Facing down the big ‘C’

The conference was run from the Lidex studio in Warsaw’s Wawer district, while the panellists and everyone else taking part logged on from their own homes and offices (and other places). Sometimes, the intense discussions were interrupted by a coffee machine chuntering, the noise of drilling outside or people speaking in a neighbouring room, but this only injected some extra fun into the event and actually gave everyone a bit of a laugh. The main topic was that it would have been another fantastic year for the real estate market in Poland but for the ‘C’-word. How had the leading players on the market dealt with this unprecedented challenge? What state do companies now find themselves in? What’s the future of the sector? Such were the questions that cropped up repeatedly throughout the discussions.

Elżbieta Mączyńska, the chair of the Polish Economic Society, launched the conference with a presentation in which she assessed the impact of the economic pandemic and what that has meant for real estate sector as well as the factors that have been shaping the market this year and into the future. In her view there will be no return to ‘normality’ because, even before the pandemic, the economy was not normal. “The pandemic has acted like a magnifying glass, which has made the true state of the economy visible,” she said, before adding: “Many are treating the global pandemic as a typical black swan event – the idea that predictions are useless because unforeseen events will always occur, even though few people had thought such phenomena were possible. Since black swans cannot be predicted, there remains nothing else to do except wait for their arrival. Covid-19 has just given us a brutal lesson on this.” After this enthralling opening, it was time for the first discussion, which, as usual, was dedicated to the investment market. The panel, moderated by Marek Paczuski of Savills, wondered whether investment really has switched to standby mode for the time being. The pandemic might have shaken up the rankings for the most attractive market segments, but the end of the year figures for real estate are still going to come in at a reasonable level. All the panellists agreed that in these circumstances the warehouse market has been the clear winner – of the EUR 4 bln invested in Poland over the first three quarters of 2020, almost half (EUR 1.9 bln) went into the logistics sector. Last year offices were the clear leader. “Next year will be just as good for logistics, but also for retail parks and convenience centres,” forecasted Erik Drukker of BNP Paribas Real Estate. Following this, Wojciech Rumian (Hines) and Bartłomiej Kordeczka (Dentons) both predicted that the PRS sector would continue to grow in importance in the years ahead of us.

Those taking part in the next discussion panel, which was on the PRS market, also agreed. This time Przemysław Chimczak of ThinkCo was the moderator. It was pointed out that the falling number of foreign tourists has had a huge impact on the state of this market, as has the phenomenon of students studying from home. Roee Shamir of Aurec Capital Poland argued that the lack of students was just a temporary problem and that those investors who remain active in the market are not slowing down. Maximilian Mendel of JLL pointed out that tourists don’t stay in PRS accommodation and that smaller buildings also make up part of the market. As a result, this segment is in much better condition than others that have had to cope with foreign travel restrictions and drastically reduced tourism. “This is a market where the client always comes back,” said the JLL representative. The moderator then emphasised that the PRS market wasn't just apartments for rent but also co-living projects and student accommodation. Jan Trybulski of Griffin Real Estate chimed in that the PRS market was becoming ever-more diverse and even more attractive to investors.

Then it was time for coffee. But this year – quite unusually – everyone had to provide their own and, unfortunately, the face-to-face networking that should have accompanied the espressos was as a result sadly missed. After the break, it was the question-and-answer session, which many had been looking forward to. The special guest this year was Magdalena Kowalewska, the Poland country manager for operations of Immofinanz. The first question to kick off this part of the conference was whether Immofinanz believed itself to be a trend-setter on the real estate market. “Absolutely. We were the first to launch an office brand: MyHive. We were one of the first to introduce the position of community manager. We also have other brands, such as Stop Shop and Vivo,” she replied. When asked about her own shopping habits, whether she preferred to go to malls or shop online, she answered: “I have learnt what the benefits and drawbacks of online shopping are so I haven’t become addicted to it." At the moment she is making more purchases online, but still likes to shop in the traditional way. When asked about Immofinanz’s plans, she explained that the company intended to improve the operations of what it already has in the market, but it is also planning to introduce a new co-working service. When asked about her favourite projects developed by her competitors, she listed the Cosmopolitan office building in Warsaw as well as several of the developments around Rondo Daszyńskiego. Finally, when the question was put to her if she liked working from home, she replied: “Of course! But only when it has additional advantages. But I very much enjoy meeting with my colleagues face-to-face and brainstorming with them.”

The next session was about the shake-up to the tax law and how this is set to impact the real estate sector. Legal advisor Justyna Bauta-Szostak, a partner at MDDP, outlined the changes that are to come into force over 2021 and 2022 – the increased tax burden for real estate companies, registering limited partnerships as income tax payers, the restrictions on writing off losses against tax, as well as the lowering of depreciation rates. She went on to reveal that soon the taxman would be turning his attention to an even wider range of transactions and also provided us with the new legal definition of what a real estate company is. She then added that the range of freelance professions was being widened by the inclusion of such positions as architect and building engineer.

Next, it was time to take a look at the office market in a panel moderated by Jakub Sylwestrowicz of JLL. All the participants were able to agree the Covid crisis has yet to halt the boom in the regional office market and that coworking centres and serviced offices are still popping up like mushrooms after the rain. However, there was also a lot of talk about pre-lease renegotiations, since many tenants have had to review their future expansion plans. The moderator then drew our attention to the fact that according to JLL’s figures, almost 907,000 sqm was leased between January and September this year and that in the third quarter alone the total came to almost 240,000 sqm, with 113,000 sqm of that figure having been transacted in Warsaw and 126,000 sqm in the regions. Peter Chatfield of Vastint stressed that investors are now turning their attention to the regions. “The circumstances right now are forcing investors to cut costs by around 20–30 pct, but I’m convinced that the Polish economy remains strong, so despite everything I’m optimistic,” he said. Then it was the turn of Marcin Sojda of New Work to make the point that people are increasingly embracing the sharing economy, which has resulted in the seemingly unstoppable rise of such services as Airbnb and Uber, as well as of flexible and coworking offices. And tenants need to ensure that their leases are flexible. “The disruption to the market has exposed the fact that tenants have new requirements, but a flexible approach to leasing should allow win-win situations to be reached,” explained Kamil Krępa of TDJ. When asked about the changes in their clients’ style of work, the panellists highlighted the growing popularity of webinars and other forms of online meetings, including virtual tours of properties. The office market will survive: it’s moving more in the direction of flexible solutions and coworking, but it should weather the storm –was the general consensus.

But what about the hospitality segment, which has been pushed to the very brink by the restrictions on tourism and the reduced business travel? The hotel panel moderated by Alex Kloszewski of Hotel Professionals Management Group considered how both hotel owners and developers have been keeping afloat during these trying times as well as the extent to which investor enthusiasm has been extinguished. Ireneusz Węgłowski, the president of the Chamber of Commerce of the Polish Hotel Industry (IGHP), admitted that the banks right now do not consider hotels to be a sound investment. This was partly due to occupancy rates being low even during the summer holiday period when tourists were allowed to travel under the government’s health and safety recommendations. He also appealed for more government aid for the sector, to stave off the threat of wide scale bankruptcies. Małgorzata Broniarek of Polski Holding Hotelowy went as far as saying that even the larger chains needed help. “In such a situation dialogue between hotel owners and their operators is absolutely necessary,” argued Adam Konieczny of the Louvre Hotels Group. “The MICE sector is now faced with a huge challenge as it is so intimately connected with the hotel industry,” emphasised Ireneusz Węgłowski.

Finally, for dessert (and maybe to sweeten things up after the gloominess of the hotel discussion), the next panel was devoted to the warehousing sector, which has recently been promoted to the Premier League – if it hasn’t even already won the Champions League itself. Tom Listowski of Cresa Polska moderated the discussion and the panel considered whether the warehousing boom created by the rise of e-commerce was likely to continue. “The situation is slowly settling down and all the cards are held by retail and e-commerce tenants,” insisted Marek Dobrzycki of Panattoni Europe. Jarosław Czechowicz of GLP interjected that he should have added tenants from the pharmaceutical industry to that list. “And more often tenants have been asking for short term leases of a few months to a year,” he added. Then Waldemar Witczak of Segro added that despite Covid-19, tenants are more focused on environmental issues and about the latest proptech developments.

Running through all the discussions there was a definite mood of cautious optimism, which probably shows that the investment market in Poland has solid fundamentals, which Covid-19 might have shaken but certainly cannot topple. Although many projects have been put on hold, and others have been scaled back, it looks as though the situation will gradually return to normal.

We would like to thank all those who took part as well as the sponsors, without whom it wouldn’t have been possible for the Eurobuild Investment Conference to move into its second quarter-century. We hope that future conferences will once again be held in the real world and that you will remain with us for the next 25 years.