Navigating through the turbulence

Small talk
Nikolay Ovchinnikov, a senior asset manager at LaSalle Investment Management tells us why his platform is still keen on investing in the CEE office market during the present economic and geo-political situation, the investor's recent successes with WiredScore ‘Platinum’ certification, and, in fact, why he's been so busy he needs a well-deserved Christmas break

Three of your portfolio’s buildings, one in Poland and two in the Czech Republic, have recently received WiredScore certification at the highest level of ‘Platinum’. This certificate is only just becoming popular in the CEE region. What significance does it have for you?

Nikolay Ovchinnikov, senior asset manager, LaSalle Investment Management: Securing this certification for our three assets in Poland and the Czech Republic is a significant milestone. With this accreditation, all of our office properties in the CEE region are now WiredScore ‘Platinum’ certified. This certificate recognises office buildings with best-in-class digital connectivity and demonstrates our commitment to providing tenants with high calibre, differentiated office space through an active asset management strategy. In the post-Covid world, digital connectivity – both the quality of internet and telephone connections – is crucial for tenants. That’s why we have ensured that this is factored into our plans.

What are the biggest challenges in asset management in these times of high inflation and high interest rates?

Such macroeconomic headwinds are continuing to have an impact on all sectors of the economy. I think it’s fair to say that real estate asset management is no exception to this. Our main challenge during these times is to maintain the quality of our buildings and services to our clients, which in turn rewards our investors with better asset performance. High-quality, well-located buildings such as the three we’ve mentioned – which are underpinned with good fundamentals and recognised for their sustainability attributes and infrastructure features – form a critical part of a balanced real estate portfolio that can mitigate adverse economic changes.

What conditions have to be met for the market to revive?

For investors looking to navigate the turbulence in the market, a balanced portfolio focused on good quality assets in strong markets remains crucial. For example, there’s great potential in cities like Warsaw and Prague that benefit from strong supply and demand dynamics when it comes to well-located buildings. At the same time, assets must fit the changing demands of office tenants. Their expectations have changed. The drive for superb digital connectivity, high quality space that can facilitate both in-person and virtual collaboration coupled with a sustainable footprint are all key attributes defining the current market. We are not in control of certain macroeconomic events. However, what we have seen in this environment is that best-in-class properties in great locations remain liquid and are performing well.

Could you try to forecast the state of the real estate market in the near future?

As I’ve mentioned, the real estate markets in Prague and Warsaw remain supported by relatively good demand from well-diversified pools of occupiers. We think this is only going to continue in the near future. According to our European Cities Growth Index (ECGI) 2023, Prague is in the midst of a jobs boom, especially in its tech sector, while Warsaw has been accelerating its dominance as a regional business hub. Combined with the increasingly limited property development supply given the challenging financial conditions, the income returns in both cities will prove resilient.

Do you have any new plans for the Polish market?

Poland has many characteristics that support a growth market, given its strong demographics, including its young and increasingly skilled, pool of labour, which insulates the country from the current challenging financial and economic market environment. Warsaw, for example, which is ranked in the top 20 European cities in our ECGI 2023, now closely rivals many large metropoles, such as Barcelona and Amsterdam. This is positively correlated with more high-skilled nationals returning home and Poland therefore benefitting from a ‘brain gain’. Warsaw’s economic growth in the next ten years (its GDP growth based on Oxford Economics forecasts) will exceed such cities as Berlin or Copenhagen.

How much time do you spend in the office? What do you think an ideal office should look like?

I’m in the office all week, except when I’m travelling. Being there enables better collaboration and productivity. I’d hate to miss out on all the unplanned-for encounters with colleagues, when some of our best ideas are born! Ideally, offices should be in strong, lively locations and should include modern amenities, such as co-working rooms, phone booths and space for colleagues to mingle. And, of course, they should be energy efficient and have access to building infrastructure, which remain key. But this is as true of offices as it is for other property types – and it will be those real estate investment managers that innovate to meet changing market demands that will continue to generate a competitive performance for investors.

What present would you most like to get this Christmas?

A break! I’m looking forward to a very restful Christmas and spending time with friends and family.

Interview: Anna Zamyłka