Poland and its new dynamic
From the editor
Poland will put its status as a backwater curiosity in the eyes of the rest of Europe behind it after May 1. But whatever the huge symbolic import of this date for the country, its impact may only be truly felt some years after the celebrations to mark Poland's accession have become a blurred memory.
That's certainly the view of most of the players on the property market here who have kindly made contributions to this special issue of Lokale. Though real estate professionals in this market have been waiting for this historic moment for a long time now, they've also been dealing on a day-to-day basis with the hard reality of vacant offices and hotel rooms, falling rents and assorted legal hurdles, to name but a few of the less heartening features of life here in Poland. That is why the contributions throughout this edition of the supplement are admirably free of the sentimentality one might expect and even forgive given the occasion.
But these same people wouldn't be working here if they weren't at the same time extremely optimistic about Poland's long-term prospects. Their experience tells them that whatever tribulations the market here may be going through, big, exciting things will be about to happen just around the corner, and the incidence of these, it is hoped, will become more prevalent with each passing month. Eventually, in perhaps two or three years' time, what is perceived as the 'good news' of today could well become the stuff of routine expectation and, who knows, some of us might then even look back on Poland's less predictable years with a little nostalgia for the edge they gave to doing business here.
As the real estate market has itself shown, Poland has, however, been in the process of joining the wider continent of Europe for some time now. As with other European capitals, for instance, a philosophy of strict urban planning dominates Warsaw's Rada Urbanistyczno-Architektoniczna (Council of Architects), which advises Mayor Lech Kacziński and the City Architect Michał Borowski. They all claim to share a determination that the days when a skyscraper could be erected above and beyond its neighboring buildings at the drop of a hat are a thing of the past.
Those developments that do get the go ahead to begin construction, however, whatever their scale, are going up faster than ever in Warsaw, which is why we've been hearing of some impressively big pre-leases over recent months in the office market. Back in October 2002, the announcement that Microsoft had signed up for 5,500 square meters at TK Development's 9,100 square meter Jerozolimskie Company House 2 caused enough of a stir. More recently, we've had Ghelamco's triumphant wooing of Commercial Union to their 10,600 square-meter Crown Point in November last year, to take up a whole 7,500 square meters in a building that's due for completion at the end of 2004. But Hochtief Project Development set new standards for the pre-lease game when it persuaded Ernst & Young to move into 11,000 square meters of its 55,000 square-meter Rondo 1 development, which will be ready in 2006. There'll be plenty of other developers hoping that Poland's EU membership will bring in these sorts of deals in greater numbers.
Putting up buildings quickly and winning tenants means luxury isn't a priority. The deluxe Metropolitan won its prize at MiPiM for its contribution to the landscape and not for any spectacular leases, which we're still waiting to hear about. Despite that, its success was an obvious boon to us all in Poland.
Not surprisingly, however, there is still some catching up to do in this part of the world with trends that, if not exactly established, are becoming evermore popular in the rest of the EU. The 'eco-building' phenomenon, which is a perfectly normal sight in northern Europe in particular, needs some promoting if it is ever to get off the ground here in Poland. Grontmij Real Estate marketed their Tulipan House last summer as the first of its kind in Poland and made a convincing case that, despite the initial outlay that might be involved in developing a 'sustainable' building, there are real savings to be made: you might not only be protecting the planet by moving into one, but your overheads could well come down as well.
Perhaps the tension between two diametrically opposed tendencies in the current office market worldwide might well make itself felt in Poland over the next few years to come. Anyone arguing for a 'new office' or 'hotdesking' regime to be implemented in their place of work would probably be treated with some suspicion in this part of the world, as if it were an excuse for shirking. As the whole thing implies less space for employees to work in, it's hardly going to be popular with developers and agents either. But the fact is that technology has made us all more mobile, and being stuck in one place from nine to five is just not a recipe for success for anyone anymore. In this new era that Poland is entering, attitudes born of habit will have to be broken.
Everyone in Western Europe knows about 'call centers' that until recently employed thousands of young people. The key phrase these days is 'Business Process Offshoring,' and dozens of 'back office' operations have been moved from the UK to countries like India, where labor costs are markedly lower. Though it's still early days, there are signs that Western firms could now be thinking more and more of bringing such activities to Poland, where there are a large number of university-educated, bilingual young people in need of a job, particularly in the regions. Electronics giant Philips this year announced that it was to move its accountancy center from Dublin to Łódż, for example. We can be assured that there'll be little 'hotdesking' going on at a hive such as this, but 'back office' tenants will also be in the business of keeping space at a premium.
Everyone who lives in Warsaw knows all about retail real estate. Those outside the property market are heard to comment frequently enough on the comparative merits of Galeria Mokotów and Sadyba Best Mall, to give two examples, in a way that might even seem strange to people in Western Europe, where high street shopping is still highly valued. But a city such as Poland's capital, with its history of destruction and reconstruction, doesn't have this luxury. Now, Varsovians have Blue City to add to their quota of shopping experiences, and if the center's opening day - when thousands fought to get into the place at the cost of casualties and discarded shoes - is anything to go by, then the Polish appetite for the shopping center has yet to wane. Next up are Arkadia, the Reduta extension and Złote Tarasy, which is growing by the day in front of the eyes of commuters near the central train station on ul. Jana Pawła II.
The immediate issue concerning all these new shopping malls will be how they compete with one another. One senses it's not going to be easy for any of them. This is evidently why the owners of the Blue City and Reduta schemes, situated opposite one another on Aleje Jerozolimskie, seem to want to make common cause with one another (for now at least) rather than be at loggerheads.
Another interesting development has been the manner in which the centers have been emphasizing the uniqueness of their design, until very recently a moot subject. The owners of Arkadia held a press conference earlier this year, highlighting exactly how the 'experience' of shopping would be more sophisticated than others in the city. The assumption until now, however, has been that customers are only bothered by what a retail center has to offer internally and not the contribution it makes to the landscape of the city. Some Polish architects, however, have been making critical noises about the apparent insensitivity of some retail schemes to their immediate environment for a few years now. And there are a number of signs further to the west of Europe that retail need not mean that the joy of shopping should come at the expense of a center's congruence with its surroundings. Perhaps some developers might begin to take note of this, given the intense competition they are about to encounter here.
The retail sector is, however, the one most likely to gain from investors' cash following Poland's EU accession, if recent moves are anything to go by. Apollo Rida's acquisition of 28 Metro-anchored shopping centers, announced at MiPiM this year, for around zł.3.3 billion (700 million), was the biggest transaction of its kind ever in Poland. Before this, other investors, such as the Chicago-based Heitman, had revealed joint venture initiatives with Plaza Centers Europe and Polimeni, which would involve expansion into the regional retail market in Poland.
Given the scarcity of quality office investment product in Poland at the moment, other investors, such as the new breed from Ireland and the older hands from Austria, are looking to spend their money on retail and logistics property.
Poland's central position in Europe means that that there are plenty of moves afoot in this country, to develop ambitious logistics schemes. Poland Central in Piotrków, Grontmij and ING Real Estate in Stryków and Europa Park in Mszczonów are just three that plan to take advantage of the country's position as a European logistics hub. Although the market here has now matured to the extent that 'build-to-suit' projects are the rule and speculative schemes the exception, some developers are thinking of inventive ways that might mean they won't have to make such a stark choice between the two approaches.
No one in Warsaw needs to be told that there are lots of hotel rooms in the city and that they are not easily filled. That's why a group of the capital's hoteliers got together and formed the Warsaw Destination Alliance to market the city more aggressively and attract a higher number of visitors. This won't happen overnight, but there have been some encouraging signs in some quarters of this sector. The Hotel Rialto, the city's first boutique hotel, opened to much acclaim last year, and it will soon be joined on the market by the Orco Group's Hotel Le Regina in Warsaw's Old Town and perhaps, intriguingly, by an initiative by the Jewish Renaissance Foundation and the Austrian developer Warimpex to renovate and refurbish the historic buildings on ul. Próżna into precisely that kind of hotel.
A couple of budget airlines have at last begun operating to and from Poland and hoteliers are pinning some of their hopes on the prospect of them bringing in some new tourists. French companies such as Accor and Groupe Envergure, which are now concentrating their efforts on expanding into the undeveloped budget sector here, are expecting to gain most from this key manifestation of Poland's new status as a member of the European community.
Poland will put its status as a backwater curiosity in the eyes of the rest of Europe behind it after May 1. But whatever the huge symbolic import of this date for the country, its impact may only be truly felt some years after the celebrations to mark Poland's accession have become a blurred memory.
That's certainly the view of most of the players on the property market here who have kindly made contributions to this special issue of Lokale. Though real estate professionals in this market have been waiting for this historic moment for a long time now, they've also been dealing on a day-to-day basis with the hard reality of vacant offices and hotel rooms, falling rents and assorted legal hurdles, to name but a few of the less heartening features of life here in Poland. That is why the contributions throughout this edition of the supplement are admirably free of the sentimentality one might expect and even forgive given the occasion.
But these same people wouldn't be working here if they weren't at the same time extremely optimistic about Poland's long-term prospects. Their experience tells them that whatever tribulations the market here may be going through, big, exciting things will be about to happen just around the corner, and the incidence of these, it is hoped, will become more prevalent with each passing month. Eventually, in perhaps two or three years' time, what is perceived as the 'good news' of today could well become the stuff of routine expectation and, who knows, some of us might then even look back on Poland's less predictable years with a little nostalgia for the edge they gave to doing business here.
As the real estate market has itself shown, Poland has, however, been in the process of joining the wider continent of Europe for some time now. As with other European capitals, for instance, a philosophy of strict urban planning dominates Warsaw's Rada Urbanistyczno-Architektoniczna (Council of Architects), which advises Mayor Lech Kacziński and the City Architect Michał Borowski. They all claim to share a determination that the days when a skyscraper could be erected above and beyond its neighboring buildings at the drop of a hat are a thing of the past.
Those developments that do get the go ahead to begin construction, however, whatever their scale, are going up faster than ever in Warsaw, which is why we've been hearing of some impressively big pre-leases over recent months in the office market. Back in October 2002, the announcement that Microsoft had signed up for 5,500 square meters at TK Development's 9,100 square meter Jerozolimskie Company House 2 caused enough of a stir. More recently, we've had Ghelamco's triumphant wooing of Commercial Union to their 10,600 square-meter Crown Point in November last year, to take up a whole 7,500 square meters in a building that's due for completion at the end of 2004. But Hochtief Project Development set new standards for the pre-lease game when it persuaded Ernst & Young to move into 11,000 square meters of its 55,000 square-meter Rondo 1 development, which will be ready in 2006. There'll be plenty of other developers hoping that Poland's EU membership will bring in these sorts of deals in greater numbers.
Putting up buildings quickly and winning tenants means luxury isn't a priority. The deluxe Metropolitan won its prize at MiPiM for its contribution to the landscape and not for any spectacular leases, which we're still waiting to hear about. Despite that, its success was an obvious boon to us all in Poland.
Not surprisingly, however, there is still some catching up to do in this part of the world with trends that, if not exactly established, are becoming evermore popular in the rest of the EU. The 'eco-building' phenomenon, which is a perfectly normal sight in northern Europe in particular, needs some promoting if it is ever to get off the ground here in Poland. Grontmij Real Estate marketed their Tulipan House last summer as the first of its kind in Poland and made a convincing case that, despite the initial outlay that might be involved in developing a 'sustainable' building, there are real savings to be made: you might not only be protecting the planet by moving into one, but your overheads could well come down as well.
Perhaps the tension between two diametrically opposed tendencies in the current office market worldwide might well make itself felt in Poland over the next few years to come. Anyone arguing for a 'new office' or 'hotdesking' regime to be implemented in their place of work would probably be treated with some suspicion in this part of the world, as if it were an excuse for shirking. As the whole thing implies less space for employees to work in, it's hardly going to be popular with developers and agents either. But the fact is that technology has made us all more mobile, and being stuck in one place from nine to five is just not a recipe for success for anyone anymore. In this new era that Poland is entering, attitudes born of habit will have to be broken.
Everyone in Western Europe knows about 'call centers' that until recently employed thousands of young people. The key phrase these days is 'Business Process Offshoring,' and dozens of 'back office' operations have been moved from the UK to countries like India, where labor costs are markedly lower. Though it's still early days, there are signs that Western firms could now be thinking more and more of bringing such activities to Poland, where there are a large number of university-educated, bilingual young people in need of a job, particularly in the regions. Electronics giant Philips this year announced that it was to move its accountancy center from Dublin to Łódż, for example. We can be assured that there'll be little 'hotdesking' going on at a hive such as this, but 'back office' tenants will also be in the business of keeping space at a premium.
Everyone who lives in Warsaw knows all about retail real estate. Those outside the property market are heard to comment frequently enough on the comparative merits of Galeria Mokotów and Sadyba Best Mall, to give two examples, in a way that might even seem strange to people in Western Europe, where high street shopping is still highly valued. But a city such as Poland's capital, with its history of destruction and reconstruction, doesn't have this luxury. Now, Varsovians have Blue City to add to their quota of shopping experiences, and if the center's opening day - when thousands fought to get into the place at the cost of casualties and discarded shoes - is anything to go by, then the Polish appetite for the shopping center has yet to wane. Next up are Arkadia, the Reduta extension and Złote Tarasy, which is growing by the day in front of the eyes of commuters near the central train station on ul. Jana Pawła II.
The immediate issue concerning all these new shopping malls will be how they compete with one another. One senses it's not going to be easy for any of them. This is evidently why the owners of the Blue City and Reduta schemes, situated opposite one another on Aleje Jerozolimskie, seem to want to make common cause with one another (for now at least) rather than be at loggerheads.
Another interesting development has been the manner in which the centers have been emphasizing the uniqueness of their design, until very recently a moot subject. The owners of Arkadia held a press conference earlier this year, highlighting exactly how the 'experience' of shopping would be more sophisticated than others in the city. The assumption until now, however, has been that customers are only bothered by what a retail center has to offer internally and not the contribution it makes to the landscape of the city. Some Polish architects, however, have been making critical noises about the apparent insensitivity of some retail schemes to their immediate environment for a few years now. And there are a number of signs further to the west of Europe that retail need not mean that the joy of shopping should come at the expense of a center's congruence with its surroundings. Perhaps some developers might begin to take note of this, given the intense competition they are about to encounter here.
The retail sector is, however, the one most likely to gain from investors' cash following Poland's EU accession, if recent moves are anything to go by. Apollo Rida's acquisition of 28 Metro-anchored shopping centers, announced at MiPiM this year, for around zł.3.3 billion (700 million), was the biggest transaction of its kind ever in Poland. Before this, other investors, such as the Chicago-based Heitman, had revealed joint venture initiatives with Plaza Centers Europe and Polimeni, which would involve expansion into the regional retail market in Poland.
Given the scarcity of quality office investment product in Poland at the moment, other investors, such as the new breed from Ireland and the older hands from Austria, are looking to spend their money on retail and logistics property.
Poland's central position in Europe means that that there are plenty of moves afoot in this country, to develop ambitious logistics schemes. Poland Central in Piotrków, Grontmij and ING Real Estate in Stryków and Europa Park in Mszczonów are just three that plan to take advantage of the country's position as a European logistics hub. Although the market here has now matured to the extent that 'build-to-suit' projects are the rule and speculative schemes the exception, some developers are thinking of inventive ways that might mean they won't have to make such a stark choice between the two approaches.
No one in Warsaw needs to be told that there are lots of hotel rooms in the city and that they are not easily filled. That's why a group of the capital's hoteliers got together and formed the Warsaw Destination Alliance to market the city more aggressively and attract a higher number of visitors. This won't happen overnight, but there have been some encouraging signs in some quarters of this sector. The Hotel Rialto, the city's first boutique hotel, opened to much acclaim last year, and it will soon be joined on the market by the Orco Group's Hotel Le Regina in Warsaw's Old Town and perhaps, intriguingly, by an initiative by the Jewish Renaissance Foundation and the Austrian developer Warimpex to renovate and refurbish the historic buildings on ul. Próżna into precisely that kind of hotel.
A couple of budget airlines have at last begun operating to and from Poland and hoteliers are pinning some of their hopes on the prospect of them bringing in some new tourists. French companies such as Accor and Groupe Envergure, which are now concentrating their efforts on expanding into the undeveloped budget sector here, are expecting to gain most from this key manifestation of Poland's new status as a member of the European community.
