Unique, prestigious, expensive

WBJ: After a period of Poles’ fascination with the suburbs, the centers of Polish cities seem to be enjoying something of a renaissance and attracting more and more retail and housing projects. Is this trend indeed visible in your segment of the market?
Cyprian Chałupczak: The center of Kraków has always attracted a lot of interest because of the limited number of projects that can be developed there. As a result, each new building constructed in the area has, somewhat automatically, been deemed prestigious. At the moment, most of the investments entail the renovation and modernization of the existing urban fabric, not only because of the protection of the Old Town area by the historic buildings conservation officer, but also because it is very difficult to find any development land there. Investors are following the renovation trend, and this is visible on the map of Kraków, not only in the very center. What is attracting the most interest is projects combining the beauty of historic buildings with modern building solutions.

Have the reprivatization scandals in Warsaw, now being investigated by a special parliamentary commission, had any negative impact on this segment of the market? Are today’s buyers concerned about the legal status of historic properties?
Absolutely. Potential buyers nowadays have many more doubts and enquiries about the entire historic tenement house market than they did a few years ago. The problem is that many clients are not aware of the nature of the reprivatization processes in Kraków. Those processes actually have little to do with reprivatization as such, and the ownership issues in the city rather entail compensation that is awarded to the previous owners of historic tenement houses. The legal status of each tenement house that becomes part of Koneser Group’s portfolio is thoroughly analyzed by lawyers who cooperate with us, so our clients need not be afraid that one day someone will want to take the property which they have purchased away from them.

How big is the tenement house market in Kraków?
The number of projects in this market has increased significantly of late. When you take a look at the leading property websites you will find advertisements for approximately 1,000 apartments located in the Old Town area of Kraków alone. If we exclude duplicate offers and offers for apartments in tenement houses which are yet to be renovated, we are still left with almost 500 properties. This corroborates what I have already said – that apartments in renovated tenement houses are now attracting more and more interest. One should also remember that it is increasingly difficult to acquire buildings of this kind in the city center, which in turn affects the prices of the particular units.

What are the prices of such units in Kraków? Are all of them seen as luxury products?
We can talk about truly luxury projects when they are in the best locations in the city. Most often these are also projects in which the majority of the apartments have windows facing the bend of the Vistula river or the Wawel Castle. The standard of the renovated building also counts – it needs to be very high. The prices of apartments in such luxury schemes can reach PLN 40,000 per sqm. When it comes to our portfolio, examples include the Plac na Groblach 19 investment, in which almost every apartment features a balcony or a terrace looking towards the Wawel Castle. However, there are also developments in which apartment prices amount to around PLN 7,000-PLN 8,000 per sqm. Those are usually unrenovated tenement houses or tenement houses located farther away from the city center.

Tenement house renovations are difficult projects – how much do they cost?
The costs depend on the condition and size of the building as well as the standard of the planned project. Minor renovations may cost from one to several thousand złoty per sqm, but such projects do not count as luxury schemes. When it comes to a high finishing standard, the costs rise to even PLN 4,000-PLN 8,000 per sqm. Formalities such as securing all the necessary permits and complicated administrative procedures present the most difficulties, although these can already be seen as a specific feature of work in the real estate industry.

How long is the development process in this segment?
Judging by the projects which we have completed so far, I can say that the entire process usually takes about two years. Of course, the time needed to thoroughly renovate a tenement house depends on the size of the building, the standard of the project and – above all – the length of the administrative procedures that one needs to go through before launching construction work. When it comes to apartment sales, we usually do not have any available units in a given tenement house by the time we are halfway through the investment process.

How many projects do you usually work on at any given time?
From four to six, and those projects are at various stages of the development process – from the finalization of the acquisition process to the finishing touches and the turning over of the apartments to their new owners. At the moment, we are finishing the renovation of a tenement house located on ul. Sarego, while work on the Plac na Groblach 19 investment is at an advanced stage. Renovation work is also underway in a building on ul. Szpitalna. On ul. Św. Sebastiana work has just started, while on ul. Dietla the project is at the design stage.

What are your plans for this and next year as far as new projects are concerned?
We are now focusing on finishing those renovation projects which are nearing completion. At the same time, we are preparing projects and securing permits for tenement houses that we have already purchased and in which renovation work is to start next year. And, of course, we are also constantly looking for new unique schemes. So, as you can see, we will be busy.