In search of the right product
Talking to institutional investors and property investment funds, the message seems to be loud and clear: we want to buy but there isn't enough investment-grade product around in Poland.
"ING Real Estate fund is actively looking in Poland, but the single greatest hindrance is lack of available stock," said Peter Davies, the Prague-based managing director of ING Real Estate Investment Management Central Europe.
"You either have to co-produce or be lucky in order to get good product, although this has changed recently," said Artur Mokrzycki of IXIS AEW Europe, which manages the PBW Real Estate fund.
There is now a common assumption that after an increase of activity last year, the spring has more or less dried up. But property consultants are starting to challenge what they feel is a very Warsaw-office-centric view.
"There is lots of investment product to purchase in Poland, we just have to be creative to find the right product for the investor," said Loic de Villard, head of investment at the Warsaw office of Cushman & Wakefield Healey & Baker.
Dorota Latkowska, head of corporate investment at Knight Frank Nieruchomości, agrees that there is a limited number of standing products on the Warsaw office market, but says that some properties that could be available are often not taken up because of the price issue.
"Some developers look at Lisbon, which was the lowest of the last wave of EU entrants, and see yields of 6%-7%. They think that if they hold out till next year, yields will drop a percentage point to 9%," she said.
Sven von der Heyden, whose development company Von der Heyden Group has built a handful of office buildings in Warsaw, confirms this opinion.
"I am certain that building, leasing and selling quickly can pay off from a developer's point of view as he turns his equity quicker, which can then be invested again, but we have not yet been made convincing offers to make selling worthwhile," he said.
An area, which to Loic de Villard appears to offer a lot of potential is sale and leaseback deals. "There was lots of talk about sale and leaseback a year or so ago and nothing much has happened, but there are some strong covenants around. I think we'll see some deals done."
Dorota Latkowska sees potential here too, but not immediately. "A number of institutions have huge portfolios, with some good and some worse properties within them. We can observe sale and leaseback deals in Europe increasing, and this could come to Poland perhaps in two to three years."
Latkowska says that portfolio investors will not be fazed by ending up with properties dotted around Poland. "Opportunity funds don't mind. Often they will only keep the ones assessed by them to be top properties and sell off the rest. They don't care if it's in Białystok."
And then there is retail. Just as availability of purchasable office stock is dipping, the retail investment market looks like it is coming out from the shadows, although to what extent, insiders disagree.
"This year will be the year for retail," said Chris Zeuner, retail investment specialist at Cushman & Wakefield Healey & Baker's Warsaw office. Zeuner says there could be as many as eight retail properties, mostly shopping centres, changing hands this year, with perhaps fifteen or sixteen serious investors interested.
Not everyone shares this opinion. "I don't think we'll see a number of retail deals this year," said Gareth Jones, head of central Europe Capital Markets at Jones Lang LaSalle's Warsaw office. "I can't really see what would be transacted (as there) are not many prime assets left."
A sector less mentioned by the investment community is the hotel sector. This is in no small part because it is unsettled at the moment, with a number of hotels either newly opened or under construction. This, according to Marek Dąbrowski, head of the hotel division at the Warsaw office of international property consultancy Colliers International, is precisely why investors should be interested now.
"I believe the next two years will be a very good time to invest in hotels here," he said. "There haven't been any new projects announced recently and given the significant time taken to get going, a balance in equilibrium will come about."
Dąbrowski, who says he has recently signed an agreement to market a well-established mid-range hotel with good revenues, says that Warsaw still has a relatively low number of hotel rooms for a city of its size and importance, although currently there is an oversupply. Picking out the Sheraton, Dąbrowski says that there are some hotels that have proved to be remarkably resilient.
"If they can produce a profit in a downturn, then there will be lots of potential in the long term. Funds with a five-year view could do well," he said.
Again, Gareth Jones is more cautious. "The 3-star segment is possible, but the current feeling with most people I have talked to is that they will sit and see how the current supply that will be dumped on the market will be soaked up, before making any moves," he said.
Despite the lack of consensus as to how much investment supply is actually available, there is little doubt that serious interest is substantial.
According to Latkowska, there is a lot of money looking for a home here. "There are five or six investors still looking for single transactions above E50 million," she said. As well as familiar investors like Europolis and Heitman, there are also some new funds coming in. These are not only from countries that have traditionally provided investors like Germany, Austria and the United States. According to one consultant, two new Irish investment funds are shopping around, as well as a new German open-ended fund and an American closed fund.
"ING Real Estate fund is actively looking in Poland, but the single greatest hindrance is lack of available stock," said Peter Davies, the Prague-based managing director of ING Real Estate Investment Management Central Europe.
"You either have to co-produce or be lucky in order to get good product, although this has changed recently," said Artur Mokrzycki of IXIS AEW Europe, which manages the PBW Real Estate fund.
There is now a common assumption that after an increase of activity last year, the spring has more or less dried up. But property consultants are starting to challenge what they feel is a very Warsaw-office-centric view.
"There is lots of investment product to purchase in Poland, we just have to be creative to find the right product for the investor," said Loic de Villard, head of investment at the Warsaw office of Cushman & Wakefield Healey & Baker.
Dorota Latkowska, head of corporate investment at Knight Frank Nieruchomości, agrees that there is a limited number of standing products on the Warsaw office market, but says that some properties that could be available are often not taken up because of the price issue.
"Some developers look at Lisbon, which was the lowest of the last wave of EU entrants, and see yields of 6%-7%. They think that if they hold out till next year, yields will drop a percentage point to 9%," she said.
Sven von der Heyden, whose development company Von der Heyden Group has built a handful of office buildings in Warsaw, confirms this opinion.
"I am certain that building, leasing and selling quickly can pay off from a developer's point of view as he turns his equity quicker, which can then be invested again, but we have not yet been made convincing offers to make selling worthwhile," he said.
An area, which to Loic de Villard appears to offer a lot of potential is sale and leaseback deals. "There was lots of talk about sale and leaseback a year or so ago and nothing much has happened, but there are some strong covenants around. I think we'll see some deals done."
Dorota Latkowska sees potential here too, but not immediately. "A number of institutions have huge portfolios, with some good and some worse properties within them. We can observe sale and leaseback deals in Europe increasing, and this could come to Poland perhaps in two to three years."
Latkowska says that portfolio investors will not be fazed by ending up with properties dotted around Poland. "Opportunity funds don't mind. Often they will only keep the ones assessed by them to be top properties and sell off the rest. They don't care if it's in Białystok."
And then there is retail. Just as availability of purchasable office stock is dipping, the retail investment market looks like it is coming out from the shadows, although to what extent, insiders disagree.
"This year will be the year for retail," said Chris Zeuner, retail investment specialist at Cushman & Wakefield Healey & Baker's Warsaw office. Zeuner says there could be as many as eight retail properties, mostly shopping centres, changing hands this year, with perhaps fifteen or sixteen serious investors interested.
Not everyone shares this opinion. "I don't think we'll see a number of retail deals this year," said Gareth Jones, head of central Europe Capital Markets at Jones Lang LaSalle's Warsaw office. "I can't really see what would be transacted (as there) are not many prime assets left."
A sector less mentioned by the investment community is the hotel sector. This is in no small part because it is unsettled at the moment, with a number of hotels either newly opened or under construction. This, according to Marek Dąbrowski, head of the hotel division at the Warsaw office of international property consultancy Colliers International, is precisely why investors should be interested now.
"I believe the next two years will be a very good time to invest in hotels here," he said. "There haven't been any new projects announced recently and given the significant time taken to get going, a balance in equilibrium will come about."
Dąbrowski, who says he has recently signed an agreement to market a well-established mid-range hotel with good revenues, says that Warsaw still has a relatively low number of hotel rooms for a city of its size and importance, although currently there is an oversupply. Picking out the Sheraton, Dąbrowski says that there are some hotels that have proved to be remarkably resilient.
"If they can produce a profit in a downturn, then there will be lots of potential in the long term. Funds with a five-year view could do well," he said.
Again, Gareth Jones is more cautious. "The 3-star segment is possible, but the current feeling with most people I have talked to is that they will sit and see how the current supply that will be dumped on the market will be soaked up, before making any moves," he said.
Despite the lack of consensus as to how much investment supply is actually available, there is little doubt that serious interest is substantial.
According to Latkowska, there is a lot of money looking for a home here. "There are five or six investors still looking for single transactions above E50 million," she said. As well as familiar investors like Europolis and Heitman, there are also some new funds coming in. These are not only from countries that have traditionally provided investors like Germany, Austria and the United States. According to one consultant, two new Irish investment funds are shopping around, as well as a new German open-ended fund and an American closed fund.
