Thursday, 19 October 2017

High revamp costs diminish interest in brownfields

By Denisa Novotná | E15 |
20 May 2009

The shrinking amount of undeveloped land was supposed to encourage builders to redevelop defunct industrial or warehousing sites. But, in practice, the high cost of cleaning up brownfields often means high expectations go unfulfiled. The mandatory costs get even higher if the land is contaminated or if there is another type of environmental damage.

"This type of project is more demanding, which is an obstacle under the present market conditions, with developers facing a shortage of cash," says Jiří Volf, an investment analyst with the King Sturge consultancy. Investors' willingness to engage in brownfield regeneration is mainly declining in smaller towns. Defunct industrial sites also tend to be surrounded by poor infrastructure, making the desired property appreciation unfeasible.

Speculators who previously refused to sell brownfields out of hopes that their price would further increase have practically disappeared. "The financial crunch and its impact on the real estate market has made an end to these speculations as investors are currently not interested in these kinds of properties," Volf says.

Still, at least Prague has some brownfields that have preserved their value despite the deterioration of the economic climate. Especially attractive are interwar or older industrial sites that are enjoying the status of protected landmarks.

"If you preserve some historical parts and blend them sensitively with a modern structure, the result is often better and more attractive than new buildings built from scratch, which tend to look always the same," says Martijn Kanters from the consultancy DTZ. Higher purchase price is then outweighed by the opportunity for atypical construction solutions. "Examples of this are the Vaňkovka shopping mall in Brno or some projects in the Prague neighbourhood of Karlín," Volf says.

Most attractive Prague brownfields

Karlín, Libeň
Real Estate Karlín Group (REKG) is currently finishing a residential project called Cornlofts Šaldova. A new building by the Viennese architecture studio Baumschlager-Eberle has been attached to a remodelled building of a former municipal granary. The same developer has converted former ČKD factories into office buildings Corso and Palác Karlín. Developer Crestyl is now revamping an area around river docks in Libeň into a residential and office complex called Docks.

Holešovice, Bubny
Prague 7 is a popular district with many developers. In the area of a former left-bank river port in Holešovice, Lighthouse Group has built the first part of its Prague Marina residential project and is building an office complex. ING Real Estate Development has recently finished a multipurpose project called A7 Arena Holešovický pivovar on the site of a defunct brewery. A nearby administrative complex, Classic 7, was built by AFI Europe in a former steam-powered mill with protected landmark status. J&T is to revamp a Tesla factory under a Tower City Holešovice project. The largest piece of land waiting for redevelopment in Prague 7 is the Bubny rail yard and its surroundings; the builder should be Orco Property Group.

Vysočany
A former eight-hectare complex of the Odkolek bakery is to be redeveloped by the Italian-owned company FIM Group. The project will preserve a part of the historical headquarters, but tear down production halls and replace them by a primarily residential complex, designed by Italian architect Umberto Capelli. Codeco plans an extensive revamp of the former Kolbenka factory.

Modřany, Braník
České nemovitosti is building flats in the factory of the former chocolate producer Orion. Nearby lots are owned by REKG, as is the former Microna headquarters, which is to be converted into 150 loft apartments according to a design by Josef Pleskot. A Neo Riviera project to build flats on the grounds of a defunct brewery in Modřany has for many years only existed on paper. In Braník, ING Real Estate Development is also planning to convert a former brewery into flats.

Smíchov, Radlice
Sekyra Group and Czech Railways have for several years been planning development on 20 hectares of land around the Smíchov railway station. Called Smíchov City, the project is to stretch from the streets Nádražní and Radlická up to Zlíchovský most. Czech-Irish developer Red Group wants to use a defunct factory compound of the aircraft engine manufacturer Walter Engines to build an office complex and, later, 1,500 flats.