Squeezed out in Gdansk
GDANSK—With age comes charm and wisdom. But for Gdansk, the historic city on the Baltic Coast of Poland which celebrated a millennium anniversary two years ago, it carries a burden to development.
A tight real estate market and even tighter building regulations in Gdansk have shunted many potential investors in the region to the city's younger and more flexible, sister city Gdynia.
While Gdansk has twice the population of Gdynia, its $260 million in major foreign investment is only $60 million higher than Gdynia's.
"Gdynia always seemed more interesting to investors," said Piotr Konkel, vice president and director of the real estate section of the Gdansk Pomerania Development Agency. "In Gdynia there is just more attractive land, easier land to build on."
But Gdansk city officials say that this February they will announce a plan to reorganize and free up part of Gdansk's 800-hectare city center in a move designed to hoist investors back to their port.
The new six million square meters of development space has a market value of approximately $5 billion, said Roman Sebastyanski, head of the city of Gdansk's real estate marketing office.
"Gdansk is slower (than Gdynia), but the potential of Gdansk is 10 or 20 times bigger than that of Gdynia," Sebastyanski said. "The problem is we have to organize the market. We're already past the halfway mark."
But if Gdansk is past the half-way mark in its paper work, it still has a long way to go before the real estate market will pick up steam, said Zbigniew Mlodzianowski, co-owner and architect at Horus Architectural Firm.
Since 1991, Horus has designed six buildings in Gdynia and, with business on the up, it has plans for an additional six in the next two years, Mlodzianowski said.
But because of Gdansk's tight architectural restrictions, including building size and height, as well as a lack of space, Horus has not worked on any projects in Gdansk, Mlodzianowski said.
"We are not interested, bluntly, in working in Gdansk because of the general attitude of the city (concerning real estate and property ownership)," Mlodzianowski said.
A lack of private property in Gdansk's center, combined with historical conservation rules and zoning regulations that require every project to be approved by the city's elected executive board, can ward off investors, Gdansk's Sebastyanski admitted.
"Because of the really difficult restrictions ... some may get the idea that this is a very confusing environment," Sebastyanski said. "To a certain degree this may be true."
The Gdansk real estate market now is split almost 50-50 between the city and the state, with a virtual lack of private property in the center, Sebastyanski said.
The result has been a warped development in the tri-city region comprising Gdansk, Sopot and Gdynia, leaving Gdynia with an excess of business-class buildings and a complete dearth in Gdansk, said Gdansk Pomerania Development Group's Konkel. Sopot, located between these two large commercial cities, is chiefly a tourism and residential center.
"There is an excess of class-A and B buildings in Gdynia," Konkel said. "Do you have any offices in Gdansk with air conditioning? I don't think so."
Germany-based AGIB Euro-Invest claims it is changing that situation, but not with great speed, said Andrzej Denninger, a representative in AGIB's marketing department.
Last March, AGIB opened up 1,400 square meters of class-A office space and another 4,500 square meters of retail space across from Gdansk's central train station, Denninger said.
As part of a $50 million investment, AGIB also modernized the former Orbis "Monopol" hotel and is currently constructing an additional 6,000 meters of class-A office space and 6,000 meters of retail space in the same location, expected to be completed within two years, Denninger said.
"This size of such quality space doesn't exist anywhere in Gdansk," Denninger said.
But while AGIB was established in Gdansk in 1991, it took years of waiting for Orbis and city permission before AGIB could begin its investment, Denninger said.
"We got this space in 1996, five years after we started in Gdansk," Denninger said. "In Gdansk this was the only place that interested us, because it's right in the center."
AGIB could be considered lucky with its development, since one of the few areas where such modern buildings can be constructed is in the modern Wrzeszcz neighborhood, in downtown Gdansk, outside of the old town, Konkel said.
But building in Wrzeszcz is virtually impossible due to heavy saturation of the real estate market there, Konkel said.
"(Archeological and architectural restrictions) wouldn't be a problem in the Wrzeszcz neighborhood" where there are few historical buildings, Konkel added. "But there's practically no space there."
Gdansk city officials insist that will begin to change later next month when the city opens a public debate on the first draft of its city center development strategy.
Among the issues raised in the strategy are a general timetable for privatization of publicly owned property and sectoral development priorities, said Gdansk's Sebastyanski.
"Mainly the need is for high-class office space and high-class retail space," he said.
A key to the plan will also be Gdansk Shipyard's sale of 35 hectares of property in the city center within the next two to three years, Sebastyanski said.
The land will be unrestricted in terms of the types of buildings that may go up there, making the area a likely candidate for upscale office buildings, he added.
But buying up land from an old shipyard can come with environmental liabilities that investors will be weary of, said Leszek Adamczyk, director of the environmental division at environmental consulting firm Atmoterm.
Dangerous substances involved in ship building and modernization, including chemicals such as paints, oils and other solvents, could be present on the surface or have seeped into the shipyard's grounds, Adamczyk said.
"These are certainly issues that the buyer has to watch out for," Adamczyk said. "All that stuff could really be somewhere there."
Still, real estate developers are likely to welcome any safe, new space in Gdansk with open arms, said Kristof Jacunski, the Poland general manager for Chelverton Properties International.
While many developers have entered Gdynia in order to get a foothold in the region, future prospects, based on the cities' size and history, are probably brighter in Gdansk, Jacunski said.
"If you compare Gdynia to Gdansk, Gdansk is four times larger," Jacunski said. "The question is where you place your bets."
For now, many investors, including ILD Business Center Joint Venture ($43.6 million), Coca-Cola Amatil ($30 million) and the HIT Centrum Handlowe shopping center ($17 million), have chosen Gdynia, according to Gdynia city officials.
At the same time, U.S.-based Europort Poland, which plans to spend $85 million to build a deep water grain peer, and AGIB with its $50 million hotel, office and retail development project, have picked Gdansk, Gdansk city officials said.
A new city strategy for Gdansk could help clear up the current long waits and tough building conditions in Gdansk, Jacunski said.
"Now I'm sure it's easier to find a spot in Gdynia," Jacunski said. "But I wouldn't say that in 10 years it will be the same."
Still, if Gdansk city officials don't get to work soon, Gdynia could come out on top, Jacunski warned.
"If Gdynia will develop momentum, I'm sure it will develop the most interest," Jacunski said.
A tight real estate market and even tighter building regulations in Gdansk have shunted many potential investors in the region to the city's younger and more flexible, sister city Gdynia.
While Gdansk has twice the population of Gdynia, its $260 million in major foreign investment is only $60 million higher than Gdynia's.
"Gdynia always seemed more interesting to investors," said Piotr Konkel, vice president and director of the real estate section of the Gdansk Pomerania Development Agency. "In Gdynia there is just more attractive land, easier land to build on."
But Gdansk city officials say that this February they will announce a plan to reorganize and free up part of Gdansk's 800-hectare city center in a move designed to hoist investors back to their port.
The new six million square meters of development space has a market value of approximately $5 billion, said Roman Sebastyanski, head of the city of Gdansk's real estate marketing office.
"Gdansk is slower (than Gdynia), but the potential of Gdansk is 10 or 20 times bigger than that of Gdynia," Sebastyanski said. "The problem is we have to organize the market. We're already past the halfway mark."
But if Gdansk is past the half-way mark in its paper work, it still has a long way to go before the real estate market will pick up steam, said Zbigniew Mlodzianowski, co-owner and architect at Horus Architectural Firm.
Since 1991, Horus has designed six buildings in Gdynia and, with business on the up, it has plans for an additional six in the next two years, Mlodzianowski said.
But because of Gdansk's tight architectural restrictions, including building size and height, as well as a lack of space, Horus has not worked on any projects in Gdansk, Mlodzianowski said.
"We are not interested, bluntly, in working in Gdansk because of the general attitude of the city (concerning real estate and property ownership)," Mlodzianowski said.
A lack of private property in Gdansk's center, combined with historical conservation rules and zoning regulations that require every project to be approved by the city's elected executive board, can ward off investors, Gdansk's Sebastyanski admitted.
"Because of the really difficult restrictions ... some may get the idea that this is a very confusing environment," Sebastyanski said. "To a certain degree this may be true."
The Gdansk real estate market now is split almost 50-50 between the city and the state, with a virtual lack of private property in the center, Sebastyanski said.
The result has been a warped development in the tri-city region comprising Gdansk, Sopot and Gdynia, leaving Gdynia with an excess of business-class buildings and a complete dearth in Gdansk, said Gdansk Pomerania Development Group's Konkel. Sopot, located between these two large commercial cities, is chiefly a tourism and residential center.
"There is an excess of class-A and B buildings in Gdynia," Konkel said. "Do you have any offices in Gdansk with air conditioning? I don't think so."
Germany-based AGIB Euro-Invest claims it is changing that situation, but not with great speed, said Andrzej Denninger, a representative in AGIB's marketing department.
Last March, AGIB opened up 1,400 square meters of class-A office space and another 4,500 square meters of retail space across from Gdansk's central train station, Denninger said.
As part of a $50 million investment, AGIB also modernized the former Orbis "Monopol" hotel and is currently constructing an additional 6,000 meters of class-A office space and 6,000 meters of retail space in the same location, expected to be completed within two years, Denninger said.
"This size of such quality space doesn't exist anywhere in Gdansk," Denninger said.
But while AGIB was established in Gdansk in 1991, it took years of waiting for Orbis and city permission before AGIB could begin its investment, Denninger said.
"We got this space in 1996, five years after we started in Gdansk," Denninger said. "In Gdansk this was the only place that interested us, because it's right in the center."
AGIB could be considered lucky with its development, since one of the few areas where such modern buildings can be constructed is in the modern Wrzeszcz neighborhood, in downtown Gdansk, outside of the old town, Konkel said.
But building in Wrzeszcz is virtually impossible due to heavy saturation of the real estate market there, Konkel said.
"(Archeological and architectural restrictions) wouldn't be a problem in the Wrzeszcz neighborhood" where there are few historical buildings, Konkel added. "But there's practically no space there."
Gdansk city officials insist that will begin to change later next month when the city opens a public debate on the first draft of its city center development strategy.
Among the issues raised in the strategy are a general timetable for privatization of publicly owned property and sectoral development priorities, said Gdansk's Sebastyanski.
"Mainly the need is for high-class office space and high-class retail space," he said.
A key to the plan will also be Gdansk Shipyard's sale of 35 hectares of property in the city center within the next two to three years, Sebastyanski said.
The land will be unrestricted in terms of the types of buildings that may go up there, making the area a likely candidate for upscale office buildings, he added.
But buying up land from an old shipyard can come with environmental liabilities that investors will be weary of, said Leszek Adamczyk, director of the environmental division at environmental consulting firm Atmoterm.
Dangerous substances involved in ship building and modernization, including chemicals such as paints, oils and other solvents, could be present on the surface or have seeped into the shipyard's grounds, Adamczyk said.
"These are certainly issues that the buyer has to watch out for," Adamczyk said. "All that stuff could really be somewhere there."
Still, real estate developers are likely to welcome any safe, new space in Gdansk with open arms, said Kristof Jacunski, the Poland general manager for Chelverton Properties International.
While many developers have entered Gdynia in order to get a foothold in the region, future prospects, based on the cities' size and history, are probably brighter in Gdansk, Jacunski said.
"If you compare Gdynia to Gdansk, Gdansk is four times larger," Jacunski said. "The question is where you place your bets."
For now, many investors, including ILD Business Center Joint Venture ($43.6 million), Coca-Cola Amatil ($30 million) and the HIT Centrum Handlowe shopping center ($17 million), have chosen Gdynia, according to Gdynia city officials.
At the same time, U.S.-based Europort Poland, which plans to spend $85 million to build a deep water grain peer, and AGIB with its $50 million hotel, office and retail development project, have picked Gdansk, Gdansk city officials said.
A new city strategy for Gdansk could help clear up the current long waits and tough building conditions in Gdansk, Jacunski said.
"Now I'm sure it's easier to find a spot in Gdynia," Jacunski said. "But I wouldn't say that in 10 years it will be the same."
Still, if Gdansk city officials don't get to work soon, Gdynia could come out on top, Jacunski warned.
"If Gdynia will develop momentum, I'm sure it will develop the most interest," Jacunski said.
