Karolina Kowalska: What is today’s market like? How has it changed since the global crisis started?
Daniel Puchalski: We have been observing a significant influx of investment to the market after years of crisis that started at the end of 2008. Based on all the data collated from analyses, we estimate equity on the market to be between zł.1.3-1.6 billion. Of course, that doesn’t have to mean all of this will be spent this year but there is potential.
Courtesy of Jones Lang LaSalle
We also want to advise on the redevelopment and refurbishment of buildings, including older ones. The market is becoming increasingly mature and ready for new investment ideas.
What kind of property is most likely to be redeveloped?
We often advise retail investors how to redevelop their facilities. For example, they can announce a tender and sell one part of a plot, and on the remaining part, they can develop a new building concept that will attract customers. This job requires a great deal of creativity in particular with the greenfield projects where it is not certain what might arise.
Today, there is a discussion among retail investors about the future generations of shopping malls, which will have interactive elements where some products will be selected on iPhones, iPads or large video screens, while retaining structures of a traditional “brick-and-mortar” shopping mall, where everything is on display.
We do not want to start creating futuristic shopping malls but we do want to ensure that our client is ready for what the market will need in several years. Today we focus on inventing new building types and new forms of service in the retail world.
How do you decide which locations are worth investing in?
We are looking for locations that today, from the point of view of our competition, are business wastelands. We try to look for a new business idea so we can enter the market with a project in a year or two. Our business idea is not to have a pipeline for the next 12 months, but for the next 12 to 24 months.
I have been working in Jones Lang LaSalle for a relatively short time, but we already have a portfolio of land worth more than zł.500 million. We are currently working on a further zł.400 million’s worth. Among them are projects with a complicated legal status, without local development plans and those which are subject to claims. We also work on projects requiring demolition, that we want to put up for sale next year.
Are you looking for plots in the entire Poland?
When it comes to residential real estate and office space, we focus on the major cities, such as Tri-City, Wrocław, Kraków, Poznań, Łódź, Szczecin and, of course, Warsaw. When it comes to retail – in all cities with more than 30,000 residents such as Kalisz, Przemyśl, Zgorzelec, Sosnowiec, Pruszków we are looking for land for retail parks or small galleries.
A lot of outlets are now being built. Do you have requests regarding land prepared for outlets?
Certainly, there is still demand for outlets in Poland. However, I assume, that they will be created differently. Both shopping centers and retail parks are looking for savings today.
Retail parks used to be planned for 15,000-20,000 sqm. Today it is more often 5,000-10,000 sqm with the exception of DIY stores. Shopping malls excluding those that had already been planned earlier are not going to be built the way they used to be, namely with an area of 80,000-100,000 sqm. New ones will rather be half that size.
Which cities are growing the most when it comes to the office market?
Warsaw has always been in first place, with Wrocław, Kraków and Poznań behind. Next are BPO markets such as Szczecin and Łódź, that could be hinterlands of the largest cities. For example, Łódź has always been a hinterland of Warsaw.
Due to a large supply of office space in Warsaw, prices have decreased, which has weakened the position of Łódź. Warsaw’s total modern office stock has passed the 4 million sqm threshold and there are business districts like Upper Wola or Służewiec Przemysłowy, where rental prices have been revised slightly downward.
Old and historic buildings seem to be gaining more interest amongst office space investors. What makes them attractive?
The strength of buildings such as Le Palais on ul. Próżna in Warsaw is primarily their location. Just as opportunity makes the thief, likewise location makes the buyer. An old building requires cooperation with the curator of historic buildings, who can delay construction. Right now we are preparing a tenement for sale in the center of Warsaw.
It is beautiful and its aesthetic look is added value but it is the location that will be a major criterion of the purchase. We have a lot of offers regarding postindustrial buildings that are beautiful, but they need to be adapted to today’s investment requirements. Firstly, there is a spatial zoning plan and building regulations that should be followed. This requires the presence of a curator of historic buildings.
We want to prepare information for our investors related to technical expertise, the opinion of the curator, and what function, from a market point of view, is better – residential or office space.
Recently, Jones Lang LaSalle set up a Land Advisory Services Department. Why did you decide to make such a change in the structure of your Polish office?
The Land Advisory Services Department was created in response to market needs. We can see a growing demand for strategic land advisory services, and expect developers and investors to become increasingly interested in purchasing investment plots. We also estimate that the land market and advisory services will be worth around zł.3.5 billion in the next three to four years.
Therefore, Jones Lang LaSalle has decided to deepen, expand and focus its investment land expertise into one department. Its launch helped us run land advisory projects for our clients more swiftly and comprehensively as well as raising our company’s profile in this segment of the real estate market.
How is this new structure different from other advisory departments?
It offers investment land services and is composed of agents with unique expertise and experience, who provide full support at every stage of a project. The real estate market is maturing and properties are aging. This means that services connected with assessing the potential of a particular location and preparing a strategy that fully exploits this potential, including a change in functionality, will become increasingly popular.
We not only support our client in land search and purchase but also assist land owners in preparing plots for a sale process: in acquiring the necessary permits, selecting and coordinating architects’, engineers’ and lawyers’ work, identifying the land development opportunities, documentation management, financial analyses and market research.
For example, someone comes to us saying he or she has land for sale but knows nothing about selling plots or their possible uses or is a market player but needs professional advisory services. We can evaluate the property and conduct research to establish whether the plot would be suitable for office or residential property. We can also revise legal status of the land, help in attaining all the necessary permits and find a buyer. This unique service responds to the needs of today’s market.
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