Opportunity ahead

Łukasz Koterski Colliers International

In 2004, foreign investors will show continued interest in the Polish investment market. The signs of economic growth and Poland's forthcoming EU accession, are bound to reduce investment risk and, consequently, increase capital inflow. Additionally, the high capitalization rates will add to the appeal of investing in Poland. New types of investment transaction could well emerge, although it is difficult to predict exactly how. Polish law must first of all be amended, so as to allow for non-standard investment operations. At present, apart from traditional investment sales, we can only observe sale and leaseback transactions. I believe that retail units are going to attract an increasing number of investors. Real estate investments outside Warsaw receive little attention, as there is a lack of quality investment product with high tenancy levels, and long-term lease agreements with reliable tenants.

Rafał Mateusiak CB Richard Ellis

Investors are and will remain active. We are witnessing a situation where many investment funds are scouring the Polish market for good opportunities. I believe that the number of transactions will exceed that of 2003, particularly given that some negotiations, which began in 2003, will be brought to a close this year. Simplified procedures for any foreign investors wishing to acquire real estate, will reduce the time needed to finalize transactions. We can safely assume that the market will be more active, which will largely stem from lower capitalization rates. The Polish market will no doubt experience the emergence of the so-called 'opportunity funds', which will be looking for real estate, defined by such features as: excellent location, mid to low class standards, (which allow for redevelopment and upgrading), and one hundred per cent leasing. Such buildings will find their way into portfolios, which will be put up for sale after five years or so. Investors are searching for investment opportunities outside Warsaw but these are few and far between. Kraków, Poznań and Wrocław are dominated by properties belonging to institutions which developed the buildings themselves, hence the prospect for sale and leaseback deals, though these could be hindered by the high cost of the buildings. When they were constructed in the nineties, the tendency was to build very costly projects, and their current rents (at USD 10-14 sqm a month) are now too low to match their sale value, so the owners might lose out when conducting transactions. VAT creates an additional problem, as it cannot be deducted by Polish banks, (banking operations are exempt from VAT). This increases the leasing costs by 22 per cent, right from the start. Nowadays, many institutions are wondering what to do with their property, which is a promising sign, as it could provide investors with a number of interesting investment proposals, involving packages.

Agnieszka Jachowicz DTZ

The total sum spent on real estate acquisition amounted to EUR 180 mln in 2003, compared to EUR 600 mln in 2002. As a result, a number of transactions, which were prepared and negotiated last year, stand a good chance of being finalized this. There has been an influx of new investors, both institutional and private, many of whom are Irish. This should result in a significant increase in the number of transactions in 2004. In our analyses so far, we have only taken completed buildings, or buildings under construction, into consideration, just as long as they'd been leased or pre-leased. I expect that due to the limited number of such products, the deals signed by the so-called 'opportunity funds' will increase.