CEDEP 2007: Strength in size

The fifth annual CEDEP conference in Warsaw was held at the Marriott Hotel, featuring lively debates in a new round table format. The debates this year featured discussions on the investment, retail and housing market in Poland, with speakers arriving from around central and western Europe.

The first round table was entitled “Pulling Away…Poland’s Investment Market” and featured John Banka (Colliers International), Thomas Bayerle (DEGI), Wolfgang Lunardon (Meinl Land Europe), Doris Schumacher (Invesco), Tomasz Trzósło (Jones Lang LaSalle) and John Verpeleti (AXA REIM).
John Verpeleti warned against getting too carried away with the strong numbers for investment transactions last year in Poland, pointing out that Hungary had led the pack at the beginning of the decade. Still, the general consensus was that the sheer size of Poland’s market would allow for major, long-term growth.
John Banka pointed out that with Poland still behind in CEE according to a variety of indicators, there was room “for building efficiency into the system as a whole.” Also, Poland offers a sufficient scale for big investors. “You can reach all the cities fairly easily, there’s one legal system, there’s one set of advisers. This means you can achieve a scale and diversity that you couldn’t in the Czech Republic or Hungary or the others.”
Tomasz Trzósło continued in the same vein. “Because of its size, Poland has the ability to capture the interest for slightly more risk-oriented transactions. We already saw this in 2006, and there will be more of that in 2007 and 2008.” Thomas Beyerle of DEGI agreed that Poland’s potential was great, but that as a core investor, his company had to look at the broader picture as well. “The whole market is just 12 or 13 million sqm, which is the size of Frankfurt or Vienna, so it’s really just a small piece of cake.” The lack of product, he said, remains the major deterrent.
Doris Schumacher cut the Central European cake slightly differently. “My feeling is there’s one league in which the Czech Republic and Poland are playing and then there’s a second one where you see Hungary and potentially Slovakia.” Wolfgang Lunardon said that having recognized the lack of available product, his company had decided the answer was simply to create its own. “For that you need to use professionals, and then you get the returns. It’s simply a matter of structuring it correctly.”

The other round tables were equally lively. The Retail panel featured Piotr Kaszyński (Cushman & Wakefield), Thomas Löffler (GENI), Agata Sekuła (Jones Lang LaSalle), Guy Speir (Quinlan Private Golub) and Grzegorz Trawiński (Eurohypo). Thomas Löffler was largely responsible for the contrarian view, arguing that investors, developers and tenants would do well to go against the grain and look at the smaller regional cities, rather than always entering from the capital. Kaszyński claimed that despite all the development in Warsaw over the past couple years, there is still room to the north and south for a pair of 60,000 sqm shopping centers. Agata Sekuła suggested that developers who focused on convenience, district-level shopping centers would do best in Warsaw. Guy Speir confirmed that QPG is seeking new opportunities, but that planning difficulties were at this moment his company’s biggest concern.

Planning was a problem brought up in the day’s final panel on Warsaw’s explosive residential market. Attended by Aleksander Jankowski (SKARBIEC), Dror Kerem (Ronson Development), Kazimierz Kirejczyk (REAS Konsulting), Maciej Mosiej (Fadesa Prokom Polska), this last roundtable evoked constant dialogue with an audience that drew connections to the previous discussions. Planning emerged as one of the factors for the rapid rise in flat prices, since delayed project meant limited supply.
Kerem said Ronson had suffered delays of two years and more thanks to the frustrating process. Kazimierz Kirejczyk said that on the demand side, an unexpected wave of foreign investors was also helping to distort the market. “How can I predict that someone in Pretoria will create a fund to buy apartments in Warsaw,” he asked, using a real-life example. Aleksander Jankowski said there had been a small window of opportunity in 2005 in which buying flats off plan and selling during construction was a good business. The big money, however, had come out of this and he warned that some of these sorts of speculators will be caught out.