Appointed to a loftier office

High ceilings, huge swing windows, lots of fresh air and fine architecture. Not a description of an apartment, but of offices in old post-industrial buildings, which make business that much more attractive

A few years ago residential lofts started to take off in Poland, although it took some time to get investors interested. Some developers kept on eye on the competition and, in secret, drafted their own projects, just in case their rivals were successful. But they were. So has the day come for post-industrial buildings converted into offices? They have not yet won universal acclaim, but on the Warsaw market are being snapped up like hot cakes. Dorota Leszczyńska of the Maxon Nieruchomości real estate agency describes what happened: “The first moves were made around 10 years ago, with the pioneering project being the Burakowska complex in Warsaw. It took several years to revitalize and no one was yet using the term ‘loft’, but instead referred to them as post-industrial buildings with service outlets and offices. The very greatest care was taken in the renovation and finishing, with the original façades, lifts and windows remaining untouched.” Stanisław Bogdański has been the owner of the premises of the former Fabryka Koronek lace factory since 1997, and spent 7 years on the renovation. Such companies as Red Onion (a furniture retailer), Miełżyński’s wine cellar, the BBDO advertising agency, Vitra and Biuro 1, were some of the first to move into the Burakowska complex.

Only for the creative

Not all tenants dream of working in a class ‘A’ glass and steel office tower on a business street in the city centre. Much depends on the company’s line of business. According to Dorota Leszczyńska: “It is not banks or large corporations that look for offices in post-industrial buildings. Advertising agents, photography studios and architectural studios also prefer renting such premises due to the natural and excellent lighting which such places boast. And there are many which forego such comforts as air-conditioning in exchange for high ceilings, large swing windows and that specific atmosphere which such space generates.”

Potential in Poland’s King Cotton

Łódź, a city less than 150 km from Warsaw, has a great deal of fine post-industrial architecture ripe for development. Almost the whole Polish textile industry was situated here in the 19th century, as evidenced by the many thousands of square metres of old factory buildings, most of which have sections being transformed into residential lofts, in line with the current fashion. But there are exceptions to the rule. Joanna Zielińska, commercial properties specialist at St. Paul Developments Polska, relates what happened: “The first revitalization of an office loft in Łódź was in 1999. The historic building in question was a former fire station in the post-industrial Księży Młyn complex. It was a high-risk investment and we wondered whether there would be any demand for offices in lofts. Today, there is tremendous interest in such premises, particularly due to the lack of ‘A’ class office buildings.”

St. Paul’s Developments Polska’s latest project in Łódź is Textorial Park – also part of Księży Młyn, where 4,000 sqm of office space is to be developed in a former cotton warehouse. There will also be two new buildings with 8,000 sqm of office space. The investment will be ready for occupation in the fourth quarter of the present year.

Other developers are moving in the same direction as St. Paul’s Developments, including Agraf, which is renovating a 4-storey factory in Łódź – the former Polmatex-Majed silk plant. The old red-brick walls that will contain the new office space are to be given a thorough cleaning. In addition to this, the building is to be raised by 1.5m, so that the attic can also be turned into offices.

Not as cheap as it seems

There are several simple reasons why not every developer is testing the water in this market niche. Buying post-industrial buildings is not always as profitable as it may seem at the outset. Although buildings already exist on the site, the cost of renovating them often substantially exceeds the expense of developing entirely new ones. Joanna  Zielińska puts it this way: “It is much more profitable to erect a new office building from an investor’s viewpoint. Lofts require structural restrictions, and there are hefty costs involved in giving a building a thorough technical check and cleaning the brickwork. On top of this it’s necessary to cooperate with the historic buildings conservator for such projects.”

Steep price

As office rental rates rise, some tenants are counting on rents in loft-type buildings being less expensive. But, as it turns out, these price differences are only marginal.

Dorota Leszczyńska of the Maxon Nieruchomości agency, explains why: “Of course, there are premises available where the rent is around USD 6 per sqm, but these are buildings which often had heavy machinery and are now in a bad condition. Their windows leak, the floors are damaged and the toilets are awful. The owners of such buildings rarely decide to renovate them. But if they take such a decision, they quickly become aware of the market situation, which is when the rents for such premises rise to the levels of modern office space. The average rates for revitalized properties in Warsaw’s Praga district are EUR 10 per sqm. Following such renovation it is not the price which distinguishes lofts from normal offices, but rather their appearance.” Rents of around EUR 10 are lower than the Warsaw average, but it must be remembered that such premises are located in the unfashionable district of Praga North. More expensive office space is usually to be found on the other side of the river Vistula, reaching even EUR 40 per sqm in the best locations.

In Łódź, where there is very little unoccupied office space, the differences are not that huge. Joanna Zielińska claims that the rent for office space in the two new buildings under construction in Textorial Park is between EUR 14 and 14.5 per sqm and EUR 13 to 13.5 in a loft.

Promising niche
in Budapest

‘Boom’ is a strong word, but the experts are agreed that it fits perfectly into this developing segment in Budapest. Since the number of available plots is diminishing, the importance of post-industrial buildings is on the rise, both from the viewpoint of developers and local government. Only a few projects to develop office space by renovating old industrial plants, warehouses and large workshops have been completed so far. Some of these also offer loft-type homes and is not always clear which function dominates in a given project. In the opinion of Gergely Arendas, deputy director general of Wallis Ingatlan, the developer of Mariassy House: “An office loft with a clear and spacious interior was created after the renovation of the previous Calves Fair Hall within the Mariassy House residential building. The manner in which the business section was designed allowed spacious offices to be created, in which the space is used in positive manner.”

Less expensive in Hungary

The fact that it is less expensive to invest in old post-industrial properties in Hungary than to build from the foundations up is another justification. According to Gergely Arendas: “The total construction costs for loft-type offices are at least one third lower than for new buildings, taking into account the fact that they are known for having efficient heating and cooling systems. We spend not much more on them than in other buildings of a similar size. May I add that 6 to 7 sqm of space per person is an index which places this type of property among the best as regards use of available space.” n

Zuzanna Wiak, Nandor Mester