No small achievement

The participants of our roundtable discussion:

Bartosz Kozieł

co-founder, president of the board of Nuvalu Polska, which was established in 2008. A manager with many years of experience, responsible for coordinating and implementing processes related to the development of the company. Along with three other partners he supervises a 30-person team of specialists. Bartosz also supports the leasing processes, advising both tenants and landlords.

Agnieszka Mazurek

member of the board, NAI Estate Fellows. She has more than ten years of experience in handling transactions in the commercial real estate market. Agnieszka joined NAI Estate Fellows in 2011 and since September 2015 has been a member of the management board. She is now the director of the lease and market research department, which comprises nine professionals and supports projects throughout Poland. She co- ordinates the work of the team as well as regional offices in tenant and landlord representation in the fields of leasing and sales transactions.

Renata Osiecka

managing partner, Axi Immo. As managing partner at Axi Immo she is responsible for the activities of all the operational units in the company. Renata has over twenty years of experience on the commercial real estate market. Prior to this she was the director of the warehouse department for Western Poland at Panattoni Europe. She is a member of the RICS and is the SIOR European Chapter President.

Tatiana Spencer

partner, Aspenn Retail Partners. Tatiana has been a partner at Aspenn since 2011 – and is in charge of the company’s operating team and activities. Prior to this she worked as an agency director at King Sturge. For over four years she was responsible for the leasing of retail, office and warehouse properties while managing a team of 16 people. Previously she was employed by Jones Lang LaSalle for nine years.

Bartłomiej Zagrodnik

partner, president of the board, founder of Walter Herz. Bartłomiej coordinates and supervises the work of a team of advisors that provides services across the country and is responsible for key accounts. He is a member of the CCIM and RICS.

Anna Pakulniewicz, ‘Eurobuild CEE’: At the end of 2015, our annual roundtable discussion was on the challenges global consultancies face on today’s market. This time we have invited leading players in their field to talk about the increasing role of smaller, local real estate agencies.

Bartosz Kozieł, member of the board, Nuvalu Polska: To start with, I’d like to say that designating consultancies as either large or small is not the right way to look at this. In our view there is only one difference: the agencies you refer to as larger are corporate agencies, with foreign capital or operating under an international brand. In the other case we are talking about companies backed by Polish capital, such as those that we here represent. And this is actually the only difference. We are among the agencies that rented the most office space in 2016. So does the size criterion matter in this respect? Of course, ‘largeness’ entails corporate arrangements. Many clients tell us from the outset: “You’re cool, but someone in Berlin, London or Vienna told us that we have to cooperate with an actual corporation.” This is what the world is like.

Tatiana Spencer, partner, Aspenn: I think that larger agencies are called this because they bring many services together under one umbrella. We specialise in a field that is one of the departments of larger agencies. Comparing my company to the retail departments of any of the larger agencies, I can see that my agency is not any smaller. We work with the same amount of square metres and we have a comparable number of employees. We consider ourselves to be boutique agencies, which specialise in something definite or in two or three sectors rather than in all of them.

Renata Osiecka, managing partner, Axi Immo: I wonder if we should not call our sector ‘boutique agencies’ or ‘specialist agencies’, in order to emphasise the high standard of services we provide, including when it comes to the atypical projects that large chains often give up on. I would certainly avoid calling my agency ‘a smaller one’, considering that we are one of the leaders in the warehouse market in terms of the amount of the area leased.

Tatiana Spencer: I have already started calling my agency ‘a boutique agency’.

Agnieszka Mazurek, director of the leasing department, member of the board, NAI Estate Fellows: Now I am listening to what you are saying and I’m wondering what to call my agency and how to position ourselves because we are not corporate, but we operate under the logo of an international brand, even though our capital is 100 pct Polish. So we are something in-between. The client is mostly looking for the safest approach. If something bad happens during the moving in process, for example, if it turns out that it has begun too late and the client needs to have someone to pass the responsibility to and explain what went wrong... then if you choose a company that has leased a certain amount of square metres in the relevant rankings and has a corporate logo, then it is clear that you can say that you opted for the safest approach available, even though it might have not been the best one. So we have to continue convincing clients that we are a safe pair of hands. The second thing is that clients pay attention to rather prosaic things, such as the type of the insurance policy.

Bartosz Kozieł: We have had no problems in this area. We’ve had the same types of insurance as corporations for years and that excludes the valuation department, which has specific tasks and must have a policy worth GBP 10 mln. However, nobody has ever heard of the policy being used by anyone.

Bartłomiej Zagrodnik, partner, Walter Herz: The corporations in Poland, including those that took part in your previous debate, have been present in Poland for twenty years. But we can already see from our five-year perspective that we have no problem reaching one tenant or another, whether we fly out for a presentation to Frankfurt, Berlin or London. Polish companies are not about some John Doe, or rather, Jan Kowalski being the company’s head, who makes the decisions on his own. And this is actually the process we are currently undergoing. Not only on the agency market but also from the tenants’ side.

Renata Osiecka: Our market is simply less mature. The entrepreneurship emerged later. And the real estate sector is no exception – because if we look at the consultancy industry, companies such as Deloitte and E&Y have much more competition in the form of smaller consultancies. Things are similar in the case of law firms. I think that it is time for such companies to be set up. Many will certainly be established, but a lot will go under when the initial buzz wears off. As they will find out, consulting is hard work and you also have to have the right strategy and team in order to succeed.

Bartłomiej Zagrodnik: Strategy and a long-term action plan are extremely important because there are really quite a few boutique agencies and freelancers.

Bartosz Kozieł: I would slightly disagree with you, Renata, with regard to the fact that there are no significant Polish companies because Poland woke up too late. Polish companies have always been on the market. They were here earlier than the international companies. They were even bigger when the international ones entered.

Renata Osiecka: But they were mostly companies on the residential market.

Bartosz Kozieł: No, not only. I started working in this business in 2001. At that time corporations were smaller compared to companies such as Maxon, Unikat or Brochocki. They were huge. You only went to them. JLL, Colliers and Cushman & Wakefield were firms with just a few people working in the leasing department.

Tatiana Spencer: Clients, at least my clients, appreciate the fact that my partner and I have a slightly different approach than people in large corporations, where you have the boss shifting tasks onto employees. I am present at every meeting; I will answer every call and will deal with any problem. I have time I can devote to my clients. So far I have been able to choose who I want to start cooperating with for both parties to be satisfied.

To sum things up, what sets you apart from the larger agencies?

Tatiana Spencer: Our approach. It is more individual.

Renata Osiecka: Taking care of the client and being focused on long-term cooperation, supported by services designed for individual clients. We are also often quicker and more flexible in our operations because we are not burdened by corporate procedures and bureaucracy.

One of the companies that did not come to the debate explained that all its partners had meetings with important clients at this time.

Renata Osiecka: Yes, our companies are mostly busy with clients.

Bartosz Kozieł: It seems to me that looking for differences at a push and positioning us in some way is nothing other than simplistic way of categorising us as second league. And this is not our goal. As long as someone does not need a corporate advisor, or they do not have a closed list of service providers, we are the equals of international brands. We do the same as they do, only better. We have greater experience and there are more of us. We can close 60,000–70,000 sqm within a year; they have to do ten times more within the same period but still work with the same team. You could assume that we share the market in this way: they take the clients who want to rent 10,000 sqm and we take those who want to rent 1,000 sqm. However, the world is not so straightforward. We can see corporations scrapping it out even for leases of 500 sqm, because you can make good money out of every client these days.

Renata Osiecka: I can list a number of such situations from last year, where we rescued projects having acquired them from large agencies. This is quite common. Somebody in a corporation acquires a client, let’s say a large chain, and you do not have to fight for this client so a junior specialist is given responsibility for them. And such a client requires great knowledge and extremely precise service – they have high expectations. And then it turns out at an advanced stage that there have been procedural errors...

Bartłomiej Zagrodnik: Fundamental errors!

Tatiana Spencer: Unfortunately, this does happen. In the past we have taken over a number of projects where it was difficult to do anything more; but after a market review, it turned out that there still are some tenants. Not the tenants looking for a few hundred or a few thousand square metres but those that rent a few dozen square metres. And it also helps the client a great deal when it comes to filling the area of the shopping centre.

Agnieszka Mazurek: We attended a final presentation and were told that we were excellent and the client wanted to work with us. Finally we received a phone call and heard that it would not work out. However, we used that contact later. The client who called said that they could not do whatever it was with us, but we could do something else together. That is why I always tell my agents that whatever they do, even if they are small contracts and amounts of money, you have to remember that they might generate bigger ones later on. And this is the case we are experiencing right now. We are now dealing with orders for the leasing of regional offices for this client.

Renata Osiecka: I believe that if a client is an experienced person, who knows what they are doing, they are not afraid of the leasing process, it is not important which agency they choose – they choose the best service. On the other hand, if the person is not very empowered, they do not feel confident in the company, they often opt for precautionary measures, such as working with a larger corporation.

Agnieszka Mazurek: I have recently been asked the question, what is needed more to establish a company like mine: money or relations? I replied – just the relations, money is not needed. And that includes relationships between consultancies. If I know that I can improve my success by doing some project with another company, I never say no.

Bartosz Kozieł: We should mostly think about what to do to win more contracts for 5,000 sqm, 10,000 sqm and 20,000 sqm. The question is, how to change potential clients’ attitude towards us and how to change the market in order to be able to participate in such tenders with our heads up.

Renata Osiecka: I think that it might require some shared, well thought-out PR and an educational strategy.

Bartosz Kozieł: We are talking about information exchange. But this does not make sense. International companies scrap over each piece of information. Even the most insignificant. The market is not professional in any sense. Everyone is trying to steal each piece of information from each other, in any way possible. Whether these are national, international or local companies. Each item of information is precious.

Renata Osiecka: I agree that there is no trust in the business and this is unlikely to change any time soon, so there is no point starting a war over this. Trust in business develops through common projects and relations.

What is the migration like between corporations and your companies?

Tatiana Spencer: The people from corporations who come over to me have had a few or a dozen or so years of such experience and have had enough. On the other side of the coin, there are young people who still want to see what it is like to work for a corporation and so leave our company.

Renata Osiecka: It’s similar at our company.

Agnieszka Mazurek: Because they want to have a large figure on their contracts rather than a high commission.

Bartosz Kozieł: People are lazy. They prefer security, but not all of them. We have to find those who want to have the process in their hands, who know that the money is linked to the work they generate.

Agnieszka Mazurek: We call it ‘the gene’.

Renata Osiecka: Agencies like ours provide great opportunities to ambitious and enterprising people. Corporations cannot offer such conditions as an income dependent upon how much someone wants to work. If they are ambitious and have potential, we give them a chance because this is also in our interest.

Bartosz Kozieł: But there is a shortage of enterprising people...

Last year was a successful one, what will this year be like?

Renata Osiecka: It will also be great. The only clouds on the horizon are the problematic changes in the regulations for the real estate sector.

Bartosz Kozieł: We have nothing to worry about until 2019. The only thing that could immediately impact the market are changes in the law and salaries, which might lead the business service market to conclude that investing in Poland is no longer profitable. Then they will start looking for other markets and will choose a different place. The economic climate is the factor that drives the real estate market. This results in dozens of huge transactions every year.

Bartłomiej Zagrodnik: Companies are now looking not for their first or second location in Poland but third one. Then it is not about Gdańsk or Kraków but about Radom, Kielce, Opole or Bydgoszcz.

Bartosz Kozieł: Because they are mostly looking for a pool of labour.

Bartłomiej Zagrodnik: A corporation delivers two locations in a given city and nothing more, but it then turns out that five developers appear there because someone made money out of production and when they hear “another building is needed and will cost PLN 1 mln,” they say: “Fine – here you are.”

Agnieszka Mazurek: Some time ago we introduced a client to the market and we were looking for a location for a shared service centre. Everything was arranged and the contract had been signed. Suddenly someone asked why the company was opening an office in this city when it had offices in ten cities across Poland. The response was: because we were advised to by a consulting company. This was in the wake of the Tholons ranking of the one hundred best locations for outsourcing. An international corporation stated that this city was ideal and we were there to help them choose the office space.

Bartosz Kozieł: The business service market is also generating construction activity. Developers are starting to build large office parks. When a tenant comes along for 10,000 sqm or 20,000 sqm, they then plan to build 40,000 sqm. The remaining part is divided among smaller tenants. This is stimulating the market into a state of continuous construction. There is no point keeping the projects in the portfolio. There is no chance that the market will weaken, unless one of its main drivers is removed. And the more buildings there are, the greater the role of the advisor.

Renata Osiecka: If I could just bring up the industrial market, which has a shorter production cycle. We have a large preliminary contract. The list of developers willing to build was initially long but by the end of 2016 the number of interested parties had got much shorter. The so-called investor-end user is more cautious: they do not enter each project, they have a more defensive approach. For German investors Poland is no longer the country of first choice as it was the case only a year ago.

And what will happen after 2019?

Tatiana Spencer: From the point of view of an agency involved in the retail market, I think that the market will saturate at some point. There will be much more work on repositioning and recommercialisation.

Bartłomiej Zagrodnik: Forecasting beyond 2019 is like reading the tea leaves. The office market will be ruled by the BPO sector. There is a great drive to locate projects in Poland. Consulting companies such as E&Y, PwC will also bring tenants because it is a 40 mln inhabitant country in the middle of Europe, which has relatively good internal connections and a highly qualified labour force. The market will also look for investment opportunities. Identifying a good location will increasingly involve demolishing something, redevelopment or extension work. And this is the type of advice developers will be looking for from us.

Bartosz Kozieł: We have plenty of plots – this isn’t Manhattan.

Agnieszka Mazurek: You can add services and you can also redevelop or make changes.

Renata Osiecka: I would not worry about the product, as there is still a lot of dormant potential in Poland in terms of the commercial sector. Because of the lack of labour that was mentioned earlier, we will certainly be seeing shifts towards alternative locations, to smaller cities such as Kielce, Zielona Góra or Białystok. Such medium-sized towns represent an opportunity for business due to their high cost efficiency.

Bartosz Kozieł: The market is unlikely to be reduced to zero. There are many Polish companies that are expanding regardless of the international situation. There is also a lot of space available, with another few hundred thousand square metres now under construction. I hear from my colleagues in the investment department that there is an average of three interested parties for each building.

Agnieszka Mazurek: There are Polish companies that have a lot of money and nothing to do with it.

Renata Osiecka: Polish companies are looking for very opportunistic transactions. Rates of return of 5 or 6 pct are not enough for them.

Bartłomiej Zagrodnik: I don’t know what things are like in warehousing, but as far as offices are concerned, developers are clearly entering increasingly smaller towns.

Agnieszka Mazurek: One of our clients, a large developer, is planning to enter Kraków. The city is hermetic, everyone offers the same terms, nobody sticks their neck out, the commissions are the same and rents are the same, too. So a developer that operates on the Warsaw market might stir things up a bit in our second city if they went there.

Everything seems positive, then. But what problems might you be envisaging from the market or in your companies?

Tatiana Spencer: I believe that large agencies have better liquidity. If a department has problems, some other department can finance them. I have to be sure that my clients are solvent because nobody else can finance me.

Agnieszka Mazurek: We have the management in place to ensure the business generates a constant cash flow.

Renata Osiecka: As long as you have clients.

Agnieszka Mazurek: Precisely, there are companies that throw in a bonus in the form of a management contract for finding a tenant for 10,000 sqm, but there are companies that do not operate this way. They look for the service in itself, appreciating its crucial role in managing relations with the tenant. And as far as management contracts are concerned, the quality of the service is very important. It took us a few years to devise a good system for this product, but we have definitely the best system right now, better than any other consulting company.

Is there a sense in which the market creates the needs of the clients?

Agnieszka Mazurek: The eco-approach has become very popular and highly utilised. Advisors are currently focusing on the details, such as drinkers for birds and flower beds. These needs have recently been created for them by developers.

Bartosz Kozieł: In my opinion ecological certification makes no sense whatsoever. No aspect of the natural environment benefits from this, only the organisation. Of course, everyone wants to have a certificate, but in reality this is a trend created by two of the organisations that grant such certificates.

Bartłomiej Zagrodnik: As far as ‘created things’ are concerned, it is worth mentioning workplace solutions. These make sense provided they are well devised, otherwise instead of renting space measuring x amount of square metres the company has to rent one and a half times more. And functionally it will be three times worse anyway.

Bartosz Kozieł: In the majority of cases tenants have greater knowledge themselves. Thanks to their experience of the leasing process they can evaluate both the professionalism and our approach. The professionalisation of tenants provides an opportunity for us because they will indeed look at the services we offer, their quality and what we want to give them. On the other hand, the fact that large companies provide tenants with pointlessly voluminous amounts of information might be a problem. And such a tenant has so much knowledge at the beginning of the process that they decide to do it themselves.

Renata Osiecka: It has always been like that. I remember a situation from 2004: a client asked all the agencies to formulate a strategy for these processes – but in the end they carried out the project themselves. However, the client does not always win this way, even if it might seem to them that they do. As an agency we always have some aces up our sleeves.

In the previous debate the subject of market consolidation came up.

Bartosz Kozieł: We are in no danger of any consolidation because this takes place globally. Nobody knows where Poland is. Let’s take the top ten real estate companies in the world. The top seven includes giants from the US and Asia. The companies present in Poland are in the bottom five. The truth is that our market is relatively negligible. There are more offices in Seattle than in Poland as a whole. Consolidation has nothing to do with our market.

And what about the internal market?

Bartosz Kozieł: It’s no secret that we were in negotiations with a number of entities. But finally it turned out that apart from expanding their own chain, the support they could offer us was actually rather insubstantial...

Agnieszka Mazurek: But on the other hand, if we negotiate with a client or a tenant, we have NAI written on our business cards, so they recognise our logo because the chain is very strong in America. This is the basic added value for me.

Bartosz Kozieł: The question is what percentage of added business would this generate? 10 or 90?

Agnieszka Mazurek: It certainly isn’t 90. It is mostly the image aspect for me.

Bartosz Kozieł: So it is worth wondering whether 10 pct extra business justifies unifying with someone else’s identification?

Renata Osiecka: You also need to consider the fact that by opting to consolidate you give up on building your own brand, the value of which also grows over time.

Agnieszka Mazurek: We are currently at the stage of changing our brand. We have matured enough to introduce something new, but as far as the logo is concerned I cannot say that I will lose anything through doing it. I might gain more. The main issue is the value against the cost – and the cooperation between each branch of the chain. If a client of NAI in Chicago needs an office in Poland, NAI in Chicago approaches us.