Money, money everywhere but not a brick to buy

Speaking at a property and construction conference organized by Eurobuild, Helmut Fischer, the managing director of commercial real estate at BPH bank, said: "I see over the last couple of year this phenomenon that towards the year end more transactions will close. A lot of funds just set up their targets this year and they need to fulfill their targets and buy."

However, a lack of quality product means prime investment opportunities are thin on the ground. Padraic Coll, managing director of Key Invest, is not as sanguine as most: "I just wonder where the product is going to come from."

According to Agnieszka Jachowicz, managing director of Arka BZ WBK, many clients are looking at imperfect buildings that they then try to make money on by renovating or upgrading them, or by improving their tenant mix.

"Everybody wants to buy in Warsaw first," says Jachowicz. "Wrocław will develop because there are several buildings in the pipeline. Kraków is also of huge interest but maybe not necessarily in the office sector."

According to Coll, many of his clients are also bulking up their operation to get a better return. "There are several investors that want to dispose of their properties," he says. "They weren't happy with them in the first years because rents were dropping and they now want to win on the yield compression. There is a tendency that if yields are coming down, [investors] can refinance part of the yield compression, which allows them to go further into the market and buy more stuff."

Forward purchasing is also proving a decisive market factor. "It's the one advantage we can still have on the market competing against the funds," says Coll. "We can be flexible in giving developers some financial guarantees before it has been built. Obviously the credibility of the developer is key to this."

Markus Leininger, head of central and eastern European property division at Eurohypo, sees forward purchasing as presenting a major problem, firstly to banks' previously dominant position, and to the market as a whole. "Forward funding is a threat to banks typically controlling the development pipeline. This could be a real threat for the market here when projects are coming online on an uncontrolled level because there is too much equity looking for a home."

Laurence Mackin