THE CHALLENGE
Office premises in properties from the 1980s can be difficult to let – especially if the property is outdated and located in an area of Copenhagen where the commercial letting market is fiercely competitive.
This was the case for Søborghus – a large office property of almost 10,000 square metres on Gladsaxevej in Søborg owned by one of Denmark’s largest property owners, DADES A/S, and wholly managed by Newsec. Following a period of increasing vacancy rates, 40 per cent of the property’s premises were vacant in 2016.
The building looked rather run-down and outdated, which made the letting of vacant premises difficult. There are quite a few new properties in the area, and even though we could offer lower square metre prices, Søborghus was often passed over in favour of new and more attractive properties
Mikkel Ravnsbæk Nielsen, Market Manager at Newsec
THE SOLUTION AND OUTCOME
New strategy and business plan
Newsec was in an ongoing dialogue with the owner, DADES, about the challenges of the property. One solution was to lower the square metre price drastically. However, this was not an ideal solution from an investment perspective, as it would reduce the value of the property.
Consequently, Newsec initiated a new strategy and business plan for the property, comparing investment requirements with the potential value increase achievable from higher rents and lower vacancy rates.
Exterior and interior upgrade
Our project department prepared proposals for replacing windows, renovating facades and stairwells, and upgrading the shared canteen to give the building an inviting and contemporary look. We also proposed upgrading outdoor areas by, for example, removing shrubs and signs and installing new lighting
Mikkel Ravnsbæk Nielsen
The proposed upgrade would enable the property to compete with new properties in the area on nearly all parameters. We could also increase the square metre price substantially and still be around 25 per cent below competitors’ price levels
Mikkel Ravnsbæk Nielsen
Newsec in charge of renovation
Following additional analyses, Newsec presented the new strategy and a long-term business plan to the client – including plans for upgrading the building. DADES decided to proceed with our proposal and invest in modernising the property to make it more competitive.
The renovation and modernisation were carried out over six months with Newsec's project department acting as project manager, while the operation and maintenance department was in charge of cleaning and upgrading the outdoor areas.
Attractive property for tenants
The property looked completely up to date after the upgrade, and Newsec's letting department could immediately sense the effect in their dialogues with potential tenants.
Previously, we had to make a lot of effort and offer discounts to persuade tenants to move into the property. Now, tenants actively select this property because Søborghus offers largely the same product and facilities as new properties in the area, but at a lower square metre price
Mikkel Ravnsbæk Nielsen
Minimal vacancy rates and higher rent levels
Following the upgrade, Newsec's letting department succeeded in letting nearly all the office space within 12 months. Vacancy rates fell from 40 per cent to just 7 per cent, and rents were increased by 16-20 per cent compared to the 2016 level.
We are very pleased to have succeeded in turning Søborghus around and increasing the property value by making a reasonable investment. We greatly benefited from working with Newsec, who proactively presented, recommended and handled all phases of the project
Niels-Peter Edvardsen, Head of Asset Management at DADES A/S
Newsec's services in connection with the project included:
- Advisory services, strategy and business plan
- Client advisory services
- Project design
- Obtaining and assessing quotations
- Contract management and construction project management
- Operation and maintenance – exterior and interior
- Marketing
- Leasing services
- Property asset management
