Poland is the number-one choice for investors in CEE, Mr Gotthardt said Courtesy of Global Real Estate Institute

Adam Zdrodowski: You are holding the New Europe GRI summit in Warsaw for the second time in a row. Does this mean Poland’s property market continues to stand out in the region?

It does, despite the trying situation in the euro zone. Or because of it. Poland has shown remarkable resilience, outshining all else in CEE. Property investors like such scenarios, and while investors have withdrawn widely from the region, Poland has been buoyant with capital coming in.

In terms of potential, the Polish property market is attractive, not just Warsaw, and investors are discovering more of the region’s opportunities for new and re-developments. The availability of debt is creating a bottleneck, and hence the transactions volume has been lower recently.

It is widely expected that the upcoming months will be more difficult for the Polish economy. Could the country’s real estate market see more problems next year?

Alongside the Czech Republic, Poland is the only alternative and remains the magnet for capital. However, if Europe slips into a severe recession, and in particular if the German economy loses steam, both of which are quite likely, the Polish economy will not be immune, though in and amongst the gloom Poland might retain its haven status, cushioning it from the worst.

The best insurance will be to continue favorable conditions and policies for foreign capital – and they will keep coming. Actual transaction numbers reveal less activity in 2012, but the real estate outlook remains better than elsewhere.

As the euro zone continues to suffer, do you see increased investor interest in the Central and Eastern Europe (CEE) region and how is that reflected in the attendance at the conference?

CEE is increasingly incoherent. Poland and the Czech Republic together account for 90 percent of all business in the region, with Poland getting the lion’s share of interest. Since the beginning of the crisis, investors have been retreating from CEE markets, finding better value domestically. And those investors are coming back only slowly and selectively. The number one choice is Poland.

Beyond that investors act asset-driven, not markets. The New Europe GRI’s return to Warsaw illustrates the importance of the Polish market. At the same time there will be more senior regional players – Romania, Slovakia, Hungary and others, and some major foreign investors and developers. Connections are the key in new markets, and that is what GRI is about.

What kinds of risks could the potential investor in Poland and CEE face? Or is the region today regarded as a safe haven in Europe?

Who would consider anything safe today? Poland is considered in much better shape than other economies, closer to core than emerging, similar for the Czech Republic. The region overall is heterogeneous. The greatest threats are from outside, like Europe and the world economy, in its tow a nationalist and protectionist drift in certain parts. History shows protectionism never solves pain but scares capital away, if anything.

Hungary, Romania, even though fundamentals are positive, are problematic for investors. On the reverse, the Polish government sends positive signals and as such portrays itself as a safe haven. Long term Central, Eastern and South Eastern Europe are highly attractive for developers and investors.

Which sector of the Polish property market has been performing best of late and in which could some potential problems loom?

The most money is in the office market and that continues to attract investors. Higher proportions of disposable income and availability of private credit creates demand in retail and shopping centers across the country. With [Poland’s] population of around 40 million, foreign retailers are expanding continuously, but often face a lack of quality retail stock.
Other sectors might not be as fancied; residential has lost some of its sheen because of investor concern and restraint in mortgage approvals. The overall shortage in housing, however, will make a future upturn likely.

In Poland, the Warsaw market continues to attract the most attention from investors. How are the regional Polish cities perceived?

Warsaw is the center, preferred by investors and lenders alike. But investors venture out towards regional centers, Gdańsk, Katowice, Kraków, Wrocław, Łódź and a few others as they find better value in the regions, as long as good infrastructure, sufficient population, local industry and jobs are available. Recent examples like AIG/Lincoln developing a retail project in Gdańsk or Immo Invest developing multifamily buildings in Luboń illustrate the opportunities are there.