Translation of an article that appeared in Finance, Slovenia’s daily financial newspaper, on Tuesday 7th April 2015

By, Jacqueline Stuart – Director of Slovenia Invest

Ljubljana is full of outdated office buildings from the socialist days. A spate of new office buildings came to market following Slovenia’s accession to the EU, but all in secondary locations. A proper central business district has yet to emerge.

So what is best? An old building or new? It all depends on your perspective, let’s examine this from different points of view.

There are some occupiers who only want to be in new buildings as they believe it would adversely affect the perception of their company to be in an older property. We have an accountancy firm as a Client that will only consider smart new office buildings. Others prefer the gravitas of a historical property – many important law firms in Ljubljana occupy such buildings.

Personally I like the comfort of a historical building, cool in the summer with the thick walls that keep the heat out, and warm in the winter. The high ceilings always create a feeling of space and grandeur.

The worst of both worlds is the office towers built in the 60s and 70s – without the charm of historical properties, but energy inefficient and poorly equipped for today’s needs. Unfortunately much of Ljubljana’s office space is in such buildings.

The key considerations in office buildings are as follows:

1)    Efficient use of space

It is in everyone’s interests (owner, occupiers and management company) to have the maximum amount of usable space and the minimum amount of common space, including lobby, corridors and staircases. Anything more than 20% of common space is inefficient and causes problems with profitability for owners, and costs for occupiers. Historical properties score well as most do not have reception areas so a larger percentage of the building comprises usable space. Older office towers from the socialist days are notoriously inefficient, many have large grandiose lobbies – clearly the objective in those days was not to create a property that could generate a profit for the landlord. Some newly built towers are cleverly designed to maximize usable space, but not all. Megacenter 1 and 2 in Verovškova, and Dunajska Vertikala on Dunajska are examples of good design with sufficient, but not excessive common space. Others, such as Eurocenter on Tivolska, and Rotonda on Dunajska, were designed with a ‘wow’ factor in mind – walking in to the atrium of those building is indeed impressive but there are many m2 that do not generate any income for the landlord and only costs for the occupiers.

There are no hard and fast rules about how common space is charged in Ljubljana. Some landlords charge rent on usable space and common space, others charge rent only on occupied space. Most charge service charges on both a proportional share of the common space and occupied space. Common space like the rest of the building has to be lit, heated, cooled and cleaned and someone has to pay for it.

2)    Energy efficiency

Historical buildings can score well again with energy efficiency due to the typically thick walls, but not always – it depends also on the quality and size of the windows. Older office towers typically have very poor energy efficiency, with newer buildings much cheaper to heat and cool. Service charges in newer towers vary between 2.3 and 3.5€/m2 – there is no older tower with charges of less than 5€/m2. This has implications for both the landlord and tenant. The landlord cannot achieve the same rent for older towers regardless of how well fitted out, because tenants consider the overall picture of rent plus service charges to assess value for money. Tenants do not like inefficient buildings for various reasons. First it is difficult to forecast costs with any certainty as the price of energy fluctuates. Second many international companies are under pressure from their headquarters to engage in corporate social responsibility, including protecting the environment by conserving energy. Third, in most older office towers it is not possible to regulate the temperature to individual requirements. Most have a fan coil system, which does not permit heating and air conditioning to function simultaneously. This has implications in spring and autumn when the sun is still low in the sky and shines directly in the windows of south facing offices turning them into ovens, whilst the occupants of north facing offices still require heating to keep the chill away.

Many of the older office towers do not have meters for individual units and there is no way to measure consumption for different occupiers, the energy bills are divided proportionally amongst all. This does not encourage responsible use of energy. When our Company was founded in 2008, we worked in the World Trade Center on Dunajska, where many of the occupants worked all summer with the air conditioning on and windows open. We now occupy a space on the 14^th floor of the Delo tower, the building is generally overheated and the heat rises through the poorly insulated floors to create something like a sauna in our office. It is surreal to sit in short sleeves in December with snow falling outside, our windows wide open, and a temperature of 25 degrees inside. It is not possible to open the windows in many modern office buildings, occupants are expected to rely on the ventilation system for fresh air. Unsurprisingly, this is a problem – we are unanimous in our Company, we would never move to a building where it is impossible to open the windows.

A tax on energy inefficient buildings is probably a question of when, not if. Energy certificates are now required in Slovenia and elsewhere in the EU. All public buildings in New York are now obliged to publish their energy consumption.

3)    Flexible space

Every occupier has their own requirements and extensive fit-outs are the norm when any sizeable Company moves to a new office. Global companies are moving to an open plan and shared workspace model, with around 10 workspaces for every 13 employees, on the basis that there are always people out of the office. Other occupiers such as Slovene state agencies are stuck with the small individual office model. What is important is the flexibility of the office building to be adapted to occupiers needs. Historical buildings score badly here, most have many load bearing walls that cannot be moved and it is difficult to change the layout. Older office towers and newer office towers are generally flexible, some more than others. Megacenter 1 and 2 on Verovškova are good examples of extremely flexible buildings. Pop up individual offices can be quickly and easily created with knauf walls, as small as 50m2, or entire floors can be completely open plan.

One interesting building in Ljubljana is Tivoli Center on the corner of Bleiweisova and Tivolska, the office property that is home to this newspaper. It consists of two adjoining buildings, one modern 6-storey structure and an older 5-storey historical building dating from the 1940s. This is due to the change in internal height standards since the construction of the original building. This development resulted in a highly unconventional interior building design, meaning that corresponding floors are physically not on the same level. This necessitated the inclusion of different connecting staircases and custom lift systems. Due to the subdivision, the split levels do not adversely affect the operation of the building, and it is possible to move seamlessly from old to new. Iztok Polanič, of Intering Holding, the Company that co-owns the building, has no doubts about the advantages of the new part. It is better insulated, has more flexible office space, better communication, and is easier to remodel when required.

From an occupier’s viewpoint however, anyone visiting the Finance offices in the old part of the building cannot help being impressed with the beautiful original floors, spectacular views of Nebotičnik on one side and Celovška on the other, and the character windows that let light flood into the space.