Plotting a comeback
Investment & finance![](/images/37256-large.jpg)
Production sector takes a liking to our part of Europe
The largest regions with the best transport links are attracting investors like the proverbial magnet. Capital cities are enjoying popularity as well, as are (as far as the warehouse market is concerned) locations with convenient access. For example, in the Czech Republic outside Prague and its vicinity the most sought after plots are those located near the German border. In Poland the western and southern part of the country is also attracting the largest volume of investment (Amazon has chosen the Wielkopolska and Lower Silesia provinces). Production and warehousing is also dynamic sector for land investors in Hungary. According to Roland Kis, a senior consultant in the warehouse department at JLL Hungary, most of the demand for land is currently being generated by this sector, but this could change. “In the last two years the demand for land was stimulated by the expansion of the automotive industry and the sub-suppliers of such companies as Audi and Mercedes. But as manufacturing plants open, the demand for plots could fall,” Roland Kis points out. The production sector in Romania is another that is experiencing higher demand for land compared to the previous year – particularly in the west of the country near the Hungarian border, where the demand is mostly coming from automotive firms. The centre and the south of Romania has become a location for companies involved in oil and gas trading. “The competition for the ownership of manufacturing plants is an interesting trend,” comments Andrei Vacaru, the head of research at JLL Romania. “However, it is the plots earmarked for office buildings and shopping centres that are enjoying the most interest. The demand has been visibly growing and buyers are interested in the best locations,” he adds. In Russia, meanwhile, a considerable slowing down of the market was registered in Q1 2014. According to research by Colliers International, the turnover on the Russian real estate market was nearly two-thirds lower than in the same period of 2013. Around USD 142 mln was invested in Russian land over the period, which constituted app. 22 pct of the total turnover. Many transactions have been postponed due to the uncertain situation on the currency exchange market and Moscow’s intervention in Ukraine – and the turnover was exclusively generated by Russian companies.
High supply – but unsated demandAccording to Colliers’ data, the interest in the investment land in Poland is now intensifying. Investors are looking for plots designated for office, residential and industrial development. Colliers International estimates that the value of transactions on the land market could reach nearly PLN 1.75 bln in 2014, thus it will be significantly higher than the figures for previous years (in 2013 and 2012 it was app. PLN 1.5 bln). “Despite the high supply, the demand for investment land has yet to be fully satisfied. The reason is the limited number of plots that fulfil developers’ requirements, as they are mainly looking for projects that guarantee a stable and quick return on capital. For attractive areas designated for residential and office projects in the largest cities we can expect a slight increase in prices,” predicts Emil Domeracki, a senior specialist in the investment service group at Colliers.
Residential market rules in Poland
Residential developers have been the driving force in the development of the Polish land market over the last two years. Unsurprisingly, therefore, areas earmarked for housing development have enjoyed the most interest. “According to Colliers, buyers spent 55 pct of their funds on such projects, they spent 40 pct on plots permitted for office and retail development and 5 pct on areas earmarked for warehouse development. App. 80 pct of the land purchased for office and residential development is in Warsaw. However, there are also signs of a revival in regional cities. In the next few months we expect the interest in land zoned for residential development to stay high, particularly in Warsaw and Wrocław, as well as the TriCity, Kraków and Poznań. According to Colliers, plots designated for office and retail development will enjoy slightly less interest – the developers of these projects are focusing on renovations rather than purchases for the building of new projects.
Stable prices with an upward trend
Parties interested in buying investment plots cannot complain about there being a lack of offers. In the largest cities there are many of these available. The rather high supply has resulted in a limited growth in land prices, which is mostly visible on the residential market. “It is worth pointing out that the main reason for the current increase in plot prices in the residential segment is not so much the number of transactions concluded but the earlier decrease in land prices during the financial downturn as well as developers’ current apartment offers selling out, which in turn has led to a greater interest in new projects. Thus if the price expectations of the sellers grow considerably, the rate of new sales transactions will slow down,” argues Daniel Puchalski, the director of the land advisory department at JLL in Poland. Two similar plots are not necessarily equal. Their preparation for future projects is of crucial importance. If this has been well implemented, you can be confident of a higher price. “In the next few months there will probably be more interest in plots that have development plans and building permits ready,” believes Mariusz Kurzac, the general director of Cenatorium. “I would expect a slow increase in prices, particularly when it comes to land attractive for residential developers and plots ideal for the retail business, particularly for smaller, convenience centres, as well as for good locations for warehouses. The prices of land earmarked for offices might not be doing as well. We are faced with saturation here – there is a lot of supply and lower demand,” insists Mariusz Kurzac. ν
Nicklas Lindberg
president, Skanska Commercial Development Europe
We want to be a city builder
In the last 15 months, Skanska sold four office complexes in the CEE region for a combined total of EUR 300 mln. This year, we intend to sell between five and seven buildings to investors. We will also start the construction of five to seven buildings to be able to meet the demand from tenants and investors. In order to continue growing in our current markets, we need to buy new land with potential for 200,000–300,000 sqm of leasable office space across the CEE region. We want to be a city builder delivering sustainable projects that are profitable for tenants, healthy and comfortable for users, and that contribute to the urban environment. This is why at Skanska we are only interested in the best plots in city centre locations with excellent access to public transport, offering the potential for at least 15,000–20,000 sqm of office space upon the project’s completion.
Eduard Zehetner
CEO, Immofinanz Group
Real estate machine
It is part of our strategy to speed up our “real estate machine” by increasing the volume of our development pipeline for our core countries. Currently, our development pipeline has a volume (fair value after completion) of app. EUR 1.23 bln in total – and we want to push this volume up to app. EUR 2 bln over the medium-term, assuming we have enough profitable projects. On average, our investment volume amounts to EUR 500–700 mln every year – that is, for the entire Immofinanz Group. As will be seen over the next few years, Germany, Poland and Russia will definitely be the core areas for development since these countries have the potential for a wide-range of exciting projects. Our focus in Poland will remain on prime retail and office projects. In addition to our projects in Warsaw and Lublin, we also want to investigate opportunities in secondary cities. In terms of retail, we are investigating a variety of options for how to expand our Stop.Shop chain or we could even launch new formats onto the market – one possibility could be our new Vivo format, which is a one-level shopping centre adjacent to residential areas.
Mirosław Bednarek
country manager, Matexi Polska
The value of a plot is what we can be built on it
The analysis and choice of location is one of the key elements in our growth on this market. It is never an easy task, but we believe that the market favours the bold and the active. Thus our team is constantly analysing opportunities as they arise – almost five hundred plots in the capital city have already been analysed by our team and we have only selected the best ones. The most important element we take into consideration in the analysis process and the selection of a plot for a new project is, of course, the location. Only when strict criteria are fulfilled, such as the access to urban and transport infrastructure, do we look into the project’s profitability and possible further design work. Matexi is on the lookout for attractive plots all over Warsaw. Our policy is to adjust to the tastes and needs of the local residents and thus Matexi’s activities have been expanding and gradually encompassing more districts of the capital city. The current portfolio of plots makes it possible to build over 1,300 flats and includes: Wola; Bielany, where we will soon start a third project, Apartamenty Marymont; and an excellent location in Ursynów, where it is really difficult to buy plots due to ownership and legal conditions and the low supply of available land. When it comes to the availability of sites and the most significant barriers in the way of purchasing them, things look different in central districts, where we often come across reprivatisation problems or claims from former owners. In Ursynów, on the other hand, the majority of land is in the hands of local housing associations and close to existing buildings. But the most frequent problem that crops up is, of course, the price. The value of a plot lies in what we can build on it and the price we can sell the finished apartments for. Unfortunately, many owners still remember the situation from a few years ago when high prices per sqm automatically inflated the prices of plots to unrealistic amounts, which often turned out to be completely unrelated to the actual state of the market. All these problems, however, are a chance for active players to display their skills, as they can resolve such problems and fish out the most interesting offers from the market. In the near future we are planning more purchases and to start new investment processes on the land already held, including another location in Bielany, on ul. Staffa. Over the next few weeks we will also begin work on our plot on ul. Kolska, where the Kolska od Nowa urban project is to be built with almost 600 flats. We are now focusing on for subsequent investment opportunities in Warsaw. However, we have not ruled out purchasing attractive plots in other cities, but this is more likely to happen in the longer term.