Shoulder to shoulder

Operating on the real estate market, preparing projects and building them, means cooperating with local government. There is no other way to do it. This is where everything starts and is what the future form of any project that sees the light of day is determined by, as well as the impact it will have on its surroundings. So we decided to take a look at the most urgent issues the crop up in the cooperation between municipalities and investors

Coherent strategy, iron determination

Cooperation between developers and local government when it comes to new projects, even though it is not easy, does have only one common goal – to do good business. No party wants to lose out in the process, but both can benefit from it. Such thinking is starting to bear its first fruit. “In recent years local authorities’ awareness of investors’ needs has improved. However, developers still have high expectations of local government, mainly in terms of the long-term development of the largest cities,” says Rafał Mazurczak, the director of the office and hotel department at Echo Investment. “The starting point is the understanding that we, developers, do not care about temporary solutions, but we are interested in the long-term development of Polish cities,” adds Rafał Mazurczak. The managing director of ECE Projektmanagement Polska confirms that there has been shift in the approach of local government to real estate investors. “The attitude of local authorities to new retail projects has changed. Just a few years ago an investors struggled to get the green light for proposals to develop shopping centres. Now it is local government that is seeking out the investors, as is reflected in the participation of local authorities in investment and development fairs in Poland and abroad,” says Leszek Sikora, the head of ECE Projektmanagement in Poland. In his opinion the interests of local authorities and developers are now coinciding. “However, this requires comprehensive, cohesive and long-term thinking about the city in a broad spatial and functional context,” he stresses. The representative of Echo also emphasises the importance of long-term operations. “There is a need for drawing up strategies to be implemented over many years,” says Rafał Mazurczak. And he is not alone in this opinion. Local authority representatives speak in a similar vein. Michał Olszewski, the deputy mayor of Warsaw and the official responsible for the city’s development and planning strategy, including infrastructure and PPP projects, says: “Cities are built over dozens of years. This is a process that is to a large extent predictable and it can certainly be planned.” But the fact that something can be done does not mean that it will be done. The lack of a long-term urban strategy can have serious consequences for development companies, including a considerably heightened risk of projects failing. “The inconsistency, the lack of a coherent strategy in terms of planning public space and the variety of interpretations of the same regulations by officials, has resulted in a situation where the investor can never be entirely sure whether another rival facility they were previously unaware of will built near their project in the future. Because we locate our projects in city centres and they constitute an integral part of the public urban space both in terms of the functionality and architecture, we are certainly interested in partnership and reliable cooperation with municipalities in this respect,” comments Leszek Sikora, the managing director of ECE Projektmanagement Polska. Clearly the will exists for this kind of cooperation. Now all that is needed is to make sure that these voices are heard by both parties. “The role of a responsible investor is to foster a dialogue between the parties, suggesting new, convenient solutions for the city. At the same time we expect a flexible approach, faster decision making and most of all the completion of long-term plans to ensure the development of urban infrastructure. Such an approach will complement the projects carried out by the developers and this will benefit the city on many levels,” argues Rafał Mazurczak.

Spatial (dis)order

The first and the most important issue involved in the cooperation of municipalities and developers is the local law for specific areas on what can be developed there. It is not surprising that a great deal of doubt exists surrounding spatial planning. Investors point out that local zoning plans (or the lack of them) are the source of many of the obstacles in the way of the smooth implementation of projects. If we add to this the responsibilities resulting from the provisions of the construction law, among others, we end up in development hell, with projects being postponed indefinitely. Konstanty Strus, the owner of Przedsiębiorstwo Budowlane Konstanty Strus, characterises the current situation thusly: “The creation of new development projects is based on detailed plans, so when you embark on some enterprise you need to take into consideration not only the details included in them but also the individual regulations from other acts, which often contradict each other.” He cannot see anything wrong with local authorities and developers cooperating over the drawing up of local zoning plans. “We build the city and we usually know very well how to utilise the potential of a given location. But the authors of zoning studies and plans often interfere too much in the process with the provisions they set. This is particularly evident in small towns. In such areas local zoning plans are wishful thinking, because there is no chance for implementing a project in line with them in the foreseeable future. On the one hand, local authorities want to control the spatial order, but on the other they are eliminating the possibility of using a given area flexibly, by rejecting amendments submitted by developers,” complains Konstanty Strus. He also suggests a return to the so-called ‘general plans’ that functioned in Poland a dozen or so years ago. “They covered the entire area of a city and established the functions for specific areas. They were pro-developmental assumptions that included the most important issues faced by a future project,” he explains. However, the deputy mayor of Warsaw believes that no town or city in Poland needs plans for 100 pct of its area. “The preparation of plans at a push entails certain consequences. There is the obligation to take over areas needed for public infrastructure as municipal property, which is not necessary in many cases. Local zoning plans related to the development that is already being shaped today are a priority for us. Local zoning plans currently cover more than 34–35 pct of the area of the capital city. Urban planning procedures have already been launched for another 30 pct of the city’s area. We could pass plans for the entire area of the city, but this requires spending PLN 17–18 bln from the city’s budget to cover the cost of buying the areas for all the plans, including the roads. And I would like to remind you that PLN 17 bln amounts to Warsaw’s semi-annual budget,” claims deputy mayor Michał Olszewski. He also adds that developers sometimes operate better in areas that do not have zoning plans. Practice indeed confirms this, but there are two sides of the coin. “A project built on a plot without a valid plan takes longer than a typical investment process of around 2–3 years. Obtaining a site development conditions decision and an environmental decision requires an additional one and a half years. However, such an approach has some advantages. It enables the developer to participate in preparatory proceedings. It is then able to analyse a given area and its surroundings thoroughly, which helps to determine the investment possibilities, to draw up a business plan and to use the area more effectively than in the case of the requirements of a zoning plan,” claims Konstanty Strus.

All roads lead to the city

Today nobody can deny that the comfort levels of a city’s residents is of great importance for its development, attracting new projects and increasing their profitability. The expansion of companies from the BPO sector could serve as an example, as they value highly the quality of life offered by cities. Maintaining this at a suitable level is of key importance for city authorities. Michał Olszewski is of the opinion that making investors’ lives easier requires improving the living conditions of citizens. “The issue of residents’ comfort is starting to be more and more perceptible among investors. The higher the quality of life, the higher the profits – and the higher the profits, the higher the return on the investment,” explains the deputy mayor of Warsaw. One of the essential pieces in this jigsaw is the city’s infrastructure and public transport system. Contrary to appearances, in Poland these are not too bad. “We have witnessed significant progress towards the improvement of urban infrastructure. Cities have invested in the development of roads, particularly local ones. This is a source of joy for us, because our facilities are located in city centres and any improvement in the accessibility of our malls is of great significance,” says Leszek Sikora in praise of the current approach of local government. “For us the second line of the underground is particularly important. “It ‘frees up’ not only investment areas at each end of the line, but also in the centre. It also happens that sometimes the intensive development of areas, such as the Służewiec business district, is ahead of the possibilities for adjusting the current road layout and infrastructure for what it needs. The situation is completely different in the cases of the Wola and Praga districts – development projects are being carried out together with the construction of infrastructure in these locations and the second metro line will provide a huge impulse for the development of the entire area of eastern Wola,” remarks Michał Olszewski.

To live better

Edyta Wiwatowska, the president of the board of the Bydgoszcz Regional Development Agency stresses that the best way to improve the investment attractiveness of an area is through well thought out and well implemented infrastructure combined with a lively cultural and public offer. This greatly improves the quality of life of a city. So developers will also support initiatives that increase the local standard of living and that generate measurable economic benefits: a reduction in the unemployment rate by creating favourable conditions for new jobs, profiled education delivering qualified staff to the market, the creation of a cultural and entertainment offer, and the creation of public space that is resident-friendly.
“Education and infrastructure are of key importance. Long-term planning should be based on a vision for a city as a ‘creative area’ or a place where the inhabitants can and want to fulfil themselves professionally and have fertile conditions for doing so. This means that the location accommodates firms that want to employ them; and to provide them with comfort at work the urban surroundings have to give them a sense of freedom and a high quality of everyday life. Through their commercial projects developers can influence the surrounding area and the development of the neighbourhood of the project significantly,” remarks Rafał Mazurczak. In this regard, the head of the Polish branch of ECE Projektmanagement out points to a coincidence of interests. “A crucial part of this approach is formed by initiatives to facilitate a professional start for graduates of the local colleges and universities, supporting the development of local businesses, and creating a consumer base to which we and our tenants can target our offer in our centres. It is important for us that the local administration takes care of creating – particularly in regional cities – an environment that will be attractive in terms of the possibilities of professional development, particularly for young residents,” argues Leszek Sikora. Representatives of local authorities are aware of this, which is why they moving in this direction. “The improvement of the quality of life of certain social groups, which could be important from the point of view of the city, is important. We are starting a social housing project designed for people who have no chance of taking out a mortgage but are above the criteria for qualifying for council homes. The city has changed its strategy because it needs to change. In ten years we will have finished the road layout and we have to think about projects for improving the functioning of the city’s social dimension,” says Warsaw’s deputy mayor.

Who and for whom?

Most cities have now prepared special incentive programmes for investors. Some, such as Bydgoszcz, have set up special companies with a degree of independence from the city hall. “In Bydgoszcz there is a special body dedicated to servicing investors, which offers support in terms of the implementation of investment projects at all stages. Bydgoszcz Regional Development Agency provides comprehensive support for investors. The aim of the company’s operations is the further revival of the local market and creating favourable conditions for establishing new businesses as well as servicing existing entities, such as businesses and local government units, in terms of investment promotion,” declares Edyta Wiwatowska. In addition the city offers a number of investment incentives, such as tax relief in the local subzone of a special economic zone, tax exemptions on the properties of investors who create new jobs, the sourcing and training of the labour force with individual investors’ requirements in mind, and forming contacts with subcontractors/co-operators as well as the science sector to set up research and development projects. “Thanks to all this investment, Bydgoszcz has transformed its image from an industrial town to a location for new technologies and services. Its convenient location in terms of transport, well-educated graduates, thriving colleges and universities, developed business environment and broad range of investment offers constitute the basis for implementing a long-term strategy in terms of attracting new investment projects. These include the development of the Bydgoszcz Industry and Technology Park over an area of app. 280 ha, which offers attractive possibilities for companies from the metal, plastic processing, packaging production and logistics sectors,” claims Ewa Wiwatowska. The situation is the opposite in Warsaw – it is the developers who trying to win the city council over to their projects. “Developers have now reached such a level of maturity that it is rarely the case that a major investor exclusively wants to develop buildings. It is now much more often the case that developers are looking to add advantages to their projects, offering public solutions that would improve the functioning of a building or the aesthetics of the environment itself,” explains Michal Olszewski. He cites as an example a developer that wanted to refurbish neighbouring buildings to increase the aesthetical appeal of its own project. “The mature approach of developers is evident in such an approach. They have started to see that without public functions a facility will not necessarily generate the interest they had hoped for. And therefore it will not generate the revenue they wanted. So many are coming forward with designs that include public functions. Examples include the Centrum Praskie Koneser project, which will now have a Museum of Vodka, while Soho in Praga district has a theatre and Norblin has a bio-bazaar,” remarks the deputy mayor of Warsaw. ν