Polish prospects
International Real Estate Symposium and Exposition CEMP 2008 was held recently in the Polish capital city of Warsaw. The event was an opportunity for real estate market experts and investors to discuss trends as well as to predict the future of the market
The third edition of Central Europe Meeting Point, an international real estate symposium and exhibition project, took place in Warsaw at the end of April, bringing together hundreds of real estate market experts and investors. The initiative, organized by Barcelona Meeting Point, was an opportunity for Poland to attract foreign investments by showcasing its investment possibilities and presenting information about its business climate.
Spot the difference
The Central Europe Meeting Point's numerous symposia focused on aspects and trends of CEE markets, particularly Poland's. A considerable portion of experts' attention centered on legal and tax issues that are of crucial significance in the investment process and which unavoidably vary between different countries in spite of their often shared legal heritage.
"Polish real estate law is very similar to that of Spain - we belong to the same continental legal system based, among others, on Roman law and the Napoleonic code. There is some 80-85 percent of common understanding of the law in the two countries," said Jaime Fúster, director of the Central European branch of Garrigues, a Spanish law firm. "There are, however, legal concepts in Poland that are completely different from those in other European countries," he added.
Experts at CEMP noted several legal issues that foreign investors may not be familiar with, such as the distinction between a ruling on the conditions for development - which provides general guidelines for land development - and a building permit. The distinction between ownership and perpetual usufruct titles to land - a distinction which may signify differences in terms of a property user's costs and rights - is another complicated area for foreigners.
New possibilities
One of the most outstanding Polish trends discussed at the exposition was the emergence of third-tier residential markets. Paweł Sztejter, a senior partner at residential consultancy REAS, pointed out that Poland is a polycentric country, with Warsaw's 1.7 million inhabitants accounting for only 4.5 percent of the country's total population. Second-tier cities, which include the Tri-city conurbation, Poznań, Wrocław, Łódź and Kraków, all have populations of 500,000-800,000 and, as a whole, a nine-percent share of the total population.
As many as 5.9 million people - or 15 percent of the population - live in the so-called third-tier Polish cities, which have from 100,000-500,000 residents. Some of these, Sztejter predicted, are bound to become new leaders on the Polish residential real estate market. The process will be fuelled by factors including saturation and growing competition in Warsaw and second-tier cities, as well as the large human potential of Poland's third-tier markets.
"Surveys show that more than 49 percent of apartment buyers are university graduates and the third-tier Polish cities of Rzeszów, Szczecin and Lublin are some of the country's largest academic centers," said Sztejter. "[These three cities] also have a very high rate of employment in the services sector and that is where most of the demand for houses comes from," he added.
Additionally, Sztejter stressed, practically all of these cities suffer from housing deficits. When all of the aforementioned factors are taken into account, he concluded, the cities of Szczecin, Lublin, Białystok, Olsztyn and Rzeszów emerge as third-tier residential market leaders. In 2010, each of these cities will see approximately apartment 15,000 completions per year.
Commercial growth
Experts also discussed the shape of the commercial segment of the Polish real estate market and concluded that it is still attractive, although far more competitive and difficult than in recent years. Yields in 2007 stabilized in both the office and retail sectors, for example.
Tomasz Trzósło, head of the investment team at Jones Lang LaSalle Poland, noted that the market is now marked by fewer property purchases and increased difficulty in obtaining development financing. Although there is still strong demand for office space, the success of particular projects depends on their location, quality as well as timing of delivery.
Industrial developments, for their part, are now increasingly being developed outside the Warsaw area, while the logistics sector is characterized by particularly strong competition. As much as six million sqm of logistics space is currently in the pipeline.
"This is a very difficult market from the developer's point of view. It is virtually dominated by a number of large companies that have monopolized it on a nationwide scale," said Trzósło.
According to Marek Dąbrowski, president of the Polish Real Estate Fund, the hospitality sector is more difficult to assess because it is more fragmented. There are some visible trends in the segment, he added, including the increasing penetration of branded products and the relatively low number of institutional transactions in the segment.
According to Dąbrowski, there are approximately 200 hotel projects at various stages of planning at the moment. He added that the future of the segment depended greatly on the development of domestic road infrastructure.
Future prospects
Participants of the Central Europe Meeting Point naturally tried to offer some predictions about the future of the Polish real estate market in the context of the Polish economy.
"The real estate market is always especially uncertain," said Witold Orłowski, chief economic advisor to PricewaterhouseCoopers Poland. He added that a recession was looming on global markets, or was indeed already taking place, and there was fear that it could affect Europe as well.
To counter such fears, experts emphasized the fact that Poland was, due to a number of factors, relatively well prepared to face a global slowdown and that the Polish real estate market was unlikely to suffer significantly from it.
For one thing, they pointed out that growth should continue as there is still a strong pent-up demand for houses in Poland, due to historical reasons particular to the market. For another thing, the Polish real estate market is relatively healthy in terms of its financial security systems, the experts stressed.
"Banks are nowadays very cautious in Poland and their financial services are professional," said Fúster. "I do not foresee a situation similar to the subprime market crisis in the United States," he concluded.
