On the waterfront

What city would not like to have plush modern waterfront offices, which bustle with people attracted by cafés overlooking stupendous views. Many municipalities are casting their eyes enviously to business districts such as London's Canary Wharf. Then they look at their own decaying post-industrial areas, such as former docklands and ports, and dream of the prestige and revenues brand new business districts might bring. However, maybe it is worth remembering that the development of London's Canary Wharf was far from smooth. The business district's original developer, Olympia and York Canary Wharf Limited, filed for bankruptcy in May 1992, and a glance around the region appears to confirm that even after twenty years, such high profile projects remain far from easy to complete.

Two capitals, two projects
Duna City is probably one of the more ambitious projects. Located on 32.5 ha brownfield site on the banks of the Danube in Budapest, the plan was to create a new government district with an office area of 160,000 sqm. Overall the project should one day offer around 500,000 sqm of useable space with shopping centres, residential blocks and hotels, all built on over 1 km of waterfront. Work has even begun on the road infrastructure. But the fly in the ointment is the fact that Gropius Építőipar, which together with Quaestor is jointly developing the project, went into liquidation at the end of 2011. Now the one thing that seems certain is that the project will miss its original planned completion date of 2018. According to a representative of Duna City, the project has not been cancelled, but is now on hold, waiting for better economic conditions. As to what has happened to the stake that Gropius held in the project, he refused to say. The city of Prague would also like to renovate some of its more dilapidated waterfront. Rohanský island is another post-industrial site, which among its various uses was once even a homeless shelter in the winter of 2011. But again deadlines appear to have slipped. Originally Sekyra Group won the tender to develop Rohanský island in 2008 and was to begin construction work on the project in 2011. Now 2014/2015 is being mooted. "At the moment, an EIA - environmental audit - is being processed; after this the planning and building permits have to be obtained, so the start of construction is likely to be the end of 2014 or early 2015," explains Leoš Anderle, the chief development officer and partner of Sekyra Group. However, the group now has more reason to start making some progress on its project because in the summer of 2012 the company began paying rent on the land of CZK 190 per sqm after the city had finally resolved all the outstanding leases. Strictly speaking, Rohańsky is not an island because the Vltava river has been filled in on one side connecting the plot to the mainland. The result is a stagnant waterway to nowhere, so the city of Prague has undertaken to re-dig the channel to turn the 20 ha site into an island once again in the true sense of the word. In the first stage, app. 200 apartments with a further 16,000 sqm of office space are to be built at an estimated cost of CZK 1.5 bln (EUR 59 mln). Sekyra has undertaken to invest CZK 12 bln (app. EUR 475 mln) in the project, including the island's eventual purchase for CZK 1.7 bln (app. EUR 67 mln).

Now for Poland
In these straitened times, however, it is Poland that has been receiving the lion's share of the region's limited investment funds. Indeed, the country can boast the greatest number of the region's waterfront projects, but the overall progress seems to be not much quicker. One project where progress is being made is the Młode Miasto (Young City) project in Gdańsk. Construction work has recently begun on ul. Nowa Wałowa, the road that is to join the project to the rest of the city. Budimex should complete the road within 18 months in a contract worth PLN 58.5 mln. When Ole Christian Vad, the CEO of Baltic Property Trust Optima (BPTO), the company behind the project, was asked whether his company had already signed up developers to build Young City, he replied: "Not yet. We are in negotiations with quite a few companies, but we were waiting for the road contract to be finalised." As he made clear, the project is not viable without the access that is to be provided by ul. Nowa Wałowa, and so without the certainty that the road would be built, no progress could be made. The project is to convert a 23 ha area, which was formerly part of the Gdańsk shipyards, into a mixed-use project. BPTO says that the exact size of the project is unknown, but it will be much smaller than the 750,000 sqm of useable space that was originally reported in the media (this figure represents the size of the useable area that could eventually be developed). The plans include a shopping centre, a residential estate and an office building. Clearly, though, there have been delays. Ole Vad concedes that "the master plan was approved quite some time ago. I believe it was 2004," but he then goes on to say that BPTO would be presenting a more detailed plan in April. This is not the only project that has been proposed for Gdańsk. Originally, Polnord was to redevelop the northern end of the Wyspa Spichrzów (Granary) island. The investment costs were estimated at around PLN 450 mln with 25,000 sqm of apartments, 10,000 sqm of hotel space and 10,000 sqm of retail and office space. The zoning plan was approved and then in 2011, just before Polnord was finally to commit to the project, the company got cold feet and pulled out. "Regarding Wyspa Spichrzów, Polnord never started that project. We withdrew for economic reasons. The deterioration in market conditions required modifications to the agreement between Polnord and the city of Gdańsk. These modifications were unacceptable for the city due to the restrictive specific requirements of the act on public-private partnerships," explains Agata Wiktorow-Sobczuk, a public relations specialist at Polnord. The southern side of the island is still to be developed, but strictly speaking Inpro's Chmielna estate is not a waterfront property. Polnord's change of heart has had little, if any, effect on other investments in the area. "In effect there is no impact on the project which is being realised by Inpro because the Chmielna Park estate is being built on another part of the island. For us, it may have a positive effect, of course, from the perspective of reduced supply from the competition," claims Rafał Zdebski, the sales director of Inpro. Construction work on Chmielna Park has begun with the completion of building ?A' planned for the third quarter of this year. A total of 315 apartments are to be built. However, the pull-out of Polnord from the development of Wyspa Spichrzów does not appear to signify any distaste on the part of the developer for such large waterside developments. In June last year the company signed a framework agreement to help develop Elektrim's Port Praski project in Warsaw. The project comprises a 36 ha site that could eventually offer a useable area of around 500,000 sqm. Elektrim was planning to begin construction work last year, but is currently still in negotiations with Polnord. Mike Atwell, the head of CEE capital markets at CBRE, sees some potential in waterfront projects, describing the Vistula as "a river that has not yet been developed". As for Port Praski itself, "it could be an exciting and interesting project with a long-term plan," he enthuses.

New projects arise
Gdynia is another city where a similar development has been announced. The Nauta shipyard has decided to sell off some of its property in order to build a new business district. The company had applied for changes to the zoning plan, but after initial talks with potential investors, Nauta returned to the city in November to ask for yet more changes. The 8.5 ha site is to be divided into two areas, on one of which a shopping centre of 35,000 sqm could be built. The city has already indicated that it will approve the new plan, which should be passed in July. Unsurprisingly Nauta will not say who those potential investors are, but Paweł Matwiejko-Demusiak, the company's vice-president, has admitted that they include both investors interested in buying individual plots and investors who are looking to buy up the entire project. Due to the proposed zoning changes, Nauta has decided to give itself a little more breathing space and now expects to wind up negotiations in June, just before the new zoning plan is passed. But this is not the end of the story. Polski Holding Nieruchomości (PHN Group) has also launched its Fisherman's Pier project, not a stone's throw away from Nauta's proposed development. The adjacent plot is to be developed with office and apartment buildings. "Obviously, it's not a comfortable situation when two large plots are to be sold at the same time, but the two projects are to have slightly different profiles," says Mr Matwiejko-Demusiak. Anna Dużyńska, the director of the commercial projects department at PHN Group, is more enthusiastic about neighbouring projects. "The development of a neighbouring plot is usually something that will add value to the surrounding land," she claims. "The recently developed Sea Towers building, as well as the Marriott Hotel and Office Park, will help to revitalise the area and in our opinion will create even more value for the location of the Fisherman's Pier project," she adds. (The Marriott Hotel and Office Park to which she refers is a proposed 90,000 sqm development by SwedeCenter called Gdynia Waterfront. The first phase of the project is to offer 25,000 sqm, with construction work to begin in the second quarter of the year.) The 10.13 ha site is owned by Dalmor, a former fishery that was incorporated into PHN Group in 2011. "Now the zoning plan allows for the construction of app. 120,000 sqm of luxury apartments with app. 70,000 sqm of office and retail facilities, as well as a marina for yachts," says Anna Dużyńska. Cushman & Wakefield has been commissioned to help select potential joint venture partners. Initially, PHN Group is to provide the land while the partner is to provide the capital. Negotiations with potential investors are expected to begin in March and PHN Group hopes to be able to start work on the retail project in the third quarter of 2014 and on the first phase of the office buildings in 2015. The development of the entire site should take around ten years. "In my opinion, the implementation of such big investments is a long-term process," explains Anna Dużyńska. "Post-industrial plots need more time because of the need for their revitalisation," she adds.

Planning for the long term
But perhaps the longest development times of all are those envisaged by the city of Szczecin, which has instituted a forty-year development plan and remarketed itself as a floating garden city. However, much of its waterfront still remains undeveloped. Lastadia Office has been developed on the banks of the Odra by SGI Baltis, offering app.11,000 sqm gla. Right now the city is building a marina on Grodzka island, which must be completed before August, when the city is expected to be inundated with spectators for the final of the Tall Ships Race. One other riverside development of note in the city is Odra Park, a 30,000 sqm office park that is also to include a Holiday Inn Express hotel. A building permit has already been granted to the developer, BCG Szczecin, a company owned by Spanish investor Flestorm. The first stage is to be completed in 2015 and the final stage in 2017. The city is also hoping to secure EU funds to develop the infrastructure in the area that used to be occupied by its former port facilities, after which it intends to invite private capital in to help develop the area. "Szczecin's waterfront - which is hardly pretty at the moment, but could, in co-operation with business partners, definitely become so - is to be offered to developers and investors. We have a master plan that allows private capital to be located here. We want to be prepared and have an attractive offer within one or two years," explains Mieszko Czarnecki, the former director of the Szczecin municipal government investor and business assistance department, who has been recently appointed Colliers International's regional director in Szczecin.Bydgoszcz is also in the process of developing its waterfront. So far a marina has been built on Wyspa Młyńska (Mill Island), but the city's other riverside developments seem to be stalling, such as Nordic
Haven on ul. Grottgera. The 18-storey building is to offer 129 apartments with sizes ranging from 32-282 sqm. Local media originally reported that work would begin in 2012. Now the company is unable to state exactly when the construction stage will start. This is not the only project in the city to disappear into a void of publicity. Stara Farbiarnia was planning to convert a riverside dye works into a 100-room Hilton hotel with work that was to be completed in 2012. But little else has been heard of this project since. So why are so many of such projects so underwhelming? CBRE's Mike Atwell admits that large waterside developments are often complicated, and attributes the difficulties to a number of factors. "Success comes down to getting the mix right between the different elements of commercial, leisure and residential facilities. This must be based on the local market and demands," he explains. He also sees land cost as "one of the major inhibitors in waterfront development plus the required infrastructure costs." But perhaps the problems result from the downturn in the world economy. The current low level of activity in the residential market, in particular in Warsaw, is causing problems, and given that waterfront projects normally comprise a large amount of residential space, it is important for this sector to perform. But none of this will stop cities from dreaming about revitalising their rundown industrial waterfronts. Perhaps one day these dreams will be realised.