The untapped potential of Polish capital
Harald Jeschek, Managing Partner of Karimpol Group, looks back at the last two decades of real estate development in Warsaw, and where we go from here.
Karimpol has been in Poland for around 20 years. What were the circumstances behind your arrival here?
The first time I came to Poland I was in a state of shock, even more so as I had just come from a Tenerife shopping centre project in the Canary Islands. It was April and it was snowing. I saw a city of a type I was not used to – the architecture was completely different. It was partly reconstructed and now I see the advantages of that – Warsaw had the chance to rebuild. It’s now a pleasant city to live in and tourism is increasing.
At that time Karimpol was quite strong in Prague and we wanted to expand further in the region. The first changes in legislation were happening in Poland, and the first wave of investment was coming in. Although there was a lot of legal uncertainty and it was not easy to develop, it was very easy to lease. Now it’s the opposite – it’s much easier to develop but much more challenging to lease. You need exactly the right product in exactly the right location. This is why our buildings have always leased well and continue to do so.
You have said that the metro is important for the project, but isn’t it a bit over-hyped at this stage? It’s only two lines and management in Poland tend to drive to work.
The metro is why we chose the location. It’s true that in a city like Vienna the metro plays a more prominent role than in Warsaw. It will come into play more in the future than now, which is why we decided to keep lots of parking spaces.
How do you view the demand and supply situation in Warsaw in general, and Wola in particular?There are a lot of new buildings on line and under construction.
There’s clearly a lot of construction, but also a very high demand for office space. Tenants are willing to move into new premises and they’re looking. It could be a bit imbalanced in the next few quarters, but we’re only looking at the longer term, and in my experience most predictions that are made don’t come true. A couple of years ago I read views that the market might even collapse, but that hasn’t come true. There have been two booms and one bust in the last 20 years. The first boom was from the mid-late 1990s until 2001, when the dot.com bubble burst and investment slowed. I don’t know why the dot.com bubble had this effect on the Warsaw market – trigger events often don’t relate to the results. The other boom was from 2004 to 2008, but you could even say it’s continued to this day because the financial crisis did not hit hard in Poland.
You’re going to build the Skyliner office building at Rondo Daszyńskiego in Wola. Why office, why Wola?
In Poland we only develop office, like in the Czech Republic, but we do other sectors in other countries. We’re a private family-owned developer, so we have to diversify, but not in an endless way. In every country we only invest in the capital because investors always buy in the capital. We see lots of activity in secondary Polish cities, even investment activity, but we concentrate on Warsaw as we find a continuing potential to develop here.
Where is Skyliner in the development cycle at the moment?
The underground preparations are already complete and we’re currently holding a construction tender. Construction is planned to start at the end of the year. In the meantime we are offering the space to a few potential key tenants.
Rondo Daszyńskiego seems to be quite a hotbed of construction at the moment – too much perhaps?
I think that the success of the latest completions there show that the decision of many developers to locate in Wola was the right decision and this is reinforced by tenant interest. In CBD the vacancy rate is 15 percent, but in Wola it’s lower. The vacancy level is a bit of a worry, but it’s up to the individual developer to build good quality buildings in the right location.
The effect of Brexit is still very much on people’s minds and the implications still ahead of us. What effect do you think it could have on the Polish market?
Brexit was of course a surprise. The only negative consequence I see in the next few months is the uncertainty. People don’t know what will happen and how long it will take. Once there is a road map, people will feel more secure and then I don’t think there will be much uncertainty. In the end the EU is diversified internally as well, so we feel safe investing in countries which are strong by themselves.
What made you go for a skyscraper, in terms of Warsaw’s office market? It’s said to be more risky, as a high building necessitates a significant amount of space at one time.
We planned it in a way that we wouldn’t exceed a certain amount of space beyond which we wouldn’t be able to manage the leasing. The building has 43,633 sqm of office space which corresponds to the usual office requirements on the Warsaw market. It’s only twice the size of Equator II.
What would you most like to see the Warsaw city authorities change or introduce to improve: 1) the construction of office projects, and 2) the city of Warsaw as a whole?
Only to do more of the same thing. Build more infrastructure for traffic and services, continue investing more in the development of public spaces.
Why are the improvement of public spaces important for you as a developer?
Because functional and attractive surroundings create an additional attraction for your building. I would like to see the city investing even more in refurbishing spaces around public buildings. You see the work on the roads, but more care needs to be taken to make them look better.
In your opinion does Warsaw have a strong enough identity abroad?
Warsaw is creating for itself a great living environment – that’s the most important thing right now. At the same time Warsaw ́s recognition around Europe is increasing as more people are aware of what’s happening here in business but also in cultural life and tourism.