Interview by Morten Lindholm

WBJ: Congratulations on your 25th anniversary of operations in Poland. Tell me about the development of your business. What has changed for the company over the last 25 years?

Raied Tanous: Thank you. This anniversary is significant, as, despite all the market turbulence, we appreciate being able to face current challenges with an outstanding premium portfolio, a highly experienced and agile team, and a solid financial base.

Over the last 25 years, many external factors have shaped the company's development. These include, among others, adjusting to changing regulations, fluctuating market dynamics and buyer needs, the economic situation, and the adjustment of operations and portfolios in times of crisis. During this time, we've learned that creativity and the ability to adjust to change are necessities in our business if you want to rank among Poland’s leading developers. That’s also why we've focused on creating an agile team and a flexible portfolio that allows us to adapt to market dynamics quickly and even, in certain aspects, become a pioneer.

For the last decade, our focus has been on quality and size rather than quantity. That’s why we have implemented the strategy of targeting a few large-scale multi-functional, sustainable, and city-forming projects at any given time. These projects must bring visible value to residents and contribute to the city’s development. Regardless of any roadblocks, this strategy has allowed us to efficiently use our full resources to deliver real results rather than empty dreams. Our approach has proven itself during turbulent times, particularly the 2008 real estate crisis and, most recently, COVID-19. We have never been strongly affected by any of these crises, nor have sales ever reached a standstill.

The Warsaw (Polish) real estate market has developed quite a lot during these past 25 years. According to your observations, what have been the most significant changes?

The Polish real estate market has positively revolutionized itself over the last 25 years, and the future still holds a lot of potential. 

The first fundemental change that I could mention is the market standard, which has transitioned from a low standard to a much higher one. This early period lacked a sustainable vision and transparent regulations. During this time, products commonly served short-term needs, and in general, developers were primarily focused on maximizing saleable/leasable areas and profit, while clients mainly cared about the prices. Visible examples of this low standard are the unsustainable buildings less than 15 years old that have been demolished and replaced by new sustainable complexes. Clearly, the market is heading toward quality and sustainability standards that can serve long-term needs.

Other key changes include subsequent legislative amendments that have normalized the market for many years, giving customers a sense of security about their purchase and/or rent. The third is the increasing accessibility and transparency of data, thanks to changes in IT in both the private and public sectors, which have led to improved productivity, efficiency, and security.

All these were supported by access to the EU in 2004, a significant flow of foreign investment along with international experience, stricter and clearer development and construction laws and regulations, a growing economy and higher wages, and, most of all, solid domestic consumption, and stable demographics.  

The increased maturity of this market can also be seen in the attitude of both developers and customers. Both sides have become more professional. Developers – in terms of customer service, the adaptation of their product to customer expectations, new technological solutions, and different design quality. Also, more recently – although this is something that Asbud introduced many years ago as part of its strategy – is a growing awareness of how the investment design can support the development of the urban fabric. On the part of buyers, this means greater purchase awareness. The customer is more aware of this process and what they expect in the quality of the project. Additional amenities, such as environmental solutions, are also increasingly important. What was once a novelty or extravagance is now standard. 

Higher rates and uncertainties have already had a significant negative impact on the market, mainly for the residential sector. Our business model prioritizes flexibility to allow us to adapt quickly to changing circumstances and, to a considerable extent, on premium projects. Premium properties are the obvious choice for buyers who value quality, as their capital is protected and rises in value more quickly than in other lower-standard properties.  Moreover, premium buyers normally possess stable creditworthiness even in such challenging times, granting them access to financing and cash resources that give them all the buying flexibility they need. From that perspective, we look to the future more positively than other developers. 

The significant slowdown in sales does not mean apartments are no longer needed. JLL estimates that the housing deficit exceeds half a million apartments, excluding immigration factors from Ukraine and elsewhere, in only six of Poland’s largest cities. Therefore, we may conclude that such a deficit will continue to increase during the slowdown period and will be deferred until a better time comes. This is a typical market cycle in which the next peaks will be determined by how long this slowdown lasts. It is certainly to be expected that the popular sector of the real estate market will have, and currently has, a greater problem with the sale of apartments. This slowdown in sales opens up a great opportunity to the Private Rental Sector (PRS) market. However, increasing interest rates and difficulties in accessing financing does not leave PRS players with any easy decisions. 

COVID-19 not only brought a terrible pandemic, it also influenced or changed for good the way people work and offices are used. How will this influence your office business development segment?

The famous expression "what doesn't kill you, makes you stronger" perfectly describes the office segment during COVID-19. Enormous difficulties imposed on the sector have forced landlords/developers and tenants alike to become more innovative, economical, and efficient than ever before. They are now seeking more modern, high-tech technology, friendly and efficient workspaces, green patios, and installations encouraging sports activities. As a result, the office segment is not only returning to a healthy and stable position, but also doing far better than before. 

The office segment has always been and continues to be part of our strategy of creating city-forming and sustainable complexes. When we design projects, we look ahead and assess the validity of its function in each location, whether it can fill a gap there and if it is needed in that part of the city. Our approach in this regard hasn't changed, and it's an approach that also reduces the risks associated with investment failure. Our office projects are part of complexes alongside residential developments or retail and service spaces.

You are finishing some massive city-forming projects for which you have consistently won awards. What projects or plans do you have in the pipeline?

We are currently focusing on developing the next part of our well-known city-forming complex near Daszyńskiego Roundabout in Warsaw, the two residential Towarowa Towers. This project received awards while still under construction. Towarowa Towers is a response to the market's demand for higher-quality premium investments in the city center and residential tower architecture – still relatively rare in Warsaw. It will fill a missing gap in the Polish real estate market. 

We will also soon start another part of the complex – three apartment buildings named Towarowa Square. Towarowa Towers and Towarowa Square are examples of the transformation of this post-industrial site and its environs which Asbud Group has been involved in for about a decade, developing over 130,000 sqm. 

Our plans also include another large-scale city-forming project – Nowa Praga, located in the district of Praga Północ at Jagiellońska Street. We are planning a multifunctional complex in this post-industrial area, which we could even call a new district. The first residential stage is being prepared for commencement.

Once we receive the relevant permits, we will also proceed with one of our most important and iconic projects that has been currently suspended, Central Garden. The buildings surrounding this unique project are designed as green relaxation spaces and recreational and utility zones available to residents all year round. The garden in which the project is situated will cover as much as 1.2 hectares and feature dozens of plants that will bloom in different colors depending on the season. Saying it loud and clear, this great project will eventually be delivered to its clients, regardless of all roadblocks and damages done to this project by third parties .

In addition, we are also planning other projects and further expansions in new locations and cities. We intend to turn tough times into wins and exploit them smartly and profitably. Times of crisis favor visionaries.

Looking back over these 25 years and assessing our operations versus those of other developers, I can say that one of our most important strengths is our flexible, diversified portfolio and our lack of fear of introducing something new. Despite corporate red tape, we can think outside the box and effectively adopt new solutions. In addition, we can operate quickly and efficiently with our quick decision-making process and agile team. 

Not everyone knows this, but over our 25 years of operation in the Polish market, we have become pioneers in many ways. We were one of the first to complete a development with sports facilities – a swimming pool – and recreational facilities already in 2001, which today is nothing extraordinary. Our project Metropoint Apartment, our first residential development, received a BREEAM certificate at the Very Good level. We have recently heard a lot about PRS, and not everybody knows that we already conducted the sale of a residential estate in 2015 when the PRS market was barely understood! Our Towarowa Towers is also one of the first Class-A residential skyscrapers. I could list even more, but I want to say that fortune favors the brave, and that is how we continue to approach business as we enter a new and challenging period in the real estate market.