Dozens of articles were used to reveal the huge demand for A-Class Building Spaces. Deficits of Hundreds of thousands or even millions of square meters were shown compared with Budapest, Warsaw, and Prague in 2007.
Both Developers and important Real Estate agencies understood the multinational companies’ need for larger and larger, imposing office spaces. They used to talk about the hunger for this kind of space and about an important deficit: 1.000.000 A-Class squared meters of space.
1.000.000 sqm office spaces deficit in 2007?
How come that starting with the 1.000.000 sqm A-Class office spaces, it ended with dozens of empty buildings or with a low percentage of occupancy? How come all those multinationals still don’t lease those buildings, despite the restraints, relocations, and lower lease prices?
The “need” for spaces that might be overrated is the most probable answer. Another answer might be that companies are more cautious in their office space evaluations and more determined to keep costs under control.
Almost all the offer was oriented to luxury clients: large companies with hundreds of employees, with more than generous budgets, and doing business with a lot of optimism. At the same time, numerous projects were based on expensive and intensely speculated lands, on expensive construction works, and were financed with easy loans but with high interest.
The office buildings developed between 2003 and 2008 failed partially to be what they pretended to be. The real-estate websites used to abound ads of self-proclaiming “A-Class Office Spaces” that were nothing else than flats, and many office buildings couldn’t obtain even a B-Class category.
Never mind the classification of the office spaces, which is not too relevant, almost all the new office building developers persisted in offering just large and very large spaces to lease. Hundreds of phone calls made by our company looking for office spaces ended with the disarming words: “Sorry, we don’t have such small spaces!”
All office spaces smaller than 200-300 sqm were extremely rare and were the hazardous result of a smaller and incomplete floor. Hundreds of thousands of small companies used to raise unprecedented rates the lease values of all apartments and virtually all small houses or villas at the same time. Villas’ apartments became the favorite office spaces for lawyers, notaries, IT companies, accounting, advertising, PR, HR, construction, design companies… virtually all small companies in the country, and even developers. The most well-established small companies used to lease a whole villa. For the real office buildings, there was a war between banks, phone companies, multinationals, and all multimillion-turnover companies.
Ironically the same period, thousands of companies were started, and all companies with turnovers of several thousand Euros were neglected.
It must be noted that hundreds of thousands of companies work in 1-2-3 bedroom apartments in a block of flats. Their need for office spaces starts from 30 sqm each. A small firm that used to lease a three-bedroom apartment needs, in fact, about 60 sqm. Almost all companies now located in larger or smaller villas need about 80-150 sqm. Relatively few companies need spaces larger than 200 sqm.
A 2 bedroom apartment is usually about 60-75 sqm, while the three rooms are no more than 50-60 sqm large. A company that pays 500-600 Euros for a monthly lease of a two-bedroom apartment needs, in fact, about 50 sqm in an office building. The same company used to pay before the economic depression between 800 and 1200 Euros monthly. This means that even now, those companies pay a monthly lease of 10-15 Euros/sqm and used to pay in the past up to 20-25 Euros/sqm.
To the sums above, a company adds other costs: the monthly costs for heating, water, hot water, elevator maintenance, waste disposal, common spaces maintenance, and the electricity bill, which represent at least another 100 Euros representing a 2-4 Euros/sqm. All those firms used to pay for alarm systems, intercoms, air-conditioning units, and Internet wires, they paid for the electric installation maintenance, and they even painted or repaired the spaces at their expense.
Euro 600 million loss yearly
Even more, those companies have to stand for the infamous “apartment company” pejorative. 100.000 of those small companies, which now pay an average of 500 Euros monthly for the lease, and maintenance of the apartments represent lost clients for the office buildings of more than 50.000.000 Euros monthly, which represents 600.000.000 Euros per year!
The sum of the above represents not a maximum but a historical minimum. One should consider that those lost clients of the office buildings used to pay more than this in not distant past!
The refusal of the office-building promoters to develop office spaces with base units starting from 30-50-80-100 sqm is hard to understand. At the same time, the already developed buildings can be converted with an important effort and loss of space. Their only chance could be the revival of the real estate market.