Radomił Charzyński, Partner, Real Estate Practice and Deputy Managing Partner at Greenberg Traurig Poland talked to Property Forum about the impact of the war in Ukraine on the Polish property market, current financial conditions and consolidation forecasts.
Can we venture to say that our domestic real estate market has already recovered from the effects of the pandemic?
The pandemic has had an enormous impact on the real estate market in Poland. While the office market has experienced a considerable slowdown due to uncertainty regarding the future of the institution of the office in general, the logistics and PRS markets have been enhanced by the reorientation of many suppliers and retailers to online marketing. The PRS market, which is quite novel in Poland, has also been boosted by an influx of new equity. So we may venture to say that overall the pandemic situation did not lead to a considerable deterioration of the real estate market.
As the severe restrictions arising due to the pandemic have gradually been lifted, there has been a noticeable revival of the office market, not only in Warsaw but also in so-called regional cities. Thus, in general, I think the market has already recovered from the Covid pandemic but unfortunately, the risk factors connected with the Russian invasion of Ukraine will impact it in the near future.
Could the war in Ukraine scare Western investment funds away from Poland? Does our position on the international real estate asset map remain secure?
The Russian invasion of Ukraine started around three months ago, so we can certainly see its initial impact on the Polish real estate market. We have noticed that at the start of the invasion, many American and Asian clients slowed down their activities on the market, while other investors tended to continue pursuing their strategy without major interruptions. Obviously, the war and the economic sanctions imposed on Russia and Belarus have had a negative influence on supply chains for the construction industry which, in turn, have worsened the market conditions for development projects. The negative consequences have mainly been pricing instability as regards construction materials and a considerable lack of labour resulting from many Ukrainian workers returning to their homeland. Price instability in construction means it's very difficult for developers to calculate their costs, and at the moment this is leading to a slowdown in the development market, particularly in logistics.
Radomił Charzyński
Partner, Real Estate Practice and Deputy Managing Partner
Greenberg Traurig Poland
Assuming that the Russian aggression behind our eastern border will soon be over - what are the most important challenges that our real estate market will have to face after its end? Inflation, skyrocketing prices of building materials, lack of manpower?
It is very difficult or almost impossible to assess the outcome of the Russian invasion of Ukraine. Should the Ukraine state succeed in its attempts to maintain independence, which I sincerely hope will be the case, the reconstruction of the Ukrainian economy will run through Poland, which will definitely have a positive impact on the Polish real estate market, particularly in the logistics sector. I also believe that the pullback by many investors from Russia will be beneficial for Poland and the relocation of their activities will certainly contribute to the growth of the Polish office market.
Which assets will be financed by banks in the near future? And which ones will be labelled as rather risky projects?
I see currently that all office or logistics acquisitions find financing without major problems. On the other hand, financing for developments is becoming increasingly problematic. This is due to the reasons described above: instability of pricing and labour shortages.
In the face of the ever-lower supply of land for new investments, can we expect an intensification of consolidation in the development market and the purchase of entire companies just for their land banks?
We already faced intensification of consolidation in the development market in the past. The acquisitions of Robyg, Capital Park and other successful development companies are good examples of this market trend. I am convinced that this consolidation process will continue in the future, in particular when it comes to the logistics market. It may be done either via the acquisition of investment vehicles or via the acquisition of land banks, which to some extent is already the case.
What would you wish for our real estate market by the end of 2022?
What do I wish for the real estate market by the end of 2022? I wish for us to live in a stable democracy surrounded by friendly states and for the market to be getting back to normal.
