WBJ Observer talked to Yuval Ben-Ari, head of Park Projects Group, about the company’s latest endeavor and its new office project – Park Avenue
WBJ Observer: The supply of new office buildings in Warsaw has never been so high. From January to June 2016, 16 major office schemes have been completed. Is there still a place for newcomers?
Yuval Ben-Ari: We are very well aware of the situation in the market. When you look at the market right now, it might seem that it is not the best time for an office investment. On the other hand, if you think long-term and consider city centers in top European cities, you’ll see it’s a very sound investment. It’s even better to launch construction now, when construction costs are relatively low. Even if the next two years are tough, we know that in five or ten years’ time the project will be very successful. Warsaw is and will continue to be the place where international companies look when establishing a base for their operations in Central and Eastern Europe.
Are you not concerned about the high vacancy rate in Warsaw?
The vacancy rate has increased mainly in the Central Business District where the majority of vacant space is offered in older offices which find it difficult to compete with recently delivered offices. We are also confident about the location of the project. It is on Wspólna Street, in the “center of the center,” between the Marriott and the Hampton by Hilton, close to the main railway station.
How long did the preparation take before launching the project?
Seven years. It always takes a long time to get all the permits in the city center, but we’ve managed to find a solution that satisfied all the interested parties.
How far along is the construction?
Warbud, the general contractor for the project, entered the site in July and is excavating the underground levels. The scheme is scheduled for completion in mid-2018.
Shouldn’t you have an anchor tenant by now?
We already have a tenant for 1,800 sqm. But we are not looking for an anchor tenant. We decided to operate in a niche, where we offer offices of 150-400 sqm to small and medium-sized companies. They are our primary target. We believe there is no completion in this niche in the Warsaw market. We believe in SMEs. They are the businesses that have built Poland as it is today. Major companies have plenty of nice buildings to choose from, but we feel that SMEs are being overlooked. When a small or medium-sized company looks for an office, they are usually offered “leftovers” in major office schemes. Then the company gets “lost” somewhere between big tenants. Our building will comprise 14,000 sqm and will not have one major tenant, but a number of equally important smaller ones. We will not put corporate logos on the facade of the building. It will be more like a boutique than a typical office scheme.
What about financing? Are you using the market standard level of financial leverage?
Our level of leveraging is lower than the market standard. We have been present on the Polish market for 15 years and thanks to our stable financial position, we can afford to commercialize the building more slowly. Our lender, Pekao SA, also believes in our strategy as it granted us financing without requiring an anchor tenant.
How are you attracting your tenants?
When we talk to companies interested in leasing space in Park Avenue, we sit down with them and an architect and he designs their office, with no obligation to use the design later on. We also put a lot of emphasis on the quality of the building. The project was designed by JSK Architekci, a renowned architectural studio. Our GC is Warbud – we could have gone with others, but decided to have the best building for our scheme. We also have a very detailed catalog of finishing materials, down to faucets and door knobs, so that the tenants are assured of the quality we will deliver. We offer openable windows in every room, VRV air-conditioning, minimized common space and seven fast elevators with a maximum waiting time of 28 seconds. The building will have power terminals for electric cars in the underground car park, as well as spacious terraces. Catering mainly to SMEs we are also much more open to negotiate specific lease terms. For instance, we will also offer shorter leases – three years instead of the five years which is the market standard.
What type of industries do you think the building will appeal to?
As mentioned before, international firms looking to set up a base of operations in Warsaw, as well as start-ups, and firms from the financial and real estate sector, such as mortgage real estate funds. We hope to have a mixture of businesses – small, medium-sized and offices of international corporations – that will all feel important and valued.