sustainable, etc., because it is a income stream guarantee.

When it is shortened, the risk component is introduced, it can change somewhere and prices will change. Naturally, if the risk to the landlord increases, then he will have to find a new tenant for a longer time, then he tries to insure himself with certain price adjustments.

I don’t mean that prices will go up, but there may be some conversion, termination, and the like fees. The market here is trying to adapt, “said the expert.

According to him, it can also be said that today’s developers are slightly redesigning already built offices. If it is seen that the spaces intended to work for many people in one place are not filling up, developers may have to make decisions to make partitions, separate spaces, etc.

“Regarding future projects, attention should also be paid here. We have to see the speeches of famous foreign architects, how they plan, there are also many ideas on how people will move, so that they are less in space, there will be movement in circles, partitions, will come to our office projects, which are still on the drawing board. “He predicted.”

Will not be tied to the workplace

Jurgita Šilaikytė, director of the Newsec mediation group, also said there will be changes in the office market. She said that large office tenants noticed during quarantine that some employees were able to work shifts, organizing work from home and office, so jobs could be rotating.

“This means that the need for non-dedicated office locations will increase, because people would work shift work, ‘shift work,'” he said.

This means that the area of ​​rented offices will also decrease, he said, which is too early to predict.

“This will be determined by reasons such as: if there will be a recurrence of pandemics, what new requirements will be imposed on offices, if more space will be needed for a workplace, more separate offices, meeting rooms, etc.,” said J Šilaikytė.

Aurimas Maldūnas, the managing partner of commercial real estate consulting firm Real Game, also spoke about whether Lithuanian companies will reduce the area of ​​rented offices. He said that today it is very popular to say that office space will decrease, but it still takes time to make sure.

He mentioned as the main reasons why working from home is not acceptable for everyone today due to the observance of the work and rest regime, family circumstances and obstacles to work, as well as the lack of socialization, etc.

“With all of this in mind, we can predict some changes, but I don’t think they will be drastic before making radical decisions to downsize or change the office, I would suggest seeing a full year cycle of work and only then making long-term decisions.” In the future, the companies will rent smaller offices, he said.

When speaking about the rental of offices, he assured that this activity is almost stopped until the end of the quarantine.

“Negotiations are underway in previously agreed areas, only the conditions are adjusted, of course, in favor of the tenants.

Tenants are negotiating with existing owners, a good time. It is possible to agree to temporary reductions in the rental price, free periods, revision of other conditions, of course, noting that the crises are happening and the relationship remains, “said A. Maldūnas.