Poland’s increasingly mature residential market is pushing developers to respond to more demanding buyers and explore new types of projects. Carlos de León, General Manager of Acciona Nieruchomości, discusses expansion beyond Warsaw, the potential of urban regeneration and the challenges created by limited development land and planning constraints.
This interview was originally published in our POLAND TOP 50 publication, listing the 50 most influential people in Polish real estate.
Acciona has traditionally been strongly associated with Warsaw, but you are now increasingly active in the Tri-City. What have you learned from entering this market, and do you see further geographic expansion in Poland?
Each city is a completely different market, both in terms of customers and in terms of public authorities. The Tri-City is a particular case. One might think of it as a single metropolis, but the three cities that make it up differ enormously and each has distinctive features, some dating back to before the Second World War. Entering any new market requires patience, a proactive attitude and a willingness to adapt to local preferences and habits. We do see scope for expansion into other cities, but it has to be analysed very carefully, especially given Acciona’s focus on more challenging projects over mass-market residential development.
Kamienna 28 combines new development with the redevelopment of a historic building. Has this experience changed how you look at urban regeneration projects and the opportunities they offer developers?
Kamienna Grobla is a unique redevelopment that involved converting a 19th-century oil mill into residential lofts and apartments while building a new aparthotel. Kamienna is a good example of what Acciona is doing in Spain and what we are willing to do in Poland as well. Mixed-use projects involving the redevelopment of historic buildings and the conversion of post-industrial areas offer a good opportunity to add value and support urban regeneration. Our flagship development is ‘Ombú’ in Madrid, an old railway engine workshop converted into an office workspace designed by Norman Foster. We would like to build on what we started with Kamienna Grobla by pursuing similar projects in other Polish cities. These developments are well received by customers looking for something different from a flat in a conventional block. They tend to appeal to ‘connoisseurs’, although several successful conversions of factories, power plants and market halls in Poland show that there is a sizeable market for this type of product.
As the Polish residential market becomes increasingly segmented, where do you see the biggest gaps between what developers are delivering and what buyers actually want?
In my opinion, each segment has its own issues and gaps. The shortage of land ready for development is the one problem common to the entire Polish real estate market. Most demand is for affordable flats in well-connected locations, but these are very hard to find. Cheaper flats are usually on the outskirts of cities or in areas without infrastructure. Lengthy planning and permitting processes are the biggest obstacle. They reduce supply and significantly increase pre-development costs, which has a strong impact on prices. Higher-end segments also face a shortage of attractive projects for demanding customers, although in this case the issue is the availability of well-located plots rather than price. Many good plots are also held by municipalities or state-owned entities that leave them unused and off the market.
Competition for attractive residential land remains intense. Has this changed the type of sites Acciona is willing to consider, for example more complex redevelopment opportunities or locations outside established residential areas?
We see more complex redevelopment as crucial to our future because we want to take on more urban regeneration projects in Polish cities, independently of the shortage of development land. There are still several brownfield sites that could be interesting for residential development, but many of them require a positive attitude from local authorities, which can be challenging. Local authorities are more accustomed to setting requirements for developers than to taking an active part in the process, even when it involves improving or regenerating urban areas. We continue to look for opportunities in these segments. We are less enthusiastic about locations outside established residential areas because developing them requires a significant, long-term commitment from the developer, often without any commitment from local authorities or utility providers to facilitate the development.
Acciona Inmobiliaria has been present in Poland for over two decades. As the residential market becomes more mature, what does a developer need to do differently today to maintain a competitive advantage?
I personally think that after more than 20 years of market growth, demand is much more focused on specific needs. Buyers in a more mature market no longer assume that prices will keep rising without good reason. They are better informed and more demanding, and legislative changes are strengthening their position vis-à-vis developers.
Poorly designed, non-functional buildings will sell poorly. Inclusivity and accessibility will become increasingly important. In my opinion, we have to work harder to win buyers’ interest in our developments. The days of queues outside sales offices and large numbers of advance reservations are over. As for state support for affordable co-operative housing, I do not think it will pose a significant problem for developers, as neither co-operatives nor social housing providers specialise in financial efficiency, and the plots offered for development may be less attractive.
Looking beyond your current pipeline, what would you like the next phase of Acciona’s growth in Poland to look like in terms of scale, locations and types of projects?
Much depends on the effects of the changes to the urban planning law. General master plans for the whole of Poland were supposed to be approved by 31 August, but that deadline was missed. This delay will have a significant impact on the entire real estate market in the short to medium term, as the lack of planning and zoning provisions will further restrict the already limited supply of land. We believe the market will get some help from lawmakers, especially given that the issue affects developers, construction companies, suppliers of finishing materials and furniture manufacturers. Around 10–15% of the Polish economy is directly or indirectly related to real estate.
As for our plans, we would like to take on more suitable projects, including the redevelopment and upgrading of historic buildings, in line with clients’ changing needs and expectations. We will also continue our traditional new-build development business, designing and delivering projects in line with BREEAM and taxonomy requirements and meeting our clients’ needs and preferences.
