A centre of monumental progress

Regional markets
At the recent Expo Real fair, the latest mixed-use project involving the reconstruction of a historic building in Łódź was unveiled: Magazyn Bawełny is to form part the Manufaktura complex. Meanwhile, Off Piotrkowska has been operating in the former Ramisch cotton mill for several years. and now the former Monopol Wódczany distillery, reborn as the Monopolis centre, is taking in tenants, while Fuzja continues to grow on the site of the Scheibler factory. Who can afford to carry out these costly renovation projects – and do they actually pay off?

In the ‘Emerging Europe Business Perception Index for 2021’, Łódź was rated as the most business-friendly city in the entire CEE region. There can be little doubt that its educational institutions have played a large part in this. Tens of thousands of students attend 18 colleges in the city and almost a third of these are studying engineering, IT and economics and finance. Among the companies that have set up in Łódź, there are many that can count on access to qualified personnel who have no intention of leaving the city once they leave university. “Łódź is a place that, although firmly grounded in its industrial past, is growing rapidly and is exceptionally open. Probably no other former industrial city in Poland has done so much to restore its old buildings to their former glory. At the same time, there are still huge expanses of the city that have yet to be developed and we want to play our part in that,” explains Maciej Michalec, the CEO of Okam. “We have already transformed some of the site of the former Józef John iron foundry, where we have opened the Strefa Piotrkowska 217 culture and recreation centre, and we have converted the former Teodor Meyerhoff cotton mill into the Łódź.Work office centre,” he adds.

Anna Wdowiak, the director of the retail leasing department at JLL, points out that “tenants and visitors appreciate revitalisation projects for the way they combine many uses through the use of historic space that echoes the spirit of past eras, and by the way they combine utility with authenticity. Łódź could doubtlessly be a model for other cities, thus proving that it is not only in Poland’s capital but also its regional cities that such projects can be taken on and embraced by the citizenry. All the more so when the technical standards applied in such projects are those that comply with the latest trends.” As Filip Kowalski, a negotiator in the tenant representation department at Knight Frank, recently argued: “Łódź wants to maintain its unique architecture and at the same time give it a new perspective following the launch of its Łódź City Development Strategy 2030+. From talking with the tenants who we advise on the choice of premises, we can see that they are very aware of the city’s potential and want to make maximum use of it.”

Focusing on flex

According to the Polish Chamber of Commercial Real Estate, the third biggest volume of new office stock in the history of Łódź was delivered in the second quarter of this year (18,800 sqm), although the vacancy rate was the highest in the country over the same period (18.6 pct). At the end of June 2022, the city’s total office stock came in at just under 630,000 sqm. Coworking and flexible office space has proven to be extremely popular in Poland – and Łódź has been eager to profit from this boom. Just this year, Warimpex subsidiary Memos opened two coworking centres in the city – Ogrodowa 8 Office and Red Tower Cowork. In addition to this, New Work, following its opening in the Imagine centre, has leased another 5,000 sqm in Hi Piotrkowska. Along with the flex space, the centre will also offer conference facilities. The first wave of the pandemic, however, put the brakes on this trend to some extent, but it didn’t take long for the flex office market to blossom once again and it continues to grow today. Large corporations as well as medium-sized companies and start-ups from all economic sectors are interested in offices as a service. “The companies that run their operations from Łódź.Work include those from the energy, paper, and cosmetic medicine segments,” reveals Maciej Michalec of Okam. “Office leasing did slow down due to the pandemic, but despite it, Łódź has nevertheless been having a good run over this time and has secured new investors – the likes of Wella, Docaposte, Godel Technologies, Marel, iTechArt and Avient Corporation – and the market has been backed up by many other well-known companies that have been operating in the city for many years, such as ABB, Fujitsu, Nordea, Clariant, Infosys and Harman,” emphasises Karol Patynowski, the director of office agency and client representation at JLL.

Warehousing on the way up

The Central Poland region as a whole is the third largest warehouse market in the country, and it could hardly be said to have been idle in recent months. According to Colliers, at the end of the first half of the year the Łódź region was among the top three in Poland in terms of stock (3.8 mln sqm) as well as for new supply (up by 353,100 sqm). Over the period, 469,900 sqm of warehouse space was leased – the third highest figure for any region in the country. The current economic and geopolitical disruption therefore appear to have had little effect on investor confidence in this sector of the city’s economy.

“A wide spectrum of sectors are interested in locating their warehouse facilities in Łódź, including e-commerce companies, such as Media Expert, and production companies like Ziehl-Abegg, which has taken up 17,000 sqm of warehouse space in Prologis Park Łódź. In such Central Poland locations as Kutno, Zgierz and the north east of Łódź (Rzgów, Wola Rakowa and their surroundings) due to the junction of the S8 expressway with the A1 motorway,” points out Paulina Dziubińska, a senior director of the warehouse leasing department at JLL. She also adds that the slowdown in the market related to the disruption to supply chains and the general economic situation is no longer a cause for concern. “After the huge increase in the number of enquiries from Ukrainians looking to relocate their businesses to Poland, the situation has now normalised. There are still enquiries, but no longer quite so many. Currently, we are receiving them mainly from small and medium-sized businesses that would prefer not to relocate here unless it’s absolutely necessary. We’re also seeing increased interest in contracts being renegotiated due to the desire to secure costs and run stable businesses. Tenants understand that in uncertain times holding discussions early can prove to be an advantage at this stage, especially when you consider that frequent relocations can result in higher costs and other challenges, such as having to recruit new staff or problems with the building’s specifications or location,” she adds.

Everything on your doorstep

The residential market in Poland has some challenges ahead of it, as can already be seen in the reduced number of apartments and projects being put up for sale. Łódź also hasn’t been able to escape the effects of the slowdown in this sector. According to Colliers, at the end of H1 2022 developers in Łódź saw a 25 pct drop in sales on a quarterly basis. It’s hard to see this trend being reversed any time soon, due to buyers having reduced means, the increasing material, utility and construction prices, as well as the looming prospect of a recession. But in such an environment, what could encourage potential buyers to sign on the dotted line are apartments combined with offices and services in the same neighbourhood – that is, the increasingly trendy notion of the fifteen-minute city, which is very much in evidence in Łódź. “Just next to Piotrkowska 217, we are developing our first apartment project in Łódź – Strefa Progress. In this case, we are being guided by the idea of functionality to create facilities and environmental solutions for residents. The project will also fulfil the social need, which has been made more pressing by Covid-19, to be able to do all your daily tasks in a single neighbourhood,” claims Maciej Michalec of Okam.

Another developer carrying out residential projects in the city is King Cross, which in September began work on the Flora Śródmieście apartment block. The first-floor frontage of the building will feature quotations from the quintessential Łódź novel ‘The Promised Land’ by Władysław Reymont. OPG Property Professionals has paid its own tribute to the city’s history with its Art Modern project, which involves the reconstruction of a 19th century power station in the ul. Wróblewskiego and ul. Skrzywana quarter. And the city itself has played a significant role in raising the quality of life for residents of its existing buildings. Townhouse renovations are not only pleasing to the eye, but are also safer, warmer and more functional. On ul. Włókiennicz, work is underway to renovate 13 tenement buildings that house more than 150 families. These are also to include care facilities and art studios.

Setting an example

Renovation projects are currently underway in many Polish cities and it seems that some of the investors behind them have been inspired by projects in Łódź, while local authorities are also coming around to the importance of such revitalisations. This approach is becoming embedded in architectural and urban trends and has been given a further boost by the fashion for ESG. And restoring to life historic buildings is not only a worthy idea, but one that turns out to be profitable.

“The post-industrial atmosphere of Łódź has now become its hallmark, but tenants are often looking for similar projects in other cities where their preferences cannot always be catered for,” admits Karol Patynowski of JLL. Anna Wdowiak is of a similar opinion: “We have seen a great deal of interest from investors from smaller cities that still don’t have such projects, but they do have former industrial sites that could be given new life,” she points out. It is therefore probably inevitable that the boom in renovating post-industrial properties will continue to spread to other communities as it is embraced by tenants, investors local authorities. If this happens, Łódź will serve as a template that will be copied for decades to come.