Cautiously opportunistic

Beata Kokeli, head of asset management and Poland country manager, TriGranit: Yes, we are, we are starting the development of building H (with app. 10,000 sqm gla and 209 parking spaces) in the Bonarka for Business (B4B) office complex in Kraków. This will extend the B4B business park to 75,000 sqm. Hamer Polsk has begun the ground work on the eighth office building in B4B. We’re currently selecting the subcontractors for the construction work. We expect that it will start at the beginning of 2018 with the centre to be put into operation in Q2 2019. We’ve also been granted a building permit for two other developments: Millenium Garden in Budapest and Lakeside Park in Bratislava. We’re currently holding a tender for the contractor in Budapest, so I hope we will also be starting the construction work there at the beginning of 2018. Bratislava will probably start in April. Admittedly, we do not normally build speculatively, but we are currently in very advanced negotiations so we decided to start the construction work. For the Budapest project, we’re even hoping to lease the entire building (37,000 sqm) to a single tenant. The building has even reached the final selection stage. As for building H in Kraków we haven’t had to work too hard on its commercialisation, either. We have had a huge response from our current tenants, which are continuing to develop and want to extend their offices. Bratislava is more difficult because it is quite a shallow market.

The tenants of B4B are mostly firms from the BPO/SSC sector, but analysts are saying that Kraków’s outsourcing market has been slowly shrinking...

It’s true that many tenants in Kraków come from the BPO and SCC sectors and that this source of demand has been drying up. This is why we decided to revive our office development project in Katowice. We have some land over there, near Silesia City Center, a shopping centre that was developed by TriGranit. The plot is just off ul. Chorzowska and we are planning to start construction work on two office buildings in 2018. We have the building permits to construct them. A number of years have passed and the needs of the market have changed, so we are reconsidering the height of the project and discussing the requirements of tenants from the BPO/SSC sector (such as car parks and cycle paths). We are also negotiating with the city so we can design the project according to the needs of the local community as well as those of the city authorities. I think that a number of final decisions are to be made over the next few weeks. The shopping centre is a major asset there, because it’s just on its doorstep. The centre offers a broad range of services and gives us a significant competitive advantage, which our tenants appreciate.

And is TriGranit planning to invest in offices outside these two cities?

We are targeting one other city – Łódź, and I hope I will soon be able to tell you something more. We want to maintain our presence in Kraków – and we’ve started preparations to construct buildings I and J, while leaving the smallest building, K, for the very end. We have started looking again at Warsaw and we’ve been analysing one potential project.

But have you already been buying any of the necessary plots?

Our strategy – and that of our owner – is first to do the market research to see how projects would fare. And that’s just what we’ve just done – we’ve done the research for many potential projects, about 100, in fact. 2018 will be the year for launching the projects. As well as in Poland we’re looking at developing two projects in Romania and two in Budapest.

And there are still warehouses and hotels...

The warehouse market is probably the only one we’re not interested in, but the hotel sector – and hostels to be precise – is something else. Our owner, TPG, has quite a wide range of operations and allows us to follow many development directions. If the project came up that would generate the desired returns, approval will be given.

I’ve heard that TriGranit is also planning purchases...

We’re currently negotiating a number of acquisitions. One very advanced transaction in Budapest, which was typically opportunistic, fell through, even though I believe it had significant potential. It was an ideal property for working on to raise its value. This shows that after a few years in the doldrums the Hungarian market has now shaken off its lethargy, as the retail data grows at a rate in the double-digits. We’re still looking for opportunistic projects there, the value of which could be considerably enhanced before exiting them after a specified period. We are also looking at the Czech Republic and Poland. Because cap rates have compressed considerably and returned to their pre-crisis levels. Things have become expensive, so we’ve started looking at other markets such as Sofia, which we quite like. Romania is a slightly overheated market, but we’re looking there too. After all, it’s an incredible market when you look at the growth there. And Romanians love to dress up. The fashion retail turnover is three or four times higher compared to the same tenants in Poland. One chain has sales of more than EUR 12,000 per sqm per year. That’s why we’re looking into the possibilities, but we’re cautious because it’s already a saturated market. We’re looking at two projects with over 100,000 sqm gla of office and retail space. Coming back to Bulgaria: this is a small market. There are perhaps two cities other than Sofia, but you can also try to invest in different formats, such as retail parks.