The autumn of the office block

An office building is like a woman: it tries to hide its real age as long as possible. And just like a woman it does this in order to remain attractive. However, a woman’s popularity cannot be measured in terms of monetary value, but for an office building it can

Emil Górecki

There are only a few really old office buildings in our part of Europe. The buildings that have been used for a few dozen years usually do not qualify as professionally prepared offices. The first symptoms of ‘wear and tear’ are already evident after several years of use. Soon some of the wiring and plumbing needs replacing, the installation of additional environmentally-friendly apparatus is required by law, and the façade looks out of fashion. “One of the most important tasks of an office building administrator is to prevent a situation where the tenants might think of the building as old,” insists Włodzimierz Moczydłowski, managing director of Akron Management Pl, which administers (among other buildings) the Warsaw Trade Tower skyscraper and the Europlex office building – both part of the AICEE II BV portfolio and completed in 1999.

Sticking to the schedule

How can this be done? The recipe is apparently simple. You need to make sure that the appliances and systems installed in the building and already in use do not differ from the ones commonly used in new buildings, in terms of standard and modernity. Administrators understand this, yet many office-building owners do not. The latter often keep a building in their portfolio for several years, and then sell it, avoiding any additional cost connected with the modernization of wiring and plumbing, which can still be in good working condition. This is particularly true during economic downturns, when the purchased properties immediately start losing value. Administrators are convinced that it is worth carrying out regular inspections and keeping tabs on the age of the wiring and plumbing systems in accordance with good construction practices and their life expectancy. “The costs that will need to be borne if the wiring or plumbing fails might be much higher,” argues Włodzimierz Moczydłowski.

Monitoring the condition of wiring and plumbing helps to maintain the value of the building, while the proper inspection and service of installations leads to longer usage. “If an office building is new, maintaining its value is relatively easy. However, after a few years more action is needed in order for the office building to keep its value, which is often only noticed by owners when they want to sell the building. Sometimes it is enough to refurbish the common areas and the reception hall in order to enhance the general impression and increase the value,” says Monika Rajska-Wolińska, partner and head of the property management department at Colliers International. It is common practice that as the tenants change, not only is the leased space refurbished and adjusted for the requirements of the new occupants, but also all the wiring and plumbing is replaced.

Collective cash counting

The repair and conservation schedule provides the basis for calculating the budget for the next year. It is worth adhering to this so that big investments do not overlap in one year and eat away all the income. “The administrator and the owner of a building prepare a schedule of work on the basis of the life expectancy of each particular system. For example, the ventilation centre is replaced every 20-30 years, while the refurbishment of the reception area is needed every couple of years. In addition, the annual meetings of the administrator and the tenants provide a great source of knowledge,” claims Monika Rajska-Wolińska.

What tasks are required of an office-building manager? Looking after the appearance of the building, ensuring that the wiring, plumbing and other equipment function correctly, as well as making sure they are not out of date. Every now and then, some novelty comes onto the market, which soon becomes all the rage. Examples of this include the installation of sensors warning about the possibility of flooding, the change in TV technology from analogue to digital, the modernization of access systems, and the integration of everything with BMS (Building Management System). According to Włodzimierz Moczydłowski: “There are three basic criteria which necessitate the modernization of office buildings: new laws imposing standard systems; security (which is self-explanatory); and the well-being of tenants – who feel satisfied enough not to be tempted to other locations.”

Following the trends

For office buildings the passage of time means not only the ageing of particular components, but also changing requirements and the need for constructors to change their assumptions. These changes require preparation. Legal and market regulations are imposing more and more pro-environment solutions. The managers of office buildings give cooling substances as one example. We are now moving away from the traditional, eco-unfriendly yet highly efficient Freon, to ‘greener’ substances. “Although the law does not require a certificate for the facilities already in use – unless they are up for sale – we want to receive the energy certificate for all our buildings, including the Warsaw Trade Tower. This will increase the value of the properties and it will soon be required by law anyway,” reveals Włodzimierz Moczydłowski.

Orco Tower is an office building in the very centre of Warsaw which underwent a thorough modernization of its interior and façade a year ago. The former exterior left much to be desired. The new owner, Endurance Fund, part of Orco Property Group, then announced a thorough modernization – including changing the façade. However, the company did not manage to carry out all of its intentions, especially where the façade was concerned. The possibility for construction work around the building is very limited due to city traffic and the fact that the building is already occupied by tenants. “It is not possible for an older building to have the same standard as a newly-built one. Not even a thorough modernization will correct all the discrepancies. We did not replace all the plumbing, wiring or installations. We changed only what was required by the new legal regulations and what was already obsolete. New installations are not always necessary or profitable,” claims Andrzej Ciupak, property management director for Poland of TVO Europe Property & Facility Management Services.

Death or life after life

The life of a modern office building is estimated at around 40-50 years. It is hard to say what will happen to buildings after this period has elapsed, since in Central and Eastern Europe there are no buildings that are so old. The oldest ones are in their twenties. The Warsaw examples are Intraco I (1975), Oxford Tower – formerly Intraco II – (1979), Blue Tower Plaza – nicknamed “the Blue Skyscraper” – (1991), and Pekao Tower (1993). These buildings are therefore still some way from the end of their planned life expectancy. There is a similar situation in Prague: the oldest office buildings include International Business Center (1993), the office section of the Myslbek complex (1996) and Praha City Center (1997). The oldest office buildings in Budapest were built in the early nineties and include East-West Business Center (1991), Emke (1994) and Bank Center (1995). This being so, administrators know only in theory what will happen to their buildings after this time. “After the estimated fifty years such a building can be sold. Its value is usually established on the basis of the value of the plot of land minus the cost of demolition work. A new, modern office building can be erected on the spot. These are substantial investments, but most often they are profitable for developers,” explains Monika Rajska-Wolińska. Włodzimierz Moczydłowski suggests other solutions: “When the life of a building is over, thorough inspections and expertise are needed to establish whether the building qualifies for demolition or a general overhaul. Such an overhaul is carried out under the supervision of a project manager and project team; when all the permits required by law are obtained the project is given to a construction company experienced in this field. Contractors carrying out the general overhaul sometimes leave only the original construction elements – and sometimes they even replace some of those. In this way, the second life of a building starts,” he explains.

However, according to Monika Rajska-Wolińska, apart from the technical condition, the location has a significant influence on the decision whether to leave the old building in its place. “If the location is excellent, there will always be tenants who will want to stay there. If it is slightly less attractive, you need to compete for tenants by means of other qualities, such as the building’s modernity,” she adds.