01 | 2021

Interview with Frank G. Schmidt

"The work environment will become much more important"

Property developers such as the Hamburg-based Quantum AG need to anticipate the expectations of tenants and buyers long in advance. In a talk with the Editor in Chief of concepts, Torsten Meise, Co-founder Frank G. Schmidt explains the change processes that characterize the office property segment today and the future effects of the coronavirus pandemic.

conceptsMr. Schmidt, one year ago the real estate market was absolutely booming. Then came the coronavirus, and suddenly the market was pretty much deflated. How has your company coped with the pandemic so far?

Frank G. SchmidtWe got through the year 2020 relatively unscathed. None of our projects were canceled, but of course there were delays because some of our decision processes required more time than before. All of us had to come to terms with the situation. But now we can see that the housing market has not been affected at all. In the commercial property market many people initially stopped looking, but by now they are again turning up regularly on the market.

conceptsAre the effects of this development showing up in the prices?

Frank G. SchmidtYes, but the situation differs greatly from one city to the next. In Berlin, for example, the effects are much more evident than in Hamburg, where I would say that the pace of rentals has slowed down, but the prices are not really more affordable.

conceptsWhat’s your prognosis for the near future?

Frank G. SchmidtIt all depends on the overall mood. I believe that 2021 will be a relatively strong repeat of last year. We simply have to see how the economic situation develops as a whole. For example, when I look at the current export figures, it makes me rather optimistic. I think that when people once again pay attention to the positive news and stop looking at only the sad pandemic figures, that will also have an impact on the commercial real estate market.

conceptsBut if working from home continues to be such a significant issue won’t companies consider the idea that they no longer really need so much floor space?

Frank G. SchmidtWhen I began to work in the real estate sector, about 25 years ago, someone told me that the office was a dying segment and that in the future everyone would be working from home. Things didn’t develop that way. It’s true that today everyone’s talking about working from home, but in my view it’s not an either/or situation. It’s almost always a both/and situation. In my opinion, it’s wrong to say that 30 percent of the currently available office space is now no longer needed because of the coronavirus pandemic.

conceptsYoung employees in particular consider their work-life balance very important. In many cases they also practice “work-life blending”—blurring the boundary between their work hours and their leisure time. What does that mean for commercial real estate?

Frank G. SchmidtThe new generation wants to have more flexibility. Digitalization and the switch to working from home have shown very clearly just how much is possible in many areas. As a result, many workflows and processes will change. But does that mean an end to the office? Absolutely not, in my opinion. People want to work in offices. Maybe not necessarily five days a week, but basically the culture of face-to-face conversation is an important aspect. This is where digital communication clearly reaches its limits.

conceptsHow can we imagine the office of the near future? Is it likely to be as playful as a startup, will it have the look of a lounge, or will it tend to have a conventional design?

Frank G. Schmidt I think it will be a mixture of all of them. There will be areas that have somewhat more open structures, and there will also be areas where lounge and playroom furniture play a role. The office of the future will have to fulfill a variety of requirements. Where can I find a quiet place to do my work? Where can I generate constructive conversations in my groups? I think one thing that will certainly increase is the desire to feel comfortable at the office. This means that there will be additional areas with a better quality of stay. The trend will ultimately be toward an expansion rather than a reduction of floor space. Work time and private life are becoming increasingly interwoven. In my opinion, the work environment will become much more important.

conceptsWill this also have an effect on the technical equipment of offices?

Frank G. SchmidtIn the office environments of today, it goes without saying that I should be able to move from A to B together with my work equipment without having to make a huge additional effort. I just grab my laptop and sit down together with other people. I think that many of the office buildings that were built in recent years offer a great many of these features and services. The basic standard that has been set in the past ten years is already very high.

conceptsHow important is sustainability in this context?

Frank G. Schmidt I think the biggest difference between the office buildings of today and those of ten years ago is that people are thinking very hard about the materials they use. This is also very important for construction companies. I’m already seeing tenants who ask about a building’s CO2 consumption. They want to know about its environmental footprint, and they wonder if it matches their corporate identity. When we talk about the quality of a building, I think we can’t avoid including a close look at construction materials in this complex of ideas.

conceptsHow flexible do office spaces need to be these days? How often does a building have to be converted during its life cycle?

Frank G. SchmidtToday it’s normal for about 15 to 20 percent of an office space to be altered every two or three years. That’s why all new buildings are constructed in ways that make changes and relocations very easy. Above all, the technical building services are designed to minimize the time and effort required for modifications. In our sector, we habitually complain about the technical building services planners. But it’s really an incredibly complex area, and most technical building services work the way they’re supposed to. To repeat, I believe that the most important change is not the technology but the fact that people are asking the same questions they ask about cars: What is consumed by this thing that I’m purchasing? How high is the quality of my office, in which I spend so much of my time? A lot of this is still uncharted territory, but it’s important and will become more important. Everyone involved has to come to terms with that. This is our task: the fact that we will need to improve our performance in this area quite a lot.

The Managing Director of Quantum Immobilien AG founded the company in 1999 together with Philipp Schmitz-Morkramer. The project developer Quantum has cooperated with HOCHTIEF to realize numerous buildings, such as the residential sections of the Elbe Philharmonic Hall in Hamburg and the Heinrich Campus in Düsseldorf, which is now under construction.