The Ideal family businessFeature
Tomasz Cudowski, ‘Eurobuild CEE’: To be perfectly honest, things aren’t so good at the moment in the market in which you operate. The demand for new warehouse space in the first half of the year slumped again by 37 pct y-o-y – down by 18 pct on the H1 five-year average. Has this trend been evident in Ideal Idea’s results?
Andrzej Dużyński, the CEO of Ideal Idea: Well, I honestly can’t see any evidence of this trend in our own projects. We’ve had no problems with leasing out space, most of which we find tenants for before the occupancy permit has even been granted – and we’re not building big boxes but SBU projects, which in theory should be harder to lease.
Who generally leases from you? What kind of company is your typical tenant?
SBUs are mainly built for small and medium companies with a global reach. To make that point a bit clearly, it’s not Coca-Cola who’s going to lease from us but their business partners and distributors. SBU tenants have completely different demands, which we try to meet, such as when it comes to the standard of the office space. Not only does this resemble standard class A office space, with elegant façades, extensive internal glazing and modern installations, but offices also make up a greater proportion of the total area in the centre – usually more than 20 pct, whereas with big boxes offices make up on average 7 pct. We also try to make every tenant feel easy and at home so that they don’t have to meet people from other companies in the kitchens or reception areas. We build business parks that are user-friendly in scale rather than vast impersonal warehouse complexes.
At Ideal Idea, you not only own your developments but you also manage them. Does doing everything in-house pay off?
Yes, of course. Owner-management is very effective because you can concentrate more on quality and have much greater control over your costs. Also, decisions are much quicker when it comes to such things as the upkeep, renovations and adapting the space to meet the needs of a particular client, since this doesn’t require permission from some central office on the other side of the world. This is what our tenants appreciate, which has been confirmed, for example, by us winning the Warehouse Manager of the Year title at last year’s Eurobuild Awards. Not having tenants that can sometimes be difficult, such as grocery chains and hauliers, is for us a big advantage because their operations aren’t going to disturb other tenants or local residents due to there being fleets of trucks and dozens of docks just outside their windows.
Are you not sometimes tempted just to exit from some of your developments?
I am, in fact, able to resist this temptation. We are developing in the Warsaw and Wrocław areas and we’re not planning any disposals for Warsaw. As for Lower Silesia, where we currently have 40,000 sqm gla, we haven’t ruled this out for the future. Right now, we have no plans to expand to other cities, because we believe that a local market has to mature before you can build SBU projects. Besides, we would have to build up our organisation significantly if we wanted to manage centres across many different regions, which is something we would like to avoid.
From what I’ve heard, you’re planning to add what is going to be the largest SBU centre in Poland to your portfolio in Warsaw. Although I probably already know the answer to this question, is the city’s transport infrastructure ready for such a project?
Yes, you’ve broached a rather difficult topic. Let’s just say that we are not great fans of everything the Warsaw authorities are doing. Even though trying to move traffic out of the city centre might be a worthy goal, they don’t understand that reducing the volume of roads (which is being done on a significant scale, but only in certain places) isn’t going to reduce the harm that cars do to the environment – and in some ways will only increase it. For example, when you reduce the capacity of certain streets, you immediately end up with traffic jams in neighbouring areas. I understand that the intention behind this is to encourage local people to use public transport, but you can’t force the entire city to use bicycles and scooters. SBU centres are in a good situation anyway, because they are on the outskirts of cities, so employees don’t have problems with commuting to work. But for many of Warsaw’s outer districts, there’s no other way to travel than by car and the journey takes forever. Cycling is no alternative to this, because narrow and crowded roads are very dangerous for cyclists. I think urban planners still have a lot to do in Poland and they really shouldn’t start this by restricting motor traffic.
What are the biggest challenges that now face investors in the SBU sector – including when it comes to the financing of projects?
This may or may not surprise you, but Ideal Idea actually doesn’t have any financing issues. We basically invest our own capital into our projects and only rely on loans to a small extent. But there are two factors that could limit our expansion. The first is the difficulty of acquiring land in good locations. In the outskirts of cities, we have to compete with many other industries, including those with greater turnovers and larger budgets. The other main obstacle we have to face are the formalities, which I would say are multi-faceted due to the administrative decisions required. I’m mainly talking about the issuing of environmental decisions, which in Warsaw can take around a year, as well as the process for issuing building permits. Civil servants sometimes make absurd decisions and these can differ from district to district. For example, in one particular district of Warsaw we wanted to build on land between two existing warehouses where there was no spatial plan. The problem that we couldn’t resolve was that there was a residential building nearby that for many years had been derelict and had fallen into disrepair due to the rising noise levels. It turned out that we couldn’t build a warehouse next to it, even though there were already a number of them operating there quite normally, because this would have disturbed the lives of the residents – even though there weren’t any residents. We even offered to build sound barriers around the warehouse, but the authorities refused to grant permission. I really hope that the introduction of general land management and integrated investment plans will eliminate such absurdities. Similar plans have been successfully introduced in Western countries to ensure that residential and industrial areas remain separated so that there’s no friction between them.
How much truth is there in the saying that your own warehouse always gets built the quickest?
Not much, unfortunately. The construction of the building itself is relatively quick, but the entire investment process takes between three and three and a half years – and if you can be certain about anything in Poland, it’s that the laws that are in force at the beginning of a project are going to be totally different when it’s completed. And this is not just true of the government leaving office right now. This back and forth with legal and tax regulations has been a feature of virtually every administration since 1989. I think that this instability has actually scared off many international investors who would love to come to Poland because the country is still booming, it has many advantages over others in the region, and also has the potential for further growth. And this will remain true for many years to come. They prefer, however, to invest in Western Europe or in our neighbour, the Czech Republic, where the tax system has not changed for many years and as a result is more predictable and investor-friendly.
Do you think Poland now has the chance to become a huge logistics hub connecting both Eastern and Western Europe – once, of course, the war in Ukraine ends?
In this regard, we have an excellent location in Europe, probably one of the best, but I would say this is rather more the case with our neighbours with stable economies, such as Germany and the Czech Republic as well as the Scandinavian countries. Our Western neighbours have been economic powers for a long time, while our neighbours to the south are doing better and better. They have already caught up to us when it comes to per capita GDP and purchasing power. I hope that the new Polish government that is currently waiting in the wings will correct many of the mistakes of the recent past and improve the economic climate so that businesses will finally stop being treated like criminal enterprises and Poland can once again move closer to Europe. Only then we will be able to feel more relaxed about the future.
You run your business together with your son. Did he need any convincing to follow in his father’s footsteps?
Jędrek obtained excellent degrees in communications and marketing from universities in the UK and the US, and when I first suggested that he joined Ideal Idea, he jumped at the chance. But I don’t think he liked it at first, because he soon left. But a while later he asked me if he could come back to the company, which of course made me very happy. Jędrek has been working in leasing for the last six years and he’s very good at it. And we work extremely well together. It’s a fantastic and unique experience to be able to work with your own child, especially when they have grown up. It’s a whole different level to when you’re passing on your experience to a teenager.
This brings me to my final question. Are you now thinking about handing over the reins to him?
To be honest, any parent would like their own child to inherit their company, but I don’t think too much about this. It will eventually be my son’s decision alone – he’s going to do what he wants to do, so it’s always possible that he’ll find another way to make a living. Every parent above all wants their child to be happy in their life and work – to get out of bed every morning wanting to go to work with a sense of joy and satisfaction. I’ve had a number of my own businesses in my life. After I graduated from the Warsaw University of Technology, I worked as a mechanic at a Fiat service centre. After that, I set up an authorised Peugeot service centre, and then opened an injection mould factory and later a plastics factory. It was for this last company that I had to build a warehouse – and that’s how I found myself working in the warehousing sector. Maybe it was all a bit accidental. but I’m proud of my business achievements and I hope Jędrek will one day also be proud of his.