The current market is perhaps the most challenging yet of the post-war property development sector. The persistent financial difficulties afflicting much of the eurozone have hampered the extent to which developers are allowed to thrive, as transactions are few and, above all, governed by cost-effectiveness and rationalisation.
The market has, since the wake of the euro crisis, been characterised by a string of increasingly complex regulations as developers have struggled to survive in an ever-more competitive property market. However, despite a measure of economic infirmity Europe remains home to a number of safe havens, not least of which being Paris. The economic power house remains an unrivalled commercial opportunity for developers, with exceptional public and private transport networks, a large educated workforce and a high standard of living. Paris has, of late, become the de facto European headquarters for many non-financial industries, lending itself to office developers in particular.
The Paris office market is – by a significant margin – the largest European office market in terms of inventory and turnover. The total office stock in the Paris market is approximately 54 million sqaure metres, in effect making it the worlds second behind Tokyo. In excess of 2.4 million square metres of office space was either let or sold to owner/occupiers throughout 2012. Also, due to the sheer diversity of industries, the Paris market is less volatile than competing locales such as London and Frankfurt.
The many and varied expectations of property developers require those in the sector to demonstrate a meticulous understanding of the market. Perhaps most indicative of this understanding is the boutique office developer HRO, a firm whose experiences of the market spans half a decade and whose prospects have gained regardless of the euro crisis.
The firm’s origins lie in the 1960’s, when Howard Ronson, the founder of the HRO Group, began developing office buildings in partnership with Chesterfield Properties. The company shortly thereafter became one of the first pan-European commercial developers, active across France, Germany, Spain, the Netherlands and the UK.
French fancies
HRO, having recognised Paris as a fruitful climate for property development, has sought to “focus more specifically on the largest international and French companies who are looking to create harmonious working environments and efficiencies by consolidating into large office space.”
Since the mid-1990s, HRO has developed 18 major office projects in Paris, London and Frankfurt. The firm works principally in the European office market, developing “grade A” office buildings.
In addition to its dealings in property development, HRO provides an extensive range of advisory services and asset management services to institutional clients, including research, appraisal, acquisition, construction, finance, repositioning, leasing, management and disposal of real estate assets. HRO’s willingness to diversify its services is illustrative of the company’s steadfast ability to acclimatise to thoroughly challenging economic circumstances.
However, regardless of Paris’ comparative fertility, HRO’s operations are not without hindrances, the company’s Co-managing Director, Tom Stauber states: “There is latent dynamism in the Paris market, with the number of medium-sized (1,000 to 5,000sq m) transactions decreasing by only four percent year-on-year. Today, however, postponement is the name of the game, with larger requirements simply put on ice until there is more visibility and optimism with regard to the economy in general.”
The downturn in Europe’s economic vitality has resulted in a great deal more emphasis on the quality and longevity of commercial properties. Tenants continue to favour new, spacious buildings offering green credentials, low charges, and convenient transport links.
Companies have come to recognise the importance of new office space in attracting and retaining talent. Occupier surveys regularly show a rate of dissatisfaction with existing premises, not uncommonly amounting to 80 percent, which reflects the widespread dissatisfaction with the increasingly obsolete office stock currently available. This obsolescence is accelerating as both construction techniques and the regulatory environment has continued to evolve in recent years.
Stauber says of the challenging economic circumstances: “We are traversing this period as best we know. By having the capacity to continue developing the best buildings in the best locations we are delivering into a shrinking pool of brand new office developments. It’s delivering what tenants need, even if they don’t know it yet.
“We continue to listen to tenants, as well as our advisors and investors, in a never-ending quest to improve our buildings and to ensure they’re adaptable to future occupier needs and requirements. Our reputation is based on our track record as a niche developer, which we aim to strengthen and expand upon.”
Tackling sustainability
In the past decade, property development has been subject to a near ceaseless procession of environmental legislature, the likes of which have fundamentally influenced the technical design of buildings throughout the entire lifecycle of a building. In France, by 2020, new buildings are expected to consume less energy than they produce, as architecture, construction and operation are increasingly required to minimise environmental impact and reduce energy consumption.
Speaking on the environmental objectives of modern-day property development, Dan Perkins, Director, says: “It is a huge challenge for the entire industry, but one we feel we are winning. For example, West Plaza, our latest 30,000sq m building, is one of the most highly environmentally certified office buildings of its size in the Paris office market. We design our buildings to foresee future legislation and surpass it.”
Perkins continues: “HRO’s approach has always been based on the principle that buildings should be designed from the inside out. Above all, the tenant has to be able to realise the full potential of its space. To attract world-class tenants, HRO buildings offer flexibility, comfort and outstanding quality not only in terms of technology but also in finishes, amenities and building services. By focusing attention on the tenant, HRO delivers projects that will always be in demand, thereby ensuring the best return on investment. Our track record is recognised by numerous industry awards.
“The combined experience of HRO’s professional team, both in-house and the external consultants, ensures an in-depth understanding of the finished product and a continuity of the HRO design philosophy, as well as technical innovation, within the ever changing framework of construction regulations.”
International interest
HRO’s stature as a leading office developer has amounted to interest from a number of world-renowned companies. Offices for the likes of Pepsico and EMC² are often cited among the best-loved places to work by staff and critics alike, cementing HRO’s status as a leading player in the sector.
The property developer routinely utilises the services of critically appraised architects, this having multiple consequences: one being that HRO buildings have a recognisable pedigree and heritage, that there is a guarantee of quality in the overall aesthetic, and that the building becomes part of the environmental and economic fabric in the city, and not part of an isolated and sterile business environment alien to local inhabitants.
Moreover, Tom Stauber insists that HRO ensures a significant measure of sustainability in all its developments: “Crucially, we listen to the elected officials who reflect the aspirations of the local residents, whatever their political hue. By having an open dialogue, we aim to improve the local built environment by facilitating greater interaction between the occupants of our buildings and the local residents.”