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Journey to the third tier

Tomasz Szpyt-Grzegórski 06 June 2018

Tomasz Szpyt-Grzegórski

Deputy editor in chief, journalist

+48 22 356 25 21

Tomek is a journalist and editor with many years of experience. He has been covering the real estate market since 2006. His main fields of interest are the investment and office markets as well as urban development. He also edits the magazine’s Facebook and twitter pages (@TomaszSzpyt). His articles have appeared, among others, in Dziennik, DGP, GazetaPrawna.pl, Forsal.pl, Dziennik.pl, Newsweek.pl, WSJ Poland and The City. In his free time he likes reading, cinema and rollerblading

Journey to the third tier
The experts on the ‘The Third Tier is Near’ panel
POLAND Warsaw and the largest regional cities are now established locations for international investors. But when might Lublin, Rzeszów, Bydgoszcz or Szczecin be added to their investment maps? And what factors could determine this? At the 4th Invested Interest – Investment Market Conference held by Eurobuild Conferences, the experts on the ‘The Third Tier is Near’ panel were focused on these very issues.

“How do investors view regional markets?” asked Krzysztof Misiak, the head of regional cities in the office agency of Cushman & Wakefield and the moderator of the panel, to begin the conversation. “Our regional markets are very active. In the last two years there have been many transactions in the largest provincial cities. From looking at the activity of investors, it seems that they are still happily buying up product in the regions. But it is the availability of real estate that might turn out to be a problem,” cautioned Przemysław Felicki, the director of the capital markets department at CBRE. “We are present in almost every major regional city, such as the TriCity, Poznań, Wrocław, Łódź and Kraków. The main feature of our projects is that they are all in excellent, unique locations. These are intriguing assets worth investing in,” added Wiktor Dąbrowski, the leasing director of Octava Property Trust.

“Lublin and Szczecin are also breaking into the mainstream. But how are things looking in Rzeszów?” asked Krzysztof Misiak. “We are the largest residential developer in Rzeszów. So we became interested in the local office market and started to analyse the factors that are crucial for the success of this type of enterprise. We came to the conclusion that Rzeszów possesses these and is ready for such projects as ours. We were not wrong. Our project – the first stage of which is 20,000 sqm, with a second 19,000 sqm stage in the pipeline –is already half-leased,” revealed Radosław Walas, a board member of Developres.

“How do the banks assess the risk of investing in cities such as Rzeszów?” queried Krzysztof Misiak. “There are only a few modern class ‘A’ office buildings in small cities like Bydgoszcz, Toruń, Rzeszów, Opole and Białystok. These are projects that have been built using Polish capital and by investors who are overwhelmingly from the residential sector. So they have a historical background and collateral in real estate. We are aware, however, that these markets are too shallow to count on for the investors who buy such office buildings. What is needed is a completely different approach to financing. We look not only at the project itself but also at the developer’s history, the company’s experience, its financial stability and the possible safeguards,” explained Anna Oleksy, the director of the commercial real estate funding department at Deutsche Bank Polska.

“What should be done to develop these markets and attract capital to them, for example, from opportunistic sources?” “In addition to cities building a critical mass of developers, these markets would benefit from governmental measures to support local projects, such as REITs or by enabling pension funds to invest in real estate. The proportion of Polish investors on the domestic market is marginal,” emphasised Przemysław Felicki. “Everything starts with the tenants – they must have the right conditions for locating their ventures. The liquidity of these markets in terms of exiting projects is also of key importance and most investors operate within a certain time frame with business plans sometimes as long as seven years. This is also a challenge,” believes Rafał Nowicki, the Europe CEO of Apollo-Rida Poland.

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