Warsaw's not London

Prices won't skyrocket in Poland long-term, says Richard Petersen, Managing Partner of newly re-named Cushman & Wakefield Healey & Baker, but invested sensibly, you won't lose money in this market either.

Richard Petersen is one of the Warsaw property market's more enigmatic figures. He is also the longest serving of the international real estate consultancy bosses. Arriving in Warsaw in 1991 he established 'Property Services International' in co-operation with Healey & Baker, with which it later merged. Since then Healey & Baker has established itself as one of the market standard-setters. Asked how he came to be in Poland at the beginning of last decade, he dissembles. "I don't know if I can think of an answer to that," he says, before explaining that he sort of drifted here with the tide. "I didn't want to come in the first place but my former business partner, Polish architect Ryszard Stepan, persuaded me to come. Then we started gradually getting hooked in." At first Petersen's company lectured to "a whole cross section of people", including "a lot of people from Voivodships", but soon found business started to open up. Part of his reluctance stemmed from the fact that he could see the opportunities Poland offered but knew that it would mean a long-term commitment, "not in economic terms, but a long time in one's life."

The EU incentive
For Petersen the major incentive in the property market right now is the run up to EU accession, bringing with it the 'inevitable' reduction in risk. "People are preparing themselves for portfolio acquisitions here on a fairly large scale before yields drop and access becomes a lot more expensive." But is there enough of the right product available? "Yes.... if you look at the retail market of course there's a mixed bag of product, but there are some good portfolios." But isn't the retail market in a state of flux at the moment? "Well, the good centres are doing well and will continue to do well. The key is of course location and assuming the project is correctly designed in the first place the fundamentals won't change. The point is that we've now reached the stage when we'll be seeing portfolio investment deals for shopping centres."

Retail: going with the cycle
Retail has long been the major focus for Cushman & Wakefield Healey & Baker in all its offices in Europe and shopping centre management is something the company - which has built up a shopping centre management team - is gearing up for in this part of the world, especially as no other major consultancy offers this service in Central Europe. Talking with institutional investors, the lack of quality retail centre management is certainly high on their list of reservations about the market here. "A shopping centre is a lot more complex to manage than an office building. There are a large number of tenants, a wide range of tenant mix and you have to be aware how the retailers are trading in order to be ahead. You should have an understanding of how they (retailers) earn their money and if there are some retailers who are not working you've got to be able to replace them in order to maintain the success of the centre." Quite a ruthless business then? "It's not ruthless. Retail is a cyclical business and many retail concepts have a cycle of about 8 years. Fashions change and for whatever reason the public just gets tired of a concept. You have to be on top of that."

Crisis, what crisis?
Another gripe often heard in the retail market, one that was raised many times at Eurobuild's recent conference on the retail market in Poland, is the perceived lack of retailers in Poland. Petersen disputes this. "It's not a problem. It's quite common in a developing market that you will have very few retailers at the beginning and then there's a kind of boom when everybody comes in and then gradually that boom will slow down." So, are we in a boom? "No, I'm just saying that's what happens in a developing market". When will we hit this boom? "There's been a boom happening over the last couple of years as more and more retailers have moved in. There are still retailers who haven't yet come to the market who will come in when they feel the time is right. Although disposable incomes are still low the demographics are good with spending likely to increase over the next 5 years."

Exclusive office locations
In the office sector Petersen sees the development of some exclusive sub-locations emerging in Warsaw, particularly along Al. Jana Pawla, "probably the most heavily invested street in Poland", around Saski Park - where the company is marketing the landmark Metropolitan building, as well as the almost fully leased Królewska building - and, to a lesser extent, Plac Trzech Krzyzy. Concerning regional activity, Petersen believes that the office market will mostly remain in Warsaw in the near and medium term because Poland's administration, business and economic roots are centralised in the capital.

A cosmetic change?
Asked whether the new name will mean any structural changes within the company, Petersen says no. "The merger we had with Cushman & Wakefield which took place 3 and a half years ago was the structural change, but even that didn't change too much as we'd already been partners for 8 years previously. We're changing the name to try and use the marketing power of Cushman & Wake-field on a global basis, but we don't want to jettison Healey & Baker because it's been built up.... certainly in Europe over the last 30 years and in the UK over 180 years it's built up a very good reputation in the retail sector. How long it will stay like this I don't know, but for the foreseeable future anyway."

Warsaw's not London
As someone who seems to be committed to Poland where would he invest in the Polish property market if he were to do so? "Well, if I was given USD 100 million I would spread the risk and invest in prime retail and office projects." Could Warsaw develop like London, where a house worth GBP 30,000 twenty or so years ago could now be worth as much as GBP 500,000? "You've got to be careful about that comparison. London is a more established market and more international - it's a big financial centre. I think values will go up but not to that extent... I think you're going to have different districts developing, districts which will become very exclusive. It all depends on what your objectives are but certainly you won't lose any money here if you choose the right product".