Out of the box

One deal in the third quarter of last year, the EUR 555 mln acquisition of the CasinoAccording to Michał Ćwikliński, senior consultant in the investment department of King Sturge, there are two main reasons for the hectic state of the market: “Yields compressed again slightly, convincing investors who had bought a few years ago to finally sell up. And there was more money in the market chasing investment product.”

But can the frantic transactional activity on the investment market at the end of 2006 be maintained this year? And surely the amounts invested in Polish real estate cannot keep increasing at the same dizzying rates? Paweł Welo, nevertheless, believes that this year will be very comparable to 2006, and may even be another record-breaker: “Although it is difficult to predict whether the volume of investment transactions will be bigger this year than in 2006, my personal feeling is that it will be higher.”Michał Ćwikliński, on the other hand, feels that the level of activity may not be maintained, since “a lot of the most significant projects were sold last year, and all the time there is less and less of this type of product for sale.” In his view, there is likely to be a change in the behaviour of investors:Flippin’ heck!

Another phenomenon that might become more evident this year is that of small, local companies trying their hand at development. According to Paweł Welo of CBRE: “These firms have seen the investment market growing and fancy themselves as developers. They are able to secure good sites with their local knowledge, but they don’t have much experience, or the equity to carry out the projects alone, so they look for investors.” He goes on to add that CBRE are currently in discussion with several such local companies who are asking the agency to find them a partner. “One of these firms, which is a client of ours,” claims Mr. Welo, “is currently developing a 10,000 sqm office building, so this type of company could provide some serious competition for the big established developers.”

Smaller investors will also play a larger role in Polish real estate in 2007, according to Michał Ćwikliński: “There are more and more of these types of investor: ‘PropCos’, which are not funds, but straightforward – often Irish or British – development companies. Typically, they buy buildings, refurbish them, build up portfolios and then sell them off a few years later.” These smaller investors tend to create portfolios out of single assets of, for example, EUR 2–3 mln in value, which can be buildings in need of refurbishment, smaller properties, retail on the ground floors of buildings and industrial sites.

Take a look outside