WBJ: “Mixed-use” seems to have become the new “green” in the commercial real estate market. What are the main reasons for mixed-use projects’ growing popularity with developers?

Nicklas Lindberg: The drive towards creating neighborhoods with a whole range of urban functions reflects people’s natural need to have a place where they can meet and socialize. Today, in the internet and social media era, we do not meet as much as we used to and many of the residential and office areas that have been developed in the last few decades are isolated islands that do not foster integration and are not 24/7 open to the public or inhabitants.

For us as a developer, the mixed-use concept means building new parts of cities, communities or, in some cases, even moving the city center. That is something that has just started and will continue to grow both in Poland and in other countries around the world. Of course, “mixed-use” can mean many different things to different developers, but what we understand under the term is its full meaning; that is including all the various functions in the mix, from residential through resi for rent and offices to convenience retail.

Additionally, when you look at mixed-use projects like our Warsaw Brewery scheme in Warsaw’s Wola district, they help bring back the former glory and beauty of long-neglected historic areas, transforming them into high-quality public areas and thus contributing to the revitalization of entire neighborhoods. In Warsaw Brewery, we are renovating historic buildings of a former brewery complex and the cellars in which beer used to be stored.

Where did the impulse come from?

We drew a lot of inspiration from other countries and we also saw that some of the newly developed areas in Poland simply did not work. In Warsaw, for example, the office function was too dominant in Mokotów, while the residential function was too dominant in Wilanów.

What is city officials’ attitude to mixed-use developments?

Generally speaking, they like them and see them as bringing additional value to the city. Of course, you still need to go through all the administrative procedures to get a building permit, but I would say that the approach of city officials to mixed-use projects is much more positive than to some other schemes as they are clearly making cities more welcoming to their inhabitants.

Do tenants like such investments?

Many tenants, which today need to think about the comfort of their employees while looking for a new office, actually only want to sign lease agreements in mixed-use projects. What we have experienced in both Warsaw Brewery and Fuzja in Łódź is that for many companies which hire a lot of young people these days, including those who are just starting their careers and cannot yet afford or do not want to buy their own apartments, the inclusion of a resi for rent component in a mixed-use scheme is very important.

Is it difficult to obtain bank financing for mixed-use projects, which tend to be big?

The scale and nature of mixed-use projects are not a problem for banks. They are usually positive about such projects, but the fundamentals need to be ok. What really matters for banks is the location and the credibility of the particular developer.

What about investment funds, which tend to be more cautious than tenants?

Investors love such projects. On the one hand, they have seen them in many other places around the globe. On the other hand, they believe in destinations more than they believe in stand-alone buildings as they know that in the long term the uniqueness of such projects will be difficult to copy. This does not mean that they have to buy the entire development – very often, an investor buys just one building in a given complex, but that still means they buy part of a destination, part of a place-making project.

What are the main challenges you encounter while developing mixed-use schemes? Is their scale a problem when it comes to the size of the plot and the amount of money that needs to be invested?

The scale itself is not a problem for us – we like big investments. I would say that the most challenging element is the logistics, the need to coordinate the construction of many buildings with many different functions at the same time.

The good thing about mixed-use projects is that you can start with many different functions at the same time and thus complete them within a relatively short period of time. This is important for us as the investor in terms of the expected returns and it is also very important for our tenants and residents, who do not want to work or live on a construction site. The development of Warsaw Brewery will take less than four years – not much for a city-transforming project featuring over 60,000 sqm of offices and more than 1,000 apartments for sale and rent.

How is work on the Warsaw Brewery project going?

The entire development will be ready in October or November next year. We have three office buildings completed or under construction there – the first of them has already been sold, the second one has been fully leased out, while in the third one lease agreements for all the available space are now being negotiated. The apartments in the first three residential buildings have been sold, with sales in the fourth building proceeding apace. The prices of the apartments in this project have gone up a lot since we started building it.

And what about Fuzja in Łódź?

There is huge interest in both apartments and offices in Fuzja, where the historic component will be even more visible than in Warsaw Brewery – the complex will feature 14 red-brick buildings! We are now working on the first two residential buildings and expect to launch construction work on the first office phases later this year or at the beginning of 2020. Apart from apartments and offices, Fuzja will also include rental units and a hotel. The entire investment should be completed in five or six years.

Earlier this year, you unveiled the architectural details of a huge mixed-use project that you want to build on ul. Towarowa in Warsaw’s Wola. When will you be able to start that scheme?

Warsaw City Hall is now working on a master plan for the area, which is now in the final stages. We are part of the discussions and we are glad to have a good dialogue with the city. Once the master plan is in place, we will need to go through a number of administrative procedures including application for a building permit. Towarowa 22 will bring together almost all the possible functions, from residential, through resi for rent, offices and convenience to culture and entertainment. It will also bring a green area that is open 24/7 into the city center and really create an urban destination that will be unique for Poland.

Do you have any other mixed-use investments in the pipeline?

We have recently acquired the Tesco site in the Kabaty area in Warsaw’s Ursynów district. We will replace the existing store with apartments, convenience retail, restaurants and greenery, and the planned project is at an early design stage. In Kraków, we have a five-hectare site that is located just next to the main railway station, near ul. Wita Stwosza. The project will combine residential, office, retail and hotel functions.

So, mixed-use will remain important in your development strategy in the coming years…

Mixed-use projects currently account for 42% of our business and we want the figure to keep growing in the coming years. We think we are one of the few true mixed-use developers offering all the competences under one