Quality, not quantity

Nathan North, 'Eurobuild CEE':
Could you take us through the recent changes at the management level at Cushman & Wakefield?
Charles Taylor, partner at Cushman & Wakefield: Carlo Barel di Sant'Albano, the chairman of Cushman & Wakefield, became CEO for the EMEA region last July, taking over from Paul Bacon, and has been implementing a five-year plan to grow the business. This involves running it on a more regional basis. Jonathan Hallet in Prague becomes chairman of our CE operations in Poland, the Czech Republic, Slovakia, Hungary and Romania, helping us to provide a more coherent platform and more consistent services across the region.

When you say "the region", do you mean the larger markets?
Yes. We have well-established offices in Prague, Bratislava, Warsaw and Budapest and see good potential for growing these further - especially in Poland. Our focus is on the bigger markets - as a global company we must concentrate on the key markets, such as the UK, Germany, Russia - we have recently hired 35 people in Germany and in Russia have acquired Jones Lang LaSalle's retail team. This doesn't mean that we won't work in others. Two years ago we advised Heitman on buying into the Arena Centar in Zagreb from our Budapest office. We're also very active in valuation and advisory services across the CEE/SEE regions.

Why has your own position changed?
On July 1st, I take over as Poland managing director and hand over my position in Budapest to Gergely Pados, who runs the office agency team. We want to grow the Polish business further and already have an excellent set-up here with strong office and retail agency teams, among others, but we are probably punching below our weight when it comes to capital markets given the size of this market. However, Izabela Mucha has been making headway in valuation. In Hungary we've probably grown the business as much as is possible in the current market, and have had a good track record and been consistently profitable. So it makes sense to join our efforts to drive business, given the obvious synergies that exist between the two markets. This would achieve the goal of creating a stronger CEE platform to deliver more complete, consistent services to our clients.

Will you also be expanding departments to achieve this?
We are opportunity driven and selectively hiring in Prague, Budapest and Warsaw. Given the market conditions, there are clearly countries and service lines where business can still grow significantly, but for this the right talent has to be in place to secure the business.

So there will be some kind of re-organisation of the Polish operations?
In Poland we have under management about 500,000 sqm, but about 750,000 sqm in Hungary - so there is clearly also an opportunity to build on this service line here. It is a similar case with capital markets, although we had a good Q1, closing the deals for New City and Green Towers and advising on Norges' acquisition of the Prologis portfolio. In all, we have been involved in about EUR 480 mln of the EUR 958 mln transacted in the CE region in Q1 2013, with a couple of major ones to close this month. With the industrial agency here under Tom Listowski there has been steady growth and there is the potential for more, while the valuation and advisory business has also been growing. Asset management is another area that has quite significant potential and we have three new instructions in Q1: phase two of the Green Horizon office complex in Łódź, the Agora Bytom shopping centre and a logistics park in Szczecin. We're already managing for pan-CE clients in the Czech Republic and Hungary, but not as yet in Poland, so this is what I mean about a creating a more consistent platform. Our PM team has secured two new important instructions, which have broadened their scope of services and strengthened their market position. One is for an industrial facility in Lublin for a new German investor. The retail and office agencies are performing well, but clearly their markets will be more challenging going forward.

Do you feel that the consolidation of real estate service companies is now over?
Probably there will be further consolidation of real estate service companies and this could take the form of large-scale mergers. DTZ being spun off is also part of this, while CBRE has acquired several smaller specialist businesses, notably property management firms, across the region. But I think it is now less likely that there will be a major acquisition. It is still too early to judge the Jones Lang LaSalle acquisition of King Sturge - if you look at their businesses in the CE region and the sum of the two parts, perhaps it is not so obvious what the net gain has been so far. It might be concluded about the JLL-KS merger that there would be less competition, but there is still a wide range, from global brands to smaller niche players operating. And driven by a more challenging market, things have actually become more competitive. BNP Paribas is coming more ?onto our radar screens now and might adjust the balance.

How competitive are things after this consolidation - and how will you respond?
The market continues to be competitive and so our philosophy is to work very closely with our key clients, ideally on a pan-Central European basis, delivering multiple service lines. We are putting more emphasis on such pan-European mandates than previously and this is one of the drivers for achieving more consistency across the region. We want to focus on the key clients working in the four major CE markets - Poland, the Czech Republic and Slovakia and Hungary. If you look at the culture of the company we don't have geographical boundaries in terms of clients - if you're working with a client looking to expand it makes sense to take them across the region and to manage regional portfolios to take advantage of economies of scale. This doesn't mean neglecting local clients - we'll continue to foster these relationships, but if there are gaps in the services for cross-border clients then it's sensible to plug them.

So your strategy has been modified?
I wouldn't say that. The strategic plan was initiated when Paul Bacon was CEO. The only difference is that we've increased the acceleration of implementing of the change and have more of a focus on regions.

But does this also involve a shift in focus away from smaller to bigger markets?
The CE business is of a significant enough scale to be treated as a region at the EMEA level, but we can still cover the smaller, peripheral CEE markets through associate offices, for example, as we do in Slovenia. But it currently doesn't make any sense to invest money and time opening an office in, e.g. Ljubljana. The crux is that we don't want to be the biggest in terms of numbers of offices and employees; it's more a question of wanting to provide the best services to clients.

Charles Taylor
is a partner at Cushman & Wakefield with over 22 years' experience in the property profession, the last 15 years of which have been in Hungary. Charles is managing director of the Budapest office and is responsible for coordinating the firm's capital markets team across Central Europe. Among the transactions he has successfully closed, the most recent include the acquisition of a major office portfolio in Budapest concluded on behalf of Heitman (Millennium Towers in a joint venture, Science Park and Alkotás Point), as well as Heitman's acquisition of a 50 pct stake in TriGranit's Arena Centar mall in Zagreb.