high-tech and aesthetically perfect workspaces

Dmitry Vishnyakov: "The Jobses at Construction Site: How Office Creation Turned Into Tech Business"

11 Aug 2022
Over the past four years, the smart filling cost component in the cost of office decoration has increased from 4% to 20%. Even despite the departure of international companies from Russia and the freezing of a number of projects, the trend for technicality is increasing, changing the market and its participants.
  • Dmitry Vishnyakov

    Managing Director of Pridex

Why the role and cost of office technology is growing

Over the past 10 years, the Russian office real estate market has developed in conditions where rental rates have remained almost at the same level, while the cost of finishing and engineering equipment of offices has increased.

In the digital equivalent, this looked like this: in 2013, the average rental rate in the business center of class "A" and the cost of the corresponding interior decoration was about 25 thousand rubles for 1 sq.m. per year. By 2022, the rental price rose to 28.5 thousand rubles for 1 sq.m. per year, and the cost of fit-out projects increased several times and amounted to about 120 thousand — 150 thousand rubles per sq.m. depending on the volume of IT component included in the project.

Such major changes involve two key factors. First of all, a significant share of the import component, critical for the quality of the final product, in the segments of finishing materials and engineering equipment, had an impact. However, in addition to this, the increase in cost is due to a change in the role of the office in the work of employees and the business as a whole, an increase in demand for the creation of a more comfortable and "friendly" environment — primarily due to the integration of smart office systems.

The most concisely this trend can be described by the well-known term "uberization". Unlike such areas of the economy as transport, retail, logistics, etc., in which the "Uber model" came many years ago, the office interior industry has only recently settled down to this course. The starting point was the need to organize hybrid work, when, on the one hand, companies had a need for more rational and efficient use of existing space, long-term planning of office activities, and on the other hand, the office became in some way a competitor to remote work, creating a request for improving the quality of the environment by personnel.

The result of this was the emergence of flexible workplaces, advanced videoconferencing systems in meeting rooms, one-stop access to all services through a mobile application, etc. At the same time, as in other areas, the changes are irreversible, and companies that once moved to this level no longer agree to return to the "traditional office".

What's happening in the market right now

The current situation, which began to take shape at the end of February 2022, has made serious changes in the dynamics of the development of the office segment. The market encountered a refusal on planned premises lease/purchase transactions, the shutdown of a significant part of the projects at the initial stage and, in some cases, the cancellation of projects under construction. The crisis also created tangible difficulties for fit-out contractors, who had to quickly cope with the rupture of supply chains, the ban on the sale of materials and equipment to Russian customers, a shortage of parts, which, in turn, affected the increase in cost and the increase in the timing of project execution.

However, from the side of the business there is still a demand for high-quality IT equipment. Right now, a natural watershed is being formed on the market, on the one hand of which are large-scale projects initiated by systemically important companies (often with state participation) with significant financial resources, and on the other hand, offices from 1 thousand to 10 thousand sq.m., projects of which are initiated by smaller companies.

The first type of customers is hooked to impressive, but often outdated assets that they own. Interest in the development of their office clusters is primarily associated with attracting and retaining staff — the lack of modern infrastructure significantly weakens the positions on this issue. As a rule, in such corporations, long-term strategies for the development of their commercial real estate are being developed, for the needs of which a separate budget is formed, designed for several years.

At the same time, customers considering offices with an area of 1 thousand to 10 thousand sq.m., are more affected by the current instability and in the face of a shortage of finishing materials and equipment can reorient to the ready-made market instead of implementing their own projects. This is largely responsible for the fact that demand will be redistributed in favor of service offices, which should give them an impetus to further improve their own process engineering solutions — after all, it is often service offices that are drivers of digital development in this segment.

Thus, in the medium term, large corporations and network office operators will become the main initiators of the construction of new projects, creating a significant amount of demand for high-quality, and, importantly, high-tech fit-out.

What this means for contractors

An important differentiating feature of the above types of clients is the availability of extensive in-house expert review in the field of construction and office maintenance. This shift of the market towards "professional customers" in conjunction with the previously indicated trend for uberization lays the groundwork for the transformation of general contractors specializing in fit-out projects. In addition to toughening the requirements regarding financial, manufacturing and warranty obligations, a request for a single competence center is already being formed on the market, capable of implementing the most complex project from both an architectural and a technical point of view.

As a matter of fact, we are talking about the formation of our own ecosystem. Customers will not have to go beyond it to get and use a modern technologically advanced office.

Technology, not specific services or products, will play a primary role. They will become the foundation for the business of contractors of the future. Based on these technologies, contractors will be able to provide solutions and generate new complex ideas for a specific customer.

Accordingly, the fit-out contractor in the new realities should assume the role of a technology company, a provider of a complex set of services for creating corporate interiors with an integrated hardware-software complex to ensure efficient business operations.

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