Bringing new soul to forgotten locations
Maciej Dyjas, Co-Managing Partner and Co-CEO, Griffin Real Estate, reveals plans for the ambitious retail scheme at the heart of Warsaw’s Wola district, and explains how the company balances its many interests.
Towarowa is an ambitious project, right in the centre of Warsaw, but it’s still unclear what it will be. Can you give us some details?
You are right, it’s going to be a very ambitious project – in fact we are creating a new quarter of town on an area of 6.5 hectares between Towarowa and Miedziana streets and the side streets. There will be 16 different buildings with streets between the buildings covered by glass roofs, each with a different façade. Most of the streets will be open to pedestrians, some 24 hours a day. On the side running down Miedziana street, in the middle of the plot, there will be a park with entertainment and restaurants facing it. About 35 percent of the scheme will be entertainment, with a large cinema, restaurants, culture, a professional theatre, and a space for open-air concerts – the rest will be retail. Wola is a great district of Warsaw, growing very quickly, but it’s post-industrial, and it doesn’t have any kind of centre. There’s office and residential, but not much soul. Our project should give a new heart to the district. We believe it will anchor this part of the city.
What has been the attitude of the city authorities?
We have had a fruitful exchange with city authorities. It’s not easy to get them to focus – they must deal with the zoning plans of the whole city, not just our plans, but the cooperation was good. We’ve also taken ideas from organisations such as Nowa Towarowa, an initiative put together by Warsaw architects and local activists.
What have you learnt from the development of Hala Koszyki?
It’s a much bigger project that Hala Koszyki, but we want to keep the same ethos. We want to deploy non-chain restaurants, a Warsaw-based theatre, an artistic cinema to attract the non-mainstream, which also happens to be wealthier, generally speaking. There will be a number of architects under one creative head, but we can’t disclose the name of the architects yet. The different designs will harmonise together, but you will see many different looks. The planned media launch of the initiative will be closely coordinated with the city authorities, since this is a common work and common initiative.
‘The city has changed dramatically over the last five years, I think we compare well to Berlin, the feel is similar.’
How do you feel about the future of Warsaw?
In terms of ‘hipness’, it’s great. The city has changed dramatically over the last five years, I think we compare well to Berlin, the feel is similar. It’s also a reasonably large city, more like 2.7 million than 1.7 million people, because people commute and work here. Warsaw can become an important business hub. It’s attractive to live here, it has the largest number of students of all the cities in Poland, about 170,000 students. The development of new services is driven by the availability of talent, so Warsaw has all the opportunities. Cities will compete by education – how many graduates come through – as well as quality of life.
What is the situation with the project on the site of the former Emilia building – is the final function decided?
Not yet because we are currently working on two options and we are doing parallel permitting for both options. We think we’ll figure it out within the next two months. It will either be office and hotel or just office. It’s too big to make one hotel out of it – there’ll be about 40,000 sqm of usable space.
Your student accommodation business seems to be growing – what are your plans there?
Student Depot is doing very well. We have 1,100 beds under operation in four dorms and we have several projects under preparation or construction, with the aim of having 6,000-7,000 beds under operation by 2019/2020 in Poland’s main cities. We will go to Warsaw, Wrocław, Gdańsk, we are already in Poznań, Łódź and Lublin, and obviously Kraków.
The residential rental market is unproven in Poland, as a commercial business activity. It’s clear there’s demand but you are relative pioneers in this sector. How substantially are you looking to go into this sector?
We have put together a company called ‘Resi 4 Rent’ which has 2,500 apartments under construction now. It is separate to Echo Investment but Echo will be able to develop some apartments for them. This is important, because the apartments may come from other developers as well. The company expects to have built 6,000-10,000 apartments within the next three to five years. In Poland there is a very large rental market. Warsaw is estimated to have about 80,000-100,000 rental apartments, but owned by private people. The biggest aggregator owns perhaps 100 apartments, but not in one block. Then there are only two or three companies which rent out apartments on behalf of individual owners. The biggest one represents something like 2,500 apartments. This is because it’s hard to buy one block of 200 apartments to be rented because typically you’re dealing with 200 owners in the apartment block. You could buy from an apartment building directly from a developer, but apartments for rent are different to regular apartments. There are smaller units among other issues. So it’s not optimal to buy a ready block. So you can build for yourself. For this you need considerable amount of capital and a developer to build it. We’re ideally placed in this regard. But we have a separate management.
You’re right that there is proven demand for rental apartments, but it’s still not a proven business model in Poland, right?
Well. Yes and no, because we have work on creating the business plan with companies which are mediating on behalf of private individuals, so we have large samples of data under which we know for how much you can lease an apartment. There’s nothing much more that needs to be tested. You need to know how much you can charge for a studio and how much for one-bedroom apartment etc. Our co-investors have developed large businesses of this type in other destinations, so we can learn from their experience. We offer a product which is better than that which is already available on the market at a similar price. The product is nicer, because there’s a building supervisor who you can call if something is broken, and the floors are cleaned – that sort of thing. And most importantly, you have the security of prolonged lease.
How long will a typical lease be?
In Poland, it’s typically a one-year lease which you then prolong. In our case, if people want to continue leasing and everything is fine, they can lease ad infinitum. That’s basically the story. Our product is much more reliable, especially for families who need reliability.
There’s the British ‘buy your home’ mentality and the German and Swiss rental mentality. Where do Poles stand?
Poland has an own-and-live mentality, but clearly there is a part of the population which needs to rent because they can’t afford to buy. Everyone would buy if they could. But before people are able to, they have their entry job, then they get a better job – this is one group of people who can rent. And there is another group – young people who like flexibility, who change their job from time to time because they are IT specialists or engineers and the job market is very good, and they don’t want the liability of a bank loan. We know the rental market is good, so we see that if we take a bit of the market we can build a nice business out of this.
What makes your company – or in this case your group of companies – stand out?
What is important is that we don’t do it all ourselves. We invest in platforms and companies which have the expertise. Echo Investment knows how to develop. EPP are long-term owners, so they can give the guarantee to Echo Investment because they are the end-user. We have a separate management for Student Depot, a separate management for the rental business, for the platform which is lending money etc. We will have a separate company which does the same as EPP does for shopping centres – it will be the biggest assembly of office and mixed use buildings on the Polish market. Our role is to make sure that there is a right strategy for each platform, proper management in place, enough capital deployed to these companies as well as that they have enough debt financing.
Maciej Dyjas is co-Managing Partner and co-CEO of Griffin Real Estate
Griffin Real Estate’s Hala Koszyki was an overnight success for the company when it opened in late 2016, immediately becoming one of the hottest destinations on the Warsaw map.