Adding some Alchemy

What’s the current stage of the Infinity office development in Wrocław – the joint venture project between Avestus and Alchemy?

Mariusz Frąckiewicz, the Poland director of Avestus Real Estate: We are already halfway through the construction phase – starting work on the fourth floor of the six-storey building and on the assembly of the ground-floor façade. We have a very reputable contractor in Eiffage Polska Budownictwo and so the project will be completed in Q2 2023.

This is also the first investment by Alchemy in Poland – in fact, outside your home country.

Gregory Sacks, the CEO of Alchemy Properties: Alchemy is a South African real estate developer that has been looking for opportunities further afield. Last year I came here on a fact-finding mission and met several investors, including Avestus – and we both certainly felt that we had a common approach to real estate investment. And at Alchemy we recognised the need to partner with a local developer with on-the-ground experience and knowledge of the local market. For this project we are more of an investor with Avestus being the main developer.

So why did you choose Poland for your first investment abroad?

GS: Well, over the last 25 years it has enjoyed sustained economic growth, which in our view is very impressive. This has been built upon a very hard working and well-educated population. In geographic terms, it is in the EU and its main trading partner is Germany. Thus, it provides very fertile ground for investment. The professionals we have been working with here are very open and friendly to foreign investors.

And why this particular project?

GS: We see this as part of a concept. We’ve had numerous curveballs thrown at us recently – Covid, the war, inflation and so on – so we’ve all had our share of challenges to face. But despite all that, this is a high-quality project of the highest standard in a very desirable location. We can still see lots of resilience in terms of the growth prospects on the Wrocław market.

MF: Our partners and tenants are of the same view, despite all these challenges. As the building emerges, they want to base their HQs here. We recently signed a 2,000 sqm contract with one and in the next few weeks Infinity should be significantly pre-leased.

Do these tenants and prospective tenants generally have a similar profile? And why are they so keen to lease office space in the age of home-working?

MF: Our tenants are large companies – often BSS and IT firms. But every company is having to redefine itself in this environment, in terms of how they adapt to the hybrid model. They don’t know what the future office is going to be like – whether they should be smaller with more open-spaces.

GS: Definitely. And there is no prescribed rule that applies to all industries. The approach in grappling with these issues has to be company-specific. But some have been making blanket statements that everyone will be working from home or coming into the office three days a week. So, this uncertainty has brought other aspects into focus, like ensuring that you have a flex office provider in your building. We are very close to finalising this with such an operator and this will give tenants the flexibility they need if they don’t know how much space they require before they commit. But they have to convince their staff that the office offers more than just a work station. It should be well-located with a range of amenities nearby. It should be modern, hi-tech and comfortable – features that they don’t have at home.

Is it in regional cities like Wrocław where the opportunities lie for such office developments at the moment?

MF: Warsaw might be fertile ground next year and then Gdańsk. But for Poland as an economy, regional markets are as important as the capital. They are all sustainable markets and international companies recognise this.

What about the current threats to the economy – the war, inflation and the prospect of a recession?

GS: It’s difficult to make any definite pronouncements about all this. Inflation is a worldwide problem and the central banks are dealing with it, so it’s out of our control. We’ve managed to contain most of the costs related to it and we think it will eventually pass. There is a new paradigm now with the war – it was a shock. But people have been factoring it into their considerations – it’s not a reason to avoid investing in Poland. In fact, there will be additional investment in building Poland’s defences, and so the economy will actually benefit from this. I also don’t expect there to be a technical recession. In South Africa over the last seven years, unlike in Poland, there has been zero or negligible economic growth, and yet the real estate sector there is still active. That’s why there’s no reason for pessimism in Poland. If you’ve got the right product, then you will succeed. And Infinity is definitely the right product.

MF: Our tenants are signing for 7 and 10 years, so they are not lacking in confidence either.

GS: The growth in Poland really has sustainable foundations – it is not built on a commodity, like oil, but on its skilled population and ideal geographic location. I think that in 20 years’ time, Poland is going to be a real economic powerhouse.

MF: In Poland, people tend to actually underestimate the potential of the economy, whereas international investors have a totally different perspective and can see all the advantages.

Interview: Nathan North