PL

Towering ambitions

Office & mixed-use development
When Ghelamco bought the land for the Warsaw Spire in 2006, the area around Rondo Daszyńskiego was a rundown wasteland of old factories and derelict houses. Six skyscrapers are now under construction in this area, four of which are the work of the Belgian developer. A fifth is in the starting blocks – and this will by no means be the company’s final foray into this corner of the city. We spoke to Jeroen van der Toolen, the managing director of Ghelamco for Central and Eastern Europe, about company’s plans for more office towers – and maybe something even grander than all of those put together

Tomasz Szpyt-Grzegórski, ‘Eurobuild CEE’: Some analysts are worried that there’s so much money on the investment market that there isn’t enough product to meet the demand.

Jeroen van der Toolen, Central and Eastern Europe managing director, Ghelamco: There’s never too much money on the market. The investment market has been in excellent health, and indeed, a huge volume of funds are currently circulating on it. Just five years ago, when we were leasing the Warsaw Spire, the agents were telling us that there would be no problem selling the entire complex at one go. However, it turned out that it wasn’t that simple. We sold the complex in three, actually four parts [half of the tower was initially bought by Madison – editor’s note]. Investors could see that it was a superb project, but why Warsaw? They were simply afraid to invest so much cash here at once. Paris, London and Frankfurt are different. But this is no longer a problem. A large number of investors – who once said that Warsaw was not a market where they would like to buy – have since been drawn into this city. Added to that, those who have been investing in Poland for years have exited from their earlier projects and are reinvesting. They now see Poland – and Warsaw in particular – as a growing market.

How is your search for a buyer for the Warsaw Hub getting on in such conditions? A ten-digit transaction would seem to be on the cards.

We’re not looking, we already have one. Negotiations have almost been completed for the sale of the entire complex to a fund. These should be concluded in the first half of the year, although, as is always the case in business, nothing is certain.

Are things going the same way with the Warsaw Unit? The anchor tenant is there, the structure is approaching 200m in height… so is the building on the market yet?

No, it isn’t. We haven’t started looking for a buyer for it yet. Admittedly, we have received a few offers, but the skyscraper is not ready for this stage yet. Firstly, we need to rent more space and finish the construction. The building should be ready in March 2021.

Does Ghelamco have any new tenants for The Unit?

Yes, we do. We will be making an announcement soon. They may not be as big as Warta, but one important tenant will be taking up a few thousand square metres.

The company’s portfolio also includes an office building that was completed in 2016 on ul. Wołoska in Warsaw’s Mokotów district. Are there no parties interested in it?

We are in negotiations with a fund over the sale of this building. Służewiec and the surrounding area are reviving after a series of urban redevelopments and investors are interested in this district once again. Many projects are the subject of negotiations and there will probably be a few changes of ownership this year. The district has taken on a new life. It not only has office buildings but also residential estates, hotels and much better infrastructure. It’s also worth noting that the lion’s share of companies actually stayed in Służewiec despite being tempted by other locations. This demonstrates the strength of this neighbourhood, and the fact that there are not so many office districts with good locations outside Warsaw city centre.

Will Ghelamco be returning to Służewiec with a new project?

At ul. Postępu 2 we have a plot with a permit for a project of ​​around 32,000 sqm.

There’s been plenty of talk about the falling yields in Warsaw. What level do you think they will reach this year?

A level of around 4.25 pct is being mooted in reports. I think that by the end of the year we should see around 4 pct for the best projects, and – who knows – maybe even this limit will also be broken.

What can we expect to see happening on the Polish real estate market in the next few months?

I think we will be seeing some very large investment deals. This will make it possible to achieve at least the same total volume as in 2019.

Where is this capital coming from?

I think mostly from Germany, Austria, the Czech Republic and the UK.

What projects are you now planning? I’ve heard that the construction of another building at Rondo Daszyńskiego – the Bellona Tower – could be launched soon.

Yes, we are planning an office skyscraper in the same neighbourhood as the Warsaw Spire. Right now we are waiting for a building permit for it. It will be a very interesting project, but slightly less tall than Warsaw Spire, below 180m in height.

Is there enough space there for a new tower, or will you need to demolish something?

We won’t be demolishing anything. The existing Bellona building will remain, ​​but it will be renovated. The local zoning plan allows for the development of a dominant feature next to it and so we’ll be able to fit it in without any need for demolition.

Another skyscraper, called the Chopin Tower, facing the Hilton hotel, was supposed to be built next to it...

This project will have to wait for now.

What plans does Ghelamco have for the plot at ul. Towarowa 7 and other sites neighbouring the Warsaw Hub, which is close to completion?

We’d like to develop a city-forming project there. We are in discussions with the city council over what could be built, but there’s not much more I can say for now. The planning process for this area is underway.

Will it be another high-rise office project? The preliminary local zoning plan allows for residential and service buildings up to 30m in height.

Logic, on the other hand, dictates that it should be offices that are built – at least in the first line of development, facing onto the loud bustle of ul. Towarowa. You could still build apartments if they were shielded from the noise by the office buildings. Furthermore, from an urbanistic point of view, office space should be located next to metro stations to provide them with convenient transport links.

Further south, at pl. Zawiszy, your firm is planning a skyscraper with the working title ‘Sobieski Tower’. What stage is this project at?

The project is the subject of discussions with Warsaw city council. We’re waiting for the city’s to decide upon changes to the transport routes in the area adjacent to our project. Unless the street layout is clear, it’s difficult to plan anything.

And what about the skyscraper at pl. Grzybowski?

We’ve obtained the site development conditions, but objections have been raised by local residents and so we’re waiting for this situation to be resolved.

Ghelamco does not only invest in Warsaw. The construction of a road tunnel has recently started in Łódź, which will be a big advantage for the development of your 2 ha plot in the city centre. When will this project start?

We’re planning to build a city-forming project there of ​​around 80,000 sqm. It will include a hotel, offices, and retail and service space. Probably it will get underway in the second half of this year, most likely starting with the hotel. The first office building will be constructed after that.

How are your projects going in other cities?

We’re planning the construction of an office building in Katowice this year and have started the construction of another in Kraków. As far as the residential market is concerned, we plan to start two projects just south of Warsaw: one is housing estate with 6,500 sqm of useable and residential space in Konstancin; and the other will comprise apartments with 22,000 sqm of useable and residential space in Piaseczno.

On the subject of residential projects – how is the refurbishment progressing of the two historic town houses on ul. Foksal in Warsaw?

More than 65 pct of the apartments available have now been sold and we will be finishing the construction work in the spring. We are also carrying out another residential project in the city – Flisac in Powiśle district. Around 70 pct of the units have already been sold, so we have been pleasantly surprised by the speed of the sales.

Will Ghelamco be building more residential projects in Warsaw?

We’re on the look-out for plots where we could carry out projects similar to Flisac.

What about renovating other historic town houses?

Foksal is a wonderful project, but we will probably never again get involved again in this type of enterprise.

Why?

Because they are too time consuming. Many years had to pass from the initial purchase to the completion of the project. We even had to wait for more than ten years to get the building permit and the conditions from the monuments preservation office. And then the conditions were actually amended during the construction, which pushed up the costs further – all this might be good for a church renovation, but not in the case of a business project. You need to add to that the duration and capital consumption required for the renovation work – for example, 1 sqm of an ornamental feature can cost PLN 4,000. However, we are extremely proud that we have finally reached the finishing line and achieved such an effect – there’s no other project comparable to this in Warsaw. In the end, you forget about all the problems you’ve had and feel a huge amount of satisfaction. However, if someone asks me if I would like to do something similar again, my answer is going to be: no! Which is a pity, because it’s basically just the bureaucracy that makes such projects so off-putting. In spite of that, these types of projects are particularly highly valued by buyers and they do add to a city’s beauty.

Has your company recently purchased land for new projects ? If so, where?

Yes, we have. One for a 40,000 sqm residential estate in Warsaw and another for a 20,000 sqm office project. We are also planning to develop a seafront estate in Gdynia with about 25,000 sqm of useable and residential space.

Is Ghelamco still looking for more sites in spite of the high land prices? Or maybe now’s the time to take a break from this?

We are looking for new plots all the time. However, I won’t say where our focus is, because then others will follow us. As far as the market prices are concerned, I think there’s not so much difference for a developer buying land now than there was a decade ago. Prices have increased, but you have to remember that we have lower yields. The market is not as crazy as during the previous peak, when the Spanish or Irish overpaid for plots. At that time, we stopped buying anything for two years. The land market is currently demanding, but without any of that madness. Of course, there’s still no shortage of land owners with crazy ideas for prices – this is always the case. But such plots are unsellable. As long as they remain so and developers don’t start buying at astronomical prices, the market will remain in a state of relative balance.

Should we expect to see a project that would take Ghelamco to a completely new level, something that would be for you what Warsaw Spire turned out to be – the first such large, high-rise complex built by the company in Poland?

We would be delighted to develop a huge multi-functional project – and this is what we hope to do.

How big would it be?

We shall have to see. Warsaw could use a whole new district, something like Miasteczko Wilanów but conceived in a completely different, future-oriented way, from which you could travel to the city centre in a quarter of an hour by public transport.

Heading for the third billion

Jeroen van der Toolen is a recognised expert in commercial and residential real estate. He currently holds the position of head of Ghelamco for Central and Eastern Europe. He joined the company in 2003 as its managing director for Poland, and three years later was appointed managing director for Central and Eastern Europe. He introduced a new vision and an innovative business strategy to the company and expanded its activities to new market sectors. Since entering Poland, Ghelamco has developed more than 630,000 sqm of office and warehouse space. As the managing director, Jeroen is responsible for the commercial success of the company. Under his leadership, the company has sold 26 commercial projects worth EUR 2.1 bln in 2003–2019.

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