Cities of good will

The majority of real estate market participants have no doubts that there are certain urban municipalities that are better for investors than others. There are cities where administrative decisions are issued faster and the local government spares no effort or funds in order to meet the expectations of companies. According to a recent ranking of cities published by the Polish Association of Developers, in 2011 more than half of the decisions over site development and building permits in Bydgoszcz were issued within less than two months. However, some cities could not even manage to match that for a single decision over the entire year – and for about half the decisions taken you needed to wait more than a year. "In Warsaw there are no local zoning plans – you need to wait maybe eight months for an environmental decision, six months for site development conditions, and then there is also the waiting for the building permit. When it comes to larger projects the construction phase might not even be able to start for one or two years after the purchase of the plot. On the other hand, in Wrocław local zoning plans cover almost the entire city, so there is no need to apply for an environmental decision in the case of residential estates,” explains Mateusz Juroszek, the vice-president of Atal, which operates in five large cities in Poland: Warsaw, Kraków, Wrocław, Łódź and Katowice. Differences in the time needed to obtain administrative decisions translate directly into money. The more sluggish the progress of a project, the higher the costs incurred – because money is being frozen for longer. Therefore investors have to budget such a scenario. “When things are a little better on one market and slightly worse on another, we have no problem responding. For many large Warsaw-based developers, Wrocław is the first place they go to when they expand, due to the ease of carrying out projects locally,” claims Mateusz Juroszek.

Some want to listen

How do such positive and negative perceptions of cities arise? Contrary to appearances, it turns out that they do not stem so much from the speed of administrative decisions. “In a ranking we published last year, Wrocław was at the bottom of the league for the length of the waiting period for site development decisions. In spite of this, according to investors’ subjective assessments, cooperation with the city is good,” points out Konrad Płochocki, the director of the Polish Association of Developers. This positive impression from investors is mainly down to good communications. “The city maintains a good rapport with investors by discussing the trends and directions in the growth of the market with them. On the basis of such analyses, they pass zoning plans and stay ahead of development activity. Because of this, a large number of projects take place in areas with existing zoning plans,” explains Konrad Płochocki. Furthermore, if it is not possible to fulfil a developer’s wish, the city goes to some length to explain why their project is not recommended in that particular area. Warsaw is now following Wrocław’s lead. Two years ago Warsaw established an infrastructure and spatial planning team together with the Polish Association of Developers. Chrzanów in Warsaw’s Bemowo district was chosen as an area faced with particular challenges due to the lack of infrastructure and the large number of projects planned. Representatives of the city, investors, designers and infrastructural companies sat together around one table to plan the development of the area in the best way possible. This was only the beginning, but the approach will also be adopted for other problematic areas of the city, such as Łuk Sierkierkowski or Pod Skocznią in Mokotów district. “Warsaw no longer operates on an ‘officials versus investors’ basis. The good news is that a dialogue has started. Together we can lose less time on friction and spend more on devising solutions. I would also like similar platforms to be established in other cities,” argues Konrad Płochocki.

Stimulating infrastructure

Warsaw is, of course, the city that spends the most on infrastructure. The cost of local government projects currently being carried out with EU support amounts to almost PLN 12 bln. According to a local government ranking recently published by the ‘Rzeczpospolita’ daily, the expenditure is four times bigger than Gdańsk’s, which comes second with PLN 3.1 bln projects, and Poznań with PLN 2.9 bln. However, the majority of the capital city’s expenditure is being eaten up by huge schemes, such as the construction of the underground line (PLN 6 bln) and the next stage of the construction of the Siekierkowska Route in Warsaw (PLN 1.2 bln). But when it comes to individual private projects, they often need improved infrastructure, too. “There are excellent places in Warsaw’s Dolny Mokotów district, near ul. Bartycka for example, which could be used by developers if it wasn’t for the fact that there is no sewage system there. This is an issue that has been ongoing for years – the Municipal Water and Sewerage Company is not doing anything about the matter and so every investor has a problem with this,” comments Mateusz Juroszek. The position of Łódź among the top four cities for public investment may come as a surprise to most people. With an investment volume of PLN 2.4 bln, it surpasses other cities of a similar size, such as Kraków, Wrocław and Katowice. The city is the location for one of the largest revitalisation projects in Europe, Nowe Centrum Łodzi, which is to be co-financed by the European Union. The scheme involves the transformation of 100 ha in the city centre. “There is a railway station at the heart of this project, which will become a multi-modal station. After the modernisation work, trains to Warsaw will depart every hour. The entire 100 ha plot will be divided into three subzones. One will comprise cultural facilities, the others will contain modern office and business buildings,” explains Karina Stasiak of the Investor Services Office in Łódź. The project also involves the redevelopment of roads. All this is set to make the surrounding areas much more attractive for investors and developers. But it is not always about money. Sometimes the good will and ingenuity of the officials responsible for the project is enough. In Chrzanów, the local authorities, who couldn't afford buying out an area for a park from developers, are to receive it free of charge in return for a permit to increase the height of a project. Thanks to this arrangement a 6 km-long green strip around the entire estate will be created. “This compensates the company for the loss of a piece of land and at the same time works for the residents, who will now be able to jog and cycle near their homes,” says Konrad Płochocki, praising the decision. However, the most obvious benefits for investors are the various investment and tax incentives provided by local government. “This includes exemption in terms of real estate tax, land tax or cooperation with special economic zones, to give more encouragement to investors through favourable taxes and local fees. Also, every time such assistance is being provided, it attracts attention and helps to build reputations,” remarks Piotr Bzowski, the leasing and development director of PointPark Properties. He also underlines the importance of social support training sessions organised by the local authorities to help the unemployed to change or improve their professional qualifications as the information on the local labour market is crucial for investors. “From the local authorities we expect a thorough analysis of the human resources available in a particular area. Data such as the number of the unemployed, their age and their qualifications is significant. This knowledge is vital when considering investment in a given location,” insists Piotr Bzowski. According to the director of the Polish Association of Developers, cities could also benefit from the feedback given by companies. “A questionnaire addressed to the investors, which would include questions about the cooperation with the city, and, for instance, outline the top five problems they face while developing a project, would be a very good idea. So far I have not heard of anybody taking such measures in Poland,” says Konrad Płochocki.

The strong can do more

The truth is, though, that the largest cities do not have to go to great lengths to draw the eyes of investors. The size of these markets and their demand are usually enough to act as business magnets. “We know that there will be administrative problems; we know that things are sometimes messy, and each plot will have a pipe or some other problem that will have to be dealt with. But we also know that Warsaw is an excellent market where apartments sales are doing very well,” admits Mateusz Juroszek. This view is confirmed by Radosław T. Krochta, the general director and vice-president of the board of MLP Group: “We are mostly attracted to large cities that offer broad access to the workforce and provide a large output market at the same time,” he claims. Because of these factors he considers Warsaw and Silesia to be Poland's most important markets these days. “Developers will invest in Warsaw projects one way or another, but when we look at Łódź or Kraków, the incentives there have to be really strong. These cities have to make more of an effort to secure investors,” claims Mateusz Juroszek. So how will the jurors of the Eurobuild Awards assess all the weaknesses and strengths of Poland’s cities? “We will find out soon. Even though some of our respondents were not so forthcoming with sharing their views on what are the least and most friendly cites from a company's perspective, finding the topic to be somewhat uncomfortable, everyone has been given a chance to freely express their opinion during the anonymous voting. Ten cities will participate in the ‘beauty contest’, in which their best assets will be critically evaluated by the market participants and the readers of ‘Eurobuild CEE’ magazine. The winner will be chosen in a vote to take place on the www.eurobuildcee.com and www.eurobuildawards.com internet portals. “We want to obtain as credible a result as possible and hope that large numbers of our readers and the people who visit our websites will take part in the voting. The achievement of this goal will be assisted by the long window provided for casting your votes: both October and November. We have also provided space for comments in which we encourage everyone to offer their opinions about the candidate cities. We are most interested in what the voters think about the cities and what their experience has been in terms of cooperating with local authorities. I think that representatives of the cities will also want to know how investors and the real estate community evaluate them. Our survey will offer them such an opportunity. May the best city win,” declares Katarzyna Matejuk, the director of the Eurobuild Awards project. ν