Smile, it’ll be better tomorrow!

The latest meeting of market experts in the longest-running and most prestigious series of annual CEE real estate conferences took place on December 12th in the historic Polonia Palace Hotel in Warsaw. Almost 200 people took part, who not only appreciated the content of the discussions but also the presence of some of the most important people working in the sector.

The conference began with a bang, or rather, a crash course in macroeconomics, providing a solid grounding for the discussions to follow, which were solely about the real estate market. The opening talk by Dr Artur Bartoszewica, an economist at the Warsaw School of Economics, sent a few tremors through the audience and was certainly more stimulating than even the strongest morning coffee. He detailed the economic outlook for Europe while at the same time highlighting the economic impact of political events during these particularly troubled times. “Politics is always a step ahead of the economics, so if we can’t understand or predict political decisions, we can’t hope to have any influence on the economics of our sector – and politicians, regardless of their views, always say the same thing. Those in power insist that everything is just fine, while those in opposition counter that everything is crumbling, whereas the truth is somewhere in between,” he argued.

Those attending were not given much time to absorb his words before the first panel discussion began, which, as always, was devoted to the investment market. “We are seeing less capital coming over from Western Europe onto the market, while more is originating from the CEE region. This is quite normal because in turbulent times investors prefer their home markets or those of their closest neighbours. At the moment, capital in Poland is scattered and the appropriate vehicles to bring it together don’t exist, so it’s been having relatively little impact and at most only allows for rental apartment acquisitions,” claimed Piotr Fijołek of Griffin Capital Partners. “The prospects for the investment market over 2024 seem much better, which is also partly due to the imminent release of EU funds from the National Reconstruction Plan, even though we not going to see the results of this until the end of the year,” pointed out Anna Tomaszewska of Capital Park. The members of the next panel were also optimistic during their discussion of the warehouse market. “In 2023, a new equilibrium was achieved, but how long things will remain stable is an open question. It wasn’t a tiny amount of space that we leased, but it wasn’t quite enough. One thing we can be certain of in 2024 is that CO2 will play the role of a hard currency,” opined Michał Białas of 7R.

All the economic uncertainty has also left its mark on the office sector, which was the topic of the next discussion panel. The office market has clearly slowed, but there are some signs that it could soon pick up. “We have seen a clear rise in enquiries for space, which is a clear signal that prosperity will soon return,” predicted Jarosław Wilk of PHN, who also added that due to rising fit-out costs there has been a drop in relocation enquiries and a tendency to downsize to smaller premises. The layout of offices has also been changing, with more space being taken up by flexible and environmental space. “Not so long ago, we delivered new offices to Amazon in Berlin, and for the entire 50,000 sqm there were only 50 parking spaces for cars but almost 700 for bicycles,” revealed Henryk Bilski of Strabag Real Estate. The retail market is also looking to the year ahead with some hopefulness, as became clear during the next panel discussion. “Obviously, there are problems with financing and the rising costs of construction, but these affect the entire sector. Established firms can cope with this and it’s only those that can’t control their costs and don’t know the business that are having problems. Good product is always successful, is easily leased and sells,” insisted Tomasz Szewczyk of Acteeum Group.

The panel during the next discussion, which was on the hospitality sector, also offered similar opinions. Hotels in Poland are seeing record occupancy rates, which is bound to tempt investors back to the sector. “We cannot expect the type of boom we saw before the Euro 2012 football championships, but I believe the sector will be supported by funds released from the National Reconstruction Plan – and just servicing the volume of investment will require bringing over experts from other countries, not to mention the armies of contractors commissioned with such projects,” said Alex Kloszewski of Hotel Professionals.

The Polish government’s 2 pct Safe Credit programme was intended to provide another boost for the residential market, even though its contribution to the current boom is somewhat contentious: the fact that demand has been massively outstripping the supply of new homes is probably more due to the current economic situation, as individual owners compete fiercely with PRS investors. “The PRS market is beginning to be more differentiated. There’s no longer just one model for developing rental apartment buildings. Overseas investors are keener to invest their capital in apartments in mixed-use projects as these are extremely attractive and built to ESG standards,” explained Anna Połeć of Arcadis.

There was a clear difference of opinion among those taking part on the construction sector panel. They complained about the number of orders, the slowdown in many sectors, and the price competition, which has resulted in bids being made that only just cover the costs of the contractor. However, on the other hand, the largest firms posted record results for 2023. “The disturbing thing is that there are growing levels of insolvency among smaller firms, which are still going through difficult times. Generally, though, we are optimistic about the future. The funds released from the National Reconstruction Plan will allow the sector to catch its breath, while the reduced number of commissions from sectors such as warehousing will be made up for by the rising number of orders from the residential sector,” pointed out Jakub Jędrys of Savills Poland.

The final speaker of the conference also provided a welcome dose of optimism for those attending. Katarzyna Nosal of KPMG presented the ‘2023 CEE Property Lending Barometer’ report, which gauged the mood of lenders when it comes to financing commercial real estate. Only 9 pct of surveyed banks were less interested in financing real estate projects than a year ago, while 19 pct stated that they were more willing to do so. According to the report, each year banks are placing more importance on investors that follow ESG guidelines.

After the official part of the conference was over, everyone met up for lunch in the Polonia Palace Hotel restaurant, where opinions and business cards (mainly the electronic sort) were readily exchanged. And wheels are already in motion for next year’s event, the 30th Annual Eurobuild CEE Commercial Real Estate Conference – so see you there!

Visit our gallery with photos from the event!