PT Urban Issues No. 019

No. 019 / 30th June 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

Newsletter Editor: Adam Zdrodowski

[email protected]

tel. +48 504 182 308

OFFICE Skanska Property Poland has laid the cornerstone for its largest office project in Wrocław to date page 4

RETAIL Balmain Asset Management is going to thoroughly refurbish the Panorama shopping centre in Poznań page 5

RESIDENTIAL Dom Development has launched construction and apartment sales in new projects in Warsaw and Wrocław page 5

LOGISTICS Goodman is building a fifth building within its Kraków Airport Logistics Centre complex in southern Poland page 5

INTERVIEW Poland Today talks to Dieter Knittel, Director Europe, Real Estate Finance International, at pbb Deutsche Pfandbriefbank page 6

LATEST LEASE DEALS IN BRIEF Recent lease transactions in the office, retail and warehouse sectors page 7

COMING & GOING Magdalena Kowalewska, Immofinanz Group page 7

FACTS &FIGURES Largest completions, largest lease deals and rents in the commercial property market in 2013 page 8

The event brought together top real estate professionals from across Europe Photo: Poland Today

New capital streaming intoNew capital streaming intoNew capital streaming intoNew capital streaming into CEE regionCEE regionCEE regionCEE region Central and Eastern Europe continues to attract real estate in-vestors, with new capital from Asia and the United States now streaming into the region, said participants in the Poland & CEE Real Estate Summit which Poland Today and Property Investor Europe organized at the Bristol Hotel in Warsaw last week page 2

weekly newsletter # 019 / 30th June 2014 / page 2

CEE MARKETS

New capital streaming New capital streaming New capital streaming New capital streaming into the Central and into the Central and into the Central and into the Central and Eastern Europe regionEastern Europe regionEastern Europe regionEastern Europe region

Central and Eastern Europe remains a highly at-tractive destination for real estate investors, said participants in the Poland & CEE Real Estate Sum-mit which Poland Today and Property Investor Eu-rope jointly organized at the Bristol Hotel in War-saw last week. There are still many interesting in-vestment opportunities in CEE, with new investors, coming from markets including Asia, now showing much interest in the region, the participants in the conference said. Growth and stability In terms of the macroeconomic situation in Central and Eastern Europe, the growth prospects are cur-rently improving, said Anna Zabrodzka, an econo-mist at the Moody’s Analytics Prague office. Growth is returning to Europe. Exports is now the main driver of growth in the CEE region, with ex-ports to Germany particularly important for the economies of the Czech Republic and Slovakia, Zabrodzka said. The region remains politically stable despite the ongoing crisis in Ukraine. We have seen little im-pact of the crisis in Ukraine on the investment sen-timent in Poland, said Jan Cienski, former Financial Times correspondent in Poland and now a senior fellow at Demos Europa. He argued that the crisis has actually strengthened the image of Poland as a safe country. Investors are now decamping from

Ukraine and those planning to enter CEE will be choosing Poland over Ukraine, Cienski said.

The summit brought together the leading investors, banks and consultancies active in the CEE region Image: Poland Today

Continued investor interest Investors have been showing continued interest in Central and Eastern Europe, and Poland, the Czech Republic and Hungary are now seen as the best de-veloped countries in the region. “I would allocate money there,” said Otis Spencer, managing director at Peakside Capital. Spencer emphasized the fact that Poland has a growth story. He contrasted in-vesting in the country with investing in Spain where investors are admittedly buying cheap these days, but have to hope for the best. Dennis Dart, consultant at Secure Legal Title, ar-gued that the problem with the Czech Republic is that there are few investment opportunities outside Prague. The Slovakian and Croatian markets are al-so small, he said. Eric Assimakopoulos, founder and managing partner at Revetas Capital Advisors, said that Bulgaria is an interesting market. For his part, Dart was of the opinion that both Bulgaria and Ro-

mania are still causing headaches and will yet have to regain their reputation. Warsaw is now a real hot spot but there is also much growth potential in the regional cities in Po-land. We are going to see new transactions there later this year, said Tomasz Puch, head of office and industrial capital markets at JLL in Poland. Maciej Zajdel, president of the management board at IVG Poland, pointed out that Poland, and Warsaw in particular, is already perceived as a core market. In the next few years, investors will go to the regional cities in the country, rather than further east, Zajdel said. Admittedly, CEE is a relatively small market, com-pared to some of the Western European markets, noted Robert Martin, principal, head of Central Eu-rope, at Europa Capital. He pointed out that the re-gion accounts for just 3% of the European property investment market. However, he stressed that his company, which as a pan-European investor can in-vest anywhere in the European Union, sees oppor-tunities in CEE and believes in the growth of Po-land. Dieter Knittel, director Europe, real estate finance international, at pbb Deutsche Pfandbriefbank, said that the lack of product is a problem in the Polish market. However, overall, the market is doing very well, Knittel said. Joanna Kowalska-Szymczak, in-vestment director at Kulczyk Silverstein Properties (KSP), stressed that the company has long-term plans for CEE and sees investment opportunities in the region. Meanwhile, new money is coming to CEE from countries including the United States. However, the real game changer could be the increased interest of Asian capital in the region, said Allan Saunderson, managing editor at Property Investor Europe. Not


much of that capital has been allocated to date and Asian investors have been rather reluctant to reveal their investment strategies. However, they are there, have a lot of money behind them and are looking for opportunities, Saunderson said.

Participants in a panel discussion on bank financing Image: Poland Today

Warsaw’s office boom During a special breakout session devoted to the of-fice market in Warsaw, the conference participants discussed the supply pipeline and the effects it could have on the vacancy rate in the city. There is now around 6.5 million sqm of office space in Po-land, of which approximately 4.2 million sqm is in Warsaw. The vacancy rate in the Polish capital cur-rently amounts to around 12.6%-13% and is ex-pected to reach 15% by year end. Two office towers – Q22 and Warsaw Spire – are under construction and many others are planned. There is a lot of skepticism about how much of what is planned will find enough pre-lease tenants to begin construction. “If you look at the supply pipeline in Warsaw, it is terrifying,” one of the par-ticipants said. It was argued that if 30% of what is

planned for the Wola district of Warsaw is built in the next five years, that would be considered a good result. There was approximately 600,000 sqm of lease deals signed in Warsaw last year, with new supply having comprised 100,000 sqm of that. It was pointed out that big tenants now seem to be leaving new buildings for newer ones. For example, Deloitte stayed in Deloitte House for just five years and is now moving, and Frontex is moving out of Rondo 1 to Warsaw Spire. On the other hand, the Warsaw Financial Center tower has managed to keep relatively full. The new developments in Wola will definitely put pressure on rents in the CBD. Effective monthly rents for class-A CBD are currently €20-€23 per sqm, while those for class-B CBD are less than €20 per sqm. Nevertheless, it was generally agreed upon that the Warsaw market will continue to expand. In the late 1990s and early 2000s, there were the same occupancy issues and pressure on rents, and then the market still grew and is likely to continue to do so, the participants said. Participants in a breakout session on the wider CEE office market said that the focus is now also turning to Budapest. It was suggested that Hungary is now seen as predictable and having political stability. There is financing available for good product in Hungary but one banker admitted that banks are still very conservative and cautious in the country. A number of banks lost a lot of money there a few years ago, he explained. New retail trends The retail property market in Poland and the other countries of Central and Eastern Europe has been witnessing the emergence of new shopping and de-velopment trends, the participants in the confer-

ence said. Some of the developers and investors present at the summit pointed to the growing im-portance of high-street retail. Kowalska-Szymczak, for one, argued that with all shopping centres look-ing much the same, Poles now want to shop in a dif-ferent way.

One of the breakout sessions during the summit Image: Poland Today

She admitted that at the moment there is not much high-street retail product available in the market. It will take many years to develop proper high streets in Poland, Kowalska-Szymczak said. Others stressed that there is growth potential in the high streets in Poland, and especially in Warsaw, but the streets should not be very exclusive. It was pointed out that the richest Poles often shop in the high streets of the Western European cities anyway. Much of the discussion also focused on the impact of e-commerce on the retail property market in CEE. It was agreed that the impact has so far not been great and that the region is still behind West-ern Europe in this regard. Admittedly, the size of the hypermarkets in shopping centres has dimin-ished considerably in recent years. On the other


hand, however, developers are now expanding many of the existing shopping centres.

Moody’s Analytics economist Anna Zabrodzka speaking during the conference Image: Poland Today

Speculative investments returning The participants in the conference pointed to the continued investment attractiveness of the logistics and industrial property market. Poland, for one, has been good at attracting foreign industrial invest-ments in recent years which has resulted in a num-ber of new BTS projects. Robert Dobrzycki, manag-ing partner at Panattoni Europe, also admitted that it has recently started to make sense to develop speculative investments in selected locations across Poland. His company itself has launched a number of such schemes in the country of late. Outside of Poland, the logistics property market is now particularly growing in the Czech Republic which is conveniently located close to the German market and is currently servicing a lot of German companies. Romania, Bulgaria and Croatia are not attracting many logistics investments at the mo-ment, the developers and investors participating in

the discussion said. However, it is expected that investors will start going to those countries within the next few years. Banks still active The representatives of several large German and Austrian banks who came to the Poland & CEE Real Estate Summit in Warsaw said that they would like to be involved in more projects in the region. “We would like to do more business in Poland,” said Helge Sehorz, vice president, team head, real estate finance, at Erste Group Immorent. At the moment, Poland accounts for just 6% of the portfolio of the bank. Robert Sztemberg, head of the corporate finance department at JLL in Poland, noted that European banks are increasing their exposure abroad. How-ever, he added that banks have now become more cautious. Banks now create their own strategies for different markets and do deals that fulfill those strategies, not necessarily following the clients’ strategies. They look at the borrower and the prod-uct, and they decide whether to follow them into a market or not, one of the bankers said.

The summit was held at the luxury Bristol Hotel Image: Poland Today

OFFICE

Skanska laying Skanska laying Skanska laying Skanska laying cornerstone for cornerstone for cornerstone for cornerstone for Wrocław office projectWrocław office projectWrocław office projectWrocław office project

Developer Skanska Property Poland has held a cor-nerstone-laying ceremony at the construction site of its Dominikański office project in Wrocław, the largest office scheme of the company in the city. The investment is located in the downtown of Wrocław and will comprise approximately 40,000 sqm of leasable space, with already secured tenants including Deloitte. The first phase of the develop-ment is scheduled to be completed in the second quarter of next year.

The project will comprise 40,000 sqm of GLA Image: Skanska Property Poland

The Dominikański project is expected to obtain LEED certification of energy efficiency and envi-ronmental performance. The scheme is being built by construction company Skanska and commercial-ized by Skanska Property Poland. Skanska Property Poland has to date delivered three office develop-


ments in Wrocław – Grunwaldzki Center, Green Towers and Green Day. The company is currently involved in office investments including Generation Park and Atrium 2 in downtown Warsaw.

RETAIL

Panorama Panorama Panorama Panorama shopping shopping shopping shopping centre in centre in centre in centre in Poznań in for Poznań in for Poznań in for Poznań in for refurbishmentrefurbishmentrefurbishmentrefurbishment

Property owner and asset manager Balmain Asset Management is going to thoroughly refurbish the Panorama shopping centre in Poznań, one of the first retail facilities to have been developed in the city. The modernization of the shopping centre is scheduled to launch at the turn of this and next year, with the process of selecting the general con-tractor now underway. Both the façade and the in-terior of the mall will be renovated.

The interior of the mall will be renovated

Image: Balmain Asset Management

The Panorama mall was opened for business more than 20 years ago. The facility comprises 22,500

sqm of leasable space and houses 150 tenants in-cluding Castorama, CCC, Deichmann, Empik, Pep-co and Rossmann. Balmain Asset Management bought the Panorama shopping centre in 2006. In Poland, the company is currently also involved in the expansion of Galeria Pomorska in Bydgoszcz and the development of Centrum Galardia in Starachowice.

RESIDENTIAL

Dom Development Dom Development Dom Development Dom Development launches new projects launches new projects launches new projects launches new projects in Warsawin Warsawin Warsawin Warsaw,,,, WrocławWrocławWrocławWrocław

Warsaw Stock Exchange-listed developer Dom De-velopment has launched construction on and sales of apartments in its Willa Lindego residential pro-ject in the Bielany district of the Polish capital. The scheme has been designed by the Grupa 5 Architekci architectural studio and will comprise 121 apartments. The development is scheduled to be completed towards the end of next year. Meanwhile, Dom Development has recently also launched construction on and sales of apartments in its Aleja Piastów residential investment in Wrocław – the third project of the company in the city. De-signed by the renowned Kuryłowicz & Associates architectural studio, the Aleja Piastów scheme will comprise 171 housing units and is scheduled for completion in the fourth quarter of next year. Jarosław Szanajca, president of the management board at Dom Development, announced earlier this year that the company would launch a combined eight residential investments in Warsaw and Wro-

cław in the first half of 2014. In the meantime, the company has recently been acquiring land for fu-ture developments. In recent months, Dom Devel-opment has announced the purchase of sites for a total of five new projects in the Ochota, Mokotów and Praga Południe districts of Warsaw.

The Willa Lindego scheme will deliver 121 homes Image: Dom Development

LOGISTICS

Goodman developing Goodman developing Goodman developing Goodman developing new new new new warehouse warehouse warehouse warehouse building near Krakówbuilding near Krakówbuilding near Krakówbuilding near Kraków

Industrial space developer Goodman has recently launched construction on the fifth warehouse building within its Kraków Airport Logistics Centre complex in Modlniczka near Kraków. The facility is being developed on a speculative basis and will de-liver 11,000 sqm in November this year. It will be the fourth speculative development within the


complex, with the previous three having been fully leased out before completion. The decision to build the warehouse was made in response to the needs of the potential customers of Goodman and the substantial demand in the local market for small facilities with immediate availabil-ity, said Błażej Ciesielczak, regional director, CEE, at the company. Kraków Airport Logistics Centre is a 50/50 joint venture between Goodman Group and Goodman European Logistics Fund (GELF). The complex has a target lease area of over 150,000 sqm and will comprise nine warehouse buildings when fully developed.

The whole complex will comprise nine buildings Image: Goodman

INTERVIEW

Investors in CEE Investors in CEE Investors in CEE Investors in CEE starting to move up the starting to move up the starting to move up the starting to move up the risk curverisk curverisk curverisk curve

Poland Today talks to Dieter Knittel, Director Eu-rope, Real Estate Finance International, at the real estate and public investment financing provider pbb

Deutsche Pfandbriefbank, about the attractiveness of CEE and the attitude of the bank toward financ-ing property in the region.

Poland Today talks to: Dieter Knittel, Director Europe, Real Estate Finance International, at pbb Deutsche Pfandbriefbank Poland Today: Poland Today: Poland Today: Poland Today: How How How How do you view the cudo you view the cudo you view the cudo you view the currrrrent arent arent arent at-t-t-t-tractiveness oftractiveness oftractiveness oftractiveness of the CEEthe CEEthe CEEthe CEE mamamamarrrrketketketketssss, compared to , compared to , compared to , compared to that of the that of the that of the that of the Western EurWestern EurWestern EurWestern Euroooopepepepean marketsan marketsan marketsan markets???? Dieter Knittel: Dieter Knittel: Dieter Knittel: Dieter Knittel: The core CEE markets, and Poland in particular, remain a sought after investment des-tination. The significant number of transactions over the past year, allied to a first quarter invest-

ment volume of around €1.4 billion, demonstrates the ongoing investor appetite for property in the re-gion, with Poland remaining the dominant invest-ment market in CEE, followed by the Czech Repub-lic. DoDoDoDo you see any major threats/challenges in you see any major threats/challenges in you see any major threats/challenges in you see any major threats/challenges in CEE/CEE/CEE/CEE/Poland at the moment?Poland at the moment?Poland at the moment?Poland at the moment? There is a lack of good product in some markets and sectors, which may constrain investment activity. Otherwise, it is a question of property fundamen-tals; for example, there is a potential oversupply of office space in Warsaw and certain cities have simi-lar issues with too much retail space. So the analysis of the micro location is of great importance. Which sectors/Which sectors/Which sectors/Which sectors/property classes in the rproperty classes in the rproperty classes in the rproperty classes in the reeeegiongiongiongion oooof-f-f-f-fer the best investment oppofer the best investment oppofer the best investment oppofer the best investment opporrrrtuntuntuntuniiiities?ties?ties?ties? To date, the focus in CEE has very much been on defensive investments in prime locations, but inves-tors are starting to move up the risk curve. There are attractive opportunities to be found in good as-sets in secondary locations, or prime investments in the capital cities of the other CEE countries, includ-ing in Budapest. What are the preferences of Deutsche What are the preferences of Deutsche What are the preferences of Deutsche What are the preferences of Deutsche Pfandbriefbank when it comes to proPfandbriefbank when it comes to proPfandbriefbank when it comes to proPfandbriefbank when it comes to propppperty claerty claerty claerty clas-s-s-s-sessessesses////locations in the region?locations in the region?locations in the region?locations in the region? We prefer the retail, office and warehouse asset classes, mainly for investment acquisitions, alt-hough we do also consider deals with a develop-ment element. Recent projects of ours demonstrate the kind of deals we are interested in: the financing with Aareal Bank of Poznań City Centre for ECE European Prime Shopping Centre fund and Resolu-tion Property; the acquisition of Prague Fashion Arena Outlet Centre by a fund advised by Meyer


Bergman; and the purchase of Lipowy Office Park (Bank Pekao’s headquarters in Warsaw) for two of WP Carey’s publicly-held non-traded REIT affili-ates. Are you currently working on any mAre you currently working on any mAre you currently working on any mAre you currently working on any maaaajor fjor fjor fjor fiiiinannannannanc-c-c-c-ing deals in the region?ing deals in the region?ing deals in the region?ing deals in the region? We are currently working on a couple of deals in the region across all sectors. Last year we closed around €940 million in CEE.

DIETER KNITTEL Dieter Knittel is based in Munich and deals with Key Ac-count Clients active in Europe, with his main focus be-ing on Central and Eastern Europe. Knittel has been ac-tive in the CEE markets for more than fifteen years, in-cluding five years spent in Warsaw (between 1997 and 2002) as Head of Credit and Senior Risk Management.

pbb Deutsche Pfandbriefbank was one of the partners of the Po-

land & CEE Real Estate Summit which Poland Today and Property

Investor Europe organized at the Bristol Hotel in Warsaw on June

25-26.

LATEST LEASE DEALS IN BRIEF Distribution space developer Prologis has signed a pre-lease agreement with logistics company Hi LHi LHi LHi Lo-o-o-o-gigigigisssstics Etics Etics Etics Euuuuroperoperoperope for 20,600 sqm of space at the fifth building of its Prologis Park Wrocław V distribution centre in Lower Silesia. Following the transaction, the building is now leased out in 75%. Prologis Park Wrocław V currently comprises five built-to-suit buildings that comprise a total of more than 90,000 sqm of space.

Prologis Park Wrocław V

Image: Prologis

Fashion retailer TK Maxx TK Maxx TK Maxx TK Maxx has leased more than 2,280 sqm at the Magnolia Park shopping centre in Wrocław. The company is going to open its store in the mall at the turn of August and September this year. The Magnolia Park shopping centre is one of the largest malls in the Lower Silesia region. The facility currently comprises almost 77,600 sqm of leasable retail space and is expected to grow by a further 20,000 sqm once its ongoing expansion is completed.

Magnolia Park in Wrocław

Image: Questia

COMING & GOING

Magdalena Magdalena Magdalena Magdalena KowalewskaKowalewskaKowalewskaKowalewska

Magdalena Kowalewska has been appointed as the new Head of Asset Management Offices & Logistics in Poland at Immofinanz Group. She has replaced Dennis Lin who is overseeing the newly established Key Account Management Office & Logistics Eu-rope department. Kowalewska has been with Immofinanz Group since 2009 and has specialized in asset management since the beginning of her work for the company. She is a graduate of, among other things, the Warsaw School of Economics and the University of Chicago.

weekly newsletter # 019/ 30th June 2014 / page 8

FACTS & FIGURES

LaLaLaLargest industrialrgest industrialrgest industrialrgest industrial projects delivered in 2013projects delivered in 2013projects delivered in 2013projects delivered in 2013

Location Project Developer Area

(sqm)

Wrocław Panattoni BTS Lear Panattoni 32,300

Silesia SEGRO Business Park Gli-

wice Building B SEGRO 31,700

Warsaw Tulipan Park Warszawa

Bulding B SEGRO 24,000

Silesia SEGRO Industrial Park

Tychy B SEGRO 18,300

Wrocław Prologs Park Wrocław V Prologis 18,282

Source: Colliers International

Largest office projects delivered in 2013Largest office projects delivered in 2013Largest office projects delivered in 2013Largest office projects delivered in 2013


(sqm)

Warsaw Konstruktorska

Business Center HB Reavis 48,300

Warsaw Miasteczko Orange Bouygues Immobilier 43,700

Warsaw Plac Unii BBI Development

/Liebrecht & wooD 41,300

Warsaw Marynarska 12 Ghelamco 40,000

Wrocław Sky Tower LC Corp 28,100


LaLaLaLargest retailrgest retailrgest retailrgest retail projects delivered in 2013projects delivered in 2013projects delivered in 2013projects delivered in 2013


(sqm)

Gliwice Europa Centralna Helical Poland 67,000

Kraków Galeria Bronowice Immochan 60,000

Poznań Poznań City Center TriGranit 58,000

Gdynia

Centrum Riviera

(Wzgórze

– extension)

Mayland Real Estate 70,500

Katowice Galeria Katowice

Meyer Bergman

European Retail

Partners/ Neinver

42,000


Selected Selected Selected Selected large investment transactions large investment transactions large investment transactions large investment transactions in 2013in 2013in 2013in 2013

Sector

Project

Value

(EUR mil-

lion)

Seller

Buyer

Retail Silesia City

Center

412 Immofinanz Allianz, ECE

Retail Galeria

Kazimierz 180

Globe Trade

Center,

Aventus

Invesco RE

Retail Galeria Domini-

kańska 151.7 ECE

Atrium

European Real

Estate

Office New City

127 ECI

Hines Global

REIT

Office Mokotów Nova

121 Ghelamco

Tristan Capital

Partners

Office Senator

120 Ghelamco

Union

Investment

In-

dustrial

H&M ware-

house

64 Invesco RE W.P. Carey

Indus-

trial Żerań Park II 43.2

Area Property

Parners,

Apollo Rida

Poland

SEGRO


LLLLargest office lease dealsargest office lease dealsargest office lease dealsargest office lease deals in 2013in 2013in 2013in 2013

Location Tenant Area(sqm) Project

Warsaw Polkomtel 22,680 Konstruktorska 4

Warsaw Getin Holding 18,850 Wola Center

Warsaw Urząd Rejestracji Leków 13,000 Adgar Park West

Warsaw Bank Zachodni

WBK 11,800 Atrium 1

Wrocław Getin Holding 11,700 Sky Tower


Retail rents (EUR/sqm/month), Q3 2013Retail rents (EUR/sqm/month), Q3 2013Retail rents (EUR/sqm/month), Q3 2013Retail rents (EUR/sqm/month), Q3 2013

20

30

40

50

60

70

80

90

ŁódźWrocław

Tri-citySzczecin

PoznańKraków

Warsaw (out of town)Silesia

Warsaw (city centre)

Source: Cushman & Wakefield

Office rents (EUR/sqm/month), Q3 2013Office rents (EUR/sqm/month), Q3 2013Office rents (EUR/sqm/month), Q3 2013Office rents (EUR/sqm/month), Q3 2013

Source: Cushman & Wakefield

10 15 20

25

Gdańsk

Szczecin

Katowice

Poznań

Kraków

Wrocław

Warsaw (non-central)

Warsaw (CBD)

Largest industrial lease deals in 2013Largest industrial lease deals in 2013Largest industrial lease deals in 2013Largest industrial lease deals in 2013

Location Tenant Area(sqm) Project

Wrocław Amazon 123,500 Goodman Wrocław South

Logistic Center

Poznań Amazon 100,653 Panattoni Poznań

Wrocław Amazon 100,653 Panattoni Wrocław

Poznań supermarket

chain 82,385 -

Central Po-

land Castorama 49,961 Panattoni Park Stryków


PT Urban Issues No. 019

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