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Poland’s commercial real estate market has been largely sheltered from the economic volatility plaguing the rest of the continent. The country’s economy is still healthy and growing and investors who ventured into Poland during the first crisis confidently expect that Poland will continue to perform well.

Short of an EU-wide meltdown, Poland seems unlikely to be dramatically affected by the euro-zone crisis. Nevertheless, an impact may be felt, and any instability across the continent in general could influence Poland’s real estate sector.

The degree to which bank financing will be impacted will largely depend on external factors, but experts that spoke with Lokale Immobilia expressed confidence that financing will continue to be available. However, lenders could begin to exercise even greater caution if uncertainty increases or economic conditions outside Poland worsen, they said.

Lower risks in Poland

As a leader in Central and Eastern Europe’s commercial real estate market, Poland has long been considered a main target for investors, Przemysław Felicki, an associate director from CBRE’s capital markets team, said. “Financing is also the most advanced in Poland and the country is stable for banks,” he added. “Compared to other markets in CEE, Poland appears much more reliable.”

Moreover, because of the country’s size, the real estate sector is also more balanced, said Marek Koziarek, director of financing for commercial real estate at Bank Pekao.

Whatever obstacles some may envision, Michał Stanisławski, a consultant from CBRE Capital Markets, said that, “Poland is still a strong market fully capable of overcoming any possible issues. We don’t see any negative impact.”

Potential concerns

So there is plenty of optimism. Nonetheless, Ilona Wołyniec, a director of the project financing department at PKO BP said that an impact from the current economic instability is already being felt.
“Many investors have decided to postpone their projects because of uncertainty about future developments,” she said.

Mr Stanisławski from CBRE also said that difficulties could develop as a result of currency fluctuations, since “most tenants pay in euro … [while] retailer income is in the Polish złoty.” He added, “This could result in some tenants asking for rent reductions, but this is not certain.”

Mr Koziarek from Pekao said that the instability in the euro zone could mean Polish banks would have limited access to euro-denominated capital, which could prove a challenge since “most financing is done in euro … and this could have an effect on refinancing.”

Erez Boniel, CFO of Warsaw-based developer GTC, stated that, “banks are keen to lend … [but they] are still selective and focus on their best clients. Thus good projects of renowned developers with a good reputation and liquidity still enjoy finance availability.”

In fact, all of the experts that spoke with Lokale Immobilia agreed that financing for a project deemed worthy enough should have no problem in obtaining financing. “It’s a question of quality,” said Mr Koziarek. But on the other side of the coin, “banks are picking safe projects,” said Mr Felicki.

Ultimately, all agreed that high-quality and well-located projects would find financing. One major requirement that both banking experts agreed on was that a minimum of 30 percent equity was required.

Safer projects

When it comes to choosing commercial projects, there is a trend away from larger retail spaces, Ms Wołyniec said. As the markets in larger cities become more saturated, retail industry investors are choosing to move to smaller cities where there may be greater opportunities. “Huge shopping malls are no longer preferred,” Ms Wołyniec added.

But retail space isn’t the only focus. “Observers view retail space as a safe bet … [but] the office sector is still very attractive,” said Mr Stanisławski.

When it comes to the warehouse sector, most experts agreed there was potential for greater risk. “There may be bigger demand,” Mr Koziarek said, “but it is still very volatile.”

The experts agreed that there was an increase in the number of banks offering financing in Poland. While that may be good news for some, it is clear that in order to obtain it, developers must prove that their projects can meet the banks’ high requirements.

Nevertheless, Mr Stanisławski emphasized, “all players are aware of the global situation … [and] everyone is cautiously optimistic.” In comparison to the rest of Europe, Mr Kaziorek said that “Poland will still perform much better than other countries.”