The spirit of the age

Zeitgeist has just begun work on a development between the streets of ul. Nowogrodzka, ul. Św. Barbary and ul. Poznańska in Warsaw. Can you tell us what kind of project it is and what makes it so exceptional?

Maximilian Mendel, Poland managing director, Zeitgeist AM: One thing about it is that it takes up such a huge area. It covers a 1 ha site right in the middle of the city. In other Polish cities, such plots are simply unavailable. Furthermore, the buildings there have a history. We want to preserve the unique character of this place through the creation of a mixed-use project that will mainly comprise offices and apartments, the first of which will be in a townhouse at ul. Św. Barbary 6/8 and should be ready in 2024. We’re also thinking about locating a hotel there. At the moment, this is just an internal discussion, but we have also started talking with the city.

What’s the most important thing to ensure when launching such an urban renewal project?

Our main ambition for this project is to open it up to the people of the city, which is why we have established our Podwórko Project, which includes a kind of social forum where people can meet and voice their opinions about the renovation of the courtyard or the kind of purpose it should serve. We want to open up this place, which was once only accessible to Orange employees and prior to that only to civil servants working in the city’s telecommunications and telegraph department. We want to make it possible to hold cultural events there with space for recreation and entertainment. When you develop such projects, you have to take on board the opinions of the local residents as well as those of the building conservation department and the city authorities. So it’s quite a delicate process.

What else is Zeitgeist doing? Are you developing anything in any other sectors?

We are currently working on quite a few other renovation projects, including on a townhouse on ul. Wrzesińska in Warsaw, and our plans in the near future include the renovation of the central post office building in Kraków. And we are developing private student halls – for example, work is already well advanced in Warsaw’s Solec district, where we are building our flagship project. Our subsidiary Zeitraum is responsible for student hall and serviced apartment projects. These serviced apartments fill the gap between long-term rentals and staying in hotels with the option of living there for less than a year. When you have to move to another city for a short period, for example, due to professional commitments lasting several months, you really can’t be renting or staying in a hotel. The first option usually requires a contract of at least a year, while booking a hotel room is usually too expensive. Projects that offer mid-term rental periods are a niche market that still hasn’t been filled in Poland and we have already successfully developed similar projects in the Czech Republic. The home elements, such as kitchens, make it easier to live normally, while the rents are competitive in comparison to hotels. Long-term rental apartments, or PRS flats, as well as short and mid-term serviced apartments and student accommodation, form the basis of what we offer for the living sector.

How do you see the prospects for the PRS sector in Poland?

When it comes to the demand, the future is certain. It’s true that since the 90s the default decision has been to buy an apartment. This has been a much stronger trend than in Germany or Switzerland, which is due to their history and their own particular conditions. Poles need more flexible accommodation solutions. It would be good if the rental market accounted for 15 pct or even 30 pct of the entire sector, with such comfort available for every size of wallet. This is something we certainly cannot count on in the near future. It should be pointed out that the commercial market is not going to cater to every need and government regulation is required. In the meantime, the accommodation product being brought to the market, including in such niches as student and senior housing, is still just a drop in the ocean when it comes to the need for this. Most rental accommodation is still privately-owned and this means less stable terms and lower levels of partnership. In my opinion, new stock from institutional investors has the chance to make the sector more civilised.

What’s going to be the biggest challenge for investors like you over the next two years?

Over the last few years, we have had to contend with quite a few serious global shake-ups, such as the pandemic and the outbreak of war in Ukraine and the Middle East. The price of raw materials has shot up while the costs of construction and financing as well as the price of land have also risen. Operational costs, such as for utilities, taxes and usufructs, are not also not going down. It’s very important not to overinvest at the beginning, so it is worth being cautious right now, examining the situation and not taking any rash decisions. We at Zeitgeist prefer to take a long-term approach, so we try to look ten years or more ahead. The market certainly has to calm down a bit before we can act with any great gusto. It’s also hard to see right now how the change in government is going to affect home buyers, both private and institutional. It’s a widely-held belief in the industry that the rental sector has a lot of potential and, even though it has yet to become the best environment, you can nevertheless still find some interesting bargains.

Interview: Julia Cudowska