Horizons of quality

Ewa Andrzejewska, 'Eurobuild CEE': It has been one and a half years since you bought a plot in the centre of Warsaw. The market has been interested in what is going to be built there for even longer. Echo concluded a preliminary contract for the purchase of the plot in the middle of 2011. For the acquisition to take place you needed to obtain a site development conditions decision allowing for a 155m skyscraper to be built. Now you are finally launching the long-awaited project.

Rafał Mazurczak, Echo Investment: To start from the beginning, the skyscraper will be called Q22. There were a lot of ideas for the name of this extraordinary project. It could have referred to the address, the location, the name of the developer or the SPV company carrying out the project; it could also have referred to the city, the type of business or the architecture. We opted for Q22. Why? Q is for top quality and Q is for a physical quantity - the effect of the project as a catalyst to change the urban area and the business that takes place in it. And Q is for quartz and the structure of this crystal, which is where the architectural inspiration comes from. The number 22 comes from the number of the plot of land where the skyscraper is to be built: al. Jana Pawła II 22. I think it is an intriguing name that should be worth pondering over. We didn't want it to dominate the tenants' names because we know that some companies care about emphasising their presence in a building.

How were the architects, the Kuryłowicz & Associates studio, inspired by this crystal?
We were aiming at an elegant form of minimalism and ended up with a form that is as clear and simple as crystal, both elegant and transparent. The project will fill the entire plot - the building will dominate most of it, but we will also develop the area around it. There will also be some landscape architecture, benches, greenery, a bus stop, and the surface in front of the building will be redeveloped (granite will be used instead of sett paving). The corner of the building will be unique - fully glazed up to a height of nearly 30m, inviting people to enter by revealing what is happening inside. A similar solution will be used at the top of the skyscraper: the peak will be glazed, which will provide a beautiful view onto the Old Town. We also saw the possibility of combining the neighbouring floors inside to create a truly unique office area. The slogan for the project, is that it brings new quality onto Warsaw's business horizon. Quality on different levels - starting from its location in the Central Business District, to the excellent city transport, to the architecture, to the solutions, the materials and technologies used, and to servicing our partners.

Modern technology - is this how you want to differentiate this from the other projects you will be competing with?
I think that one of the modern solutions we will use and which are worth mentioning are the lifts. The building has been designed in a way to make it possible to use the double deck system in one shaft. This solution has not been applied in any building in Poland so far, but we compare ourselves to the buildings in Europe in which such solutions have already been used. We are striving for the most effective use of the office floors, so that the technical area - the shafts - do not take up the space needed for office workers. The parameters we want to fulfil include a lift waiting time of less than 30 seconds and reaching a given destination within less than 90 seconds. These systems also entail, as with Formula 1 cars, energy recuperation systems. Other interesting solutions in terms of the functionality are provided by BMS, for example, the management of the light and fresh air levels and the individual video surveillance of the office area when it comes to the consumption of utilities.

Will more green solutions be utilised?
The façade will be triple-glazed. It will have interior blinds inside for the optimal management of the energy consumption. The pitched roof in the lower part of the building in the 'Light Zone' will feature photovoltaic panels to generate electric power. There will also be heat pumps for the reduction of energy consumption by up to app. 25 pct, innovative fire prevention systems with lower water requirements compared to standard ones, along with fittings to minimise the demand for water, etc. Furthermore, our approach in this respect was already being implemented as early as at the stage of demolishing the Mercure hotel, when the materials from the demolition were re-employed to carry out other projects, for instance the construction of roads, when the crushed reinforced concrete was used for the Park Rozwoju project on ul. Konstruktorska in Warsaw. We are preparing Q22 to be BREEAM-certified at the 'Excellent' grade.

What else do tenants expect from a modern office building in Warsaw?
Apart from the obvious technical parameters that the building should fulfil, I will only mention the 'soft' expectations. We listen carefully to tenants and are sensitive to their needs. They have been saying that they want a place where they can eat lunch in a pleasant and cosy atmosphere, but where they can also talk about business in a public area unhindered. So the thing we needed to do was to create special zones on the upper floors with the pitched/slanted glass roof. The floors could also be connected with each other creating a unique area filled with light where a restaurant could be opened. Besides, the area has been designed in such a way to serve many different functions, e.g. a number of conference halls with large auditoriums where films could be shown.

When will you dig the symbolic first hole at the construction site?
We acquired the plot from the seller in January 2012 and the demolition of the hotel started that spring and finished at the end of last year. We are currently securing the earthwork, dismantling the underground car park and preparing the working platform for further work. This stage will be completed at the end of August. A contractor is currently being selected and the construction work proper - on the underground car park - is to start in September and should take around 12 months. The completion of all the work is planned for Q1 2016. Looking at the surroundings and other developers' preliminary schedules, we think that we will not have a lot of competition. Atrium One is being developed in the immediate area. The company is likely to finalise another large lease contract soon, so the building will be occupied to a large extent.

Which projects, therefore, are likely to be the competition for Q22?
Warsaw Spire will be a competitor, although not directly. If someone is looking for space outside the CBD, it could be in our project or those of Ghelamco or Golub GetHouse. In a sense, the competition will also include the redeveloped Twarda Tower and other quality projects already in operation. We are targeting our offer at tenants from a variety of industries and with different needs. This is why the areas we offer vary in terms of the size of a typical office floor and the rents. Areas of almost 2,000 sqm will be offered on the lower floors, allowing for the possibility of higher workstation density. The upper floors will measure app. 950 sqm.

You mentioned Twarda Tower, but are other existing buildings, such as Rondo 1, your competition?
The vacancy rate in CBD buildings is around 8-9 pct. However few buildings offer areas of 2,500-5,000 sqm. The majority of available modules are only about 500 sqm. I think that it is hard to compare the buildings directly, since Q22 is a product from another shelf due to the modern technology applied and the low proportion of communal areas - below 3 pct. All this, as well as the energy efficient solutions being employed, will have an impact on the operating costs, making them more competitive. For us certification does not just involve ticking certain points off a list, but also represents a real advantage for the tenants.

Is architecture important for tenants?
I think that it has a lot of significance if we are considering such a product, I even know of one example when a tenant chose an existing office building because of its architecture. Everything matters in the case of this project, because it has to be complete as a whole. This means that the building will offer top quality at every level - starting from the image of the building site, to the construction process, to the ultimate effect.

Will it become Echo's symbol?
It will certainly be the tallest and the largest office project in Echo's current portfolio and I am convinced that it will not be the last office skyscraper from Echo Investment. So far we have delivered over 200,000 sqm of office space to the market in various cities and towns in Poland. Our pipeline projects for the next five years have a combined area of 480,000 sqm, including one in Kyiv. If we exclude Ukraine we are still left with nearly 380,000 sqm. The project is a great challenge - I think that Echo is well prepared for developing an office project in the premium sector. In a sense Q22 will be Echo's symbol. It will show that Echo, as one of the largest developers in Poland and a major company in the CEE region, can also develop such a scheme. We do not want to build something that will be Echo's monument. It is supposed to be a high quality product built for our tenants.

Will Echo be retaining the showpiece in its portfolio, or will it change hands?
In the course of our work - and I have been working for Echo for as many as 13 years - we have been building under the assumption that the most important thing is the tenant who occupies the building. Our aim is for the tenant to stay in the building for as long as possible. But at the end of the entire process there is the investment fund that buys the property. This property will eventually find buyers, but only when it is a ready investment product filled with tenants.

If all the office projects that have been announced for Warsaw are built, the situation on the leasing market will not be the most favourable for you.
In our opinion, in order to attract serious tenant interest, developers need to start building speculatively. We are prepared for this. It is true that there are a lot of projects planned, but some developers are still wondering when it will be worth building. Others are carrying out analyses and even more are forming relations with the entities that could finance the construction process. We have the advantage of having accomplished all of this. We are starting the construction process in order to be able to sign the first contract with a tenant. I am convinced that finalising the negotiations is near. We hope that the signing of the first significant contract will take place this year.

You mentioned that you've been working for Echo for 13 years. What major changes have taken place on the market in the meantime?
Echo has changed and so has the market. We have adapted to the changed environment. Buildings are different - nowadays there is a lot of emphasis on the floor size and the efficiency of this space, as well as access to natural light and the technologies applied. You need to be aware that tenants are richer in terms of experience because they have moved a number of times and they know the entire mechanism very well. They use good quality consulting services that are provided by agencies. The office market in regional cities has also changed.

Coming back to the situation on the market,it is likely to be more favourable for tenants than property owners in the next few years. What will the rent levels be like?
These days you have to be very cautious when making rent estimates. I think that in 2015-2016, rents will be stable with some pressure from tenants to make them a little lower. It is hard to say what the situation will be like in the city centre because we have been seeing large variations in rents, from EUR 30 to as little as EUR 19 per sqm. I think that we will be able to develop a very interesting offer in the case of Q22.

Q22

The history of the Q22 skyscraper goes back to December 2011, when Echo Investment bought the Mercure hotel on al. Jana Pawła II in Warsaw (at the junction with ul. Grzybowska) for EUR 31 mln. Work on the conceptual design and the demolition of the hotel took place last year. The Q22 tower will be 155m in height (194m including the spire), with a leasable area of 52,000 sqm. A total of 347 parking spaces will also be available in its underground car park. There will also be 110 bicycle parking spaces, together with full infrastructure for cyclists, including changing rooms, and showers. The architectural design has been prepared by the Kuryłowicz & Associates studio. Investment costs for the project will come to almost PLN 500 mln.

The man from Echo

Rafał Mazurczak is the director of the office and hotel department at Echo Investment. Rafał joined Echo Investment's team in 2000. For five years he worked as an office project leasing specialist and was responsible for the commercialisation of Babka Tower, Athina Park and Centrum Biznesu Łódź. In 2005-2006 he was the director of the office leasing section. In 2007 he became the director of the commercialisation team in the office and hotel department. He graduated in finance and banking at the Cracow University of Economics and completed postgraduate studies in real estate management at the Warsaw School of Economics.