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The Warsaw Voice » Real Estate » April 16, 2008
SPECIAL REPORT - Residential Market: Changing Times
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Spanish Armada
April 16, 2008 By Michal Jeziorski   
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A whole armada of Spanish construction companies and developers has landed in Poland. They have come enticed by record margins, ever-wealthier clients and the fact that Poland still needs another 1.5 million new homes. Spanish developers see in Poland significant opportunities for development and profits, mainly on account of the Polish market's huge potential. They offer a wealth of experience garnered in their own market.

Economic reports on Poland all point to the country being an excellent market for foreign developers. With regard to foreign investment, Poland is in sixth place in Europe, behind only five of the biggest Western European countries, and top among Central and Eastern European countries, according to the 2007 European Attractiveness Survey conducted by consulting firm Ernst & Young Polska. The Polish real estate market is becoming increasingly attractive. The most active among developers are those from the Iberian Peninsula. Foreign developers follow a simple premise that real estate prices in European Union countries increase for many years after accession. Thus it is not surprising that a huge percentage of new homes in Poland are built with foreign capital, and most of this is invested in apartments.

Years of experience

It will be worth investing in Poland for a long time because of the country's rapid economic growth, easy credit facilities, population growth in the biggest cities and a shortage of good quality apartments. Also the average wage is increasing and unemployment is falling. These two last factors lead to increased consumer spending. Moreover, only a small percentage of Poland's housing stock has been built after 1989. There is not an area in Poland where post-1989 housing accounts for more than 20 percent of all homes.

In Estonia or the Czech Republic residential development is more difficult because there is simply a lack of large conglomerations. Warsaw as the largest city in Central and Eastern Europe is becoming the regional center of Spanish activity. Spanish firm Level set up its Central and Eastern European headquarters in Warsaw, and Cogilco is following suit. The latter firm's first project is likely to be a housing estate near the historic palace-and-park complex in the Wilanów district.

Spanish firms' interest in Poland should come as no surprise. Their biggest advantage over Polish companies is that Poland's real estate market is currently in a similar position to that of Spain's 30 or 40 years ago. That was the founding time of many Spanish real estate firms, which are now storming into Eastern Europe. During the last 20 years, Spain has achieved significant successes in infrastructure development and its building sector. The Spanish still remember rising real estate prices after their country's accession to the European Union. Over the last 14 years, Spain has been a veritable El Dorado for construction companies. Some 600,000 new homes were built in Spain annually, and most of them were purchased by wealthy residents of other EU countries. That is almost six times the number being built in Poland today. The Spanish are convinced that this trend will be repeated in Poland. Spanish firms have huge capital at their disposal and are searching for somewhere new to invest it. They treat Poland not only as a huge market but also as a springboard for further expansion east. Poland could learn much from Spain with regard to building new freeways, beltways around cities, fast rail lines and impressive airports-all with thought given to environmental issues. The Spanish also know how to take full advantage of EU funding.

Huge profits

Spanish firms are also attracted by lower land prices in Poland, accounting for some 25 percent of a project's cost, compared with 50-60 percent in Spain. It is also easier to find suitable sites in Poland, for example on the outskirts of large cities. The slow process of getting building permission or a lack of local development plans does not dishearten Spanish developers since they have experienced similar problems at home.

Some analysts say the presence of foreign investors pushes up prices in large towns and cities. In Warsaw, Spanish firm Lubasa, after a drawn-out auction, paid almost zl.391 million for less than three hectares of land on Inflancka Street, or over zl.13,600 per square meter. A year earlier Polish builder Budimex had paid less than zl.6,000 per square meter for land in the vicinity. The cost of land will automatically impact the sale price of the real estate built on it.

Poland also offers high rates of return that sometimes exceed 20 percent, and the price of land is unlikely to account for more than 30 percent of a project's total cost. In Spain, a rate of return above 10 percent is difficult to achieve, and in the EU as a whole land accounts for half the total building cost on average.

The biggest players

Acciona, Fadesa, Lubasa and Ferrioval are the best-known Spanish developers in the Polish market. Acciona Immobiliaria has many years of experience in the building sector and 30,000 on staff. In Poland, it is pressing ahead with projects including the Iskra and Leśne housing estates, Pańska and Sielecka apartments, and plans further projects in Warsaw's Żoliborz and Wilanów districts.

Fadesa is from the city of La Coruna and has been in business since the beginning of the 1980s when demand for housing in Spain was high. Fadesa Prokom Polska, a joint-venture company between Spanish Fadesa and Polish Prokom, is building one of Poland's most spectacular and talked-about housing developments, Wilanów New Town in Warsaw. This will be a residential, shopping and business complex complete with clubs, cinemas, a sports center with cycle paths, tennis courts and an ice rink. The whole project is based on the most prestigious urban districts of Western Europe. Fadesa Prokom Polska also plans to build some unique urban projects in Poland's major cities in the near future. This year the firm plans to complete housing estates on the outskirts of Warsaw in Nowe Falenty and Powsin and in Wrocław to provide a total of 4,400 new homes.

Lubasa is a leading developer on the Spanish market with many years of experience. The firm entered the Polish market in 2006. Lubasa Polska is responsible for the Mariposa project in Warsaw's Bielany district. The site has excellent transport links with the city center, and the development is designed to meet the needs of a dynamic clientele. Ferrioval has been operating in Poland since 2000, when it became the majority shareholder of Polish listed builder Budimex. Among other projects, it is building the new terminal at Warsaw's Frederic Chopin Airport. Ferrioval is a global player. It is building a water desalination plant in Cyprus, the Lithuanian National Philharmonic, an aqua park in Cologne, Germany, highways in the United States, hotels in Russia, sewage treatment plants in France and China, dams in Tunisia, a bus station in Paraguay, and a hospital in Uruguay.

These four firms are not the only Spanish real estate players in Poland. Operating on the Polish market are also Restaura, Grupo Lar, LV Salamanca, Realia, Agofer, Diursa, Grupo Prasa, Chamartin, Pro Urba, Habiteos and many others. In all, some 30 Spanish developers operate in Poland.

A wide choice

The Spanish want and are able to build over 11,000 homes annually in Warsaw alone to meet market requirements. Grupo Harmonia is building the 35-story Wolska Tower and the Bielany district's Apartamentos Gdańska housing estate. Realia Polska Inwestycje, a subsidiary of one of Spain's largest developers, is building 168 prime apartments in Mokotów, ranging in size from studios to four-roomed apartments, and shops and service outlets over an area of 1,000 square meters. Restaura, after having purchased building land in Warsaw at the end of 2006, plans to spend 13 million euros on the construction of 109 apartments, a 1,500-sq-m retail and office complex and 120 parking spaces. Another firm, Vemusa SA, plans to build 500 apartments for 20 million euros. Sando Immobiliaria has made huge investments in Warsaw. It is already selling apartments in its Sansara housing development in Bemowo and owns four other sites in the capital, including the site of a former bus depot on Chełmska Street, where a skyscraper surrounded by multistory apartment buildings will soon be erected.

Spanish firms are also attracted to the western city of Poznań. The Alstan Group wants to build a luxury recreation center at Poznań's Łęgi Dębińskie park. The firm has built a recreation center in Tenerife that has wowed officials at Poznań City Hall. The Poznań project is still in the negotiating stage. All the buildings will be low-rise. Another firm, Coglico, wants to build underground garages in Poznań.

Martinsa Grupo Immobiliario has purchased 7,000 sq m of land on Gdańsk's Wyspa Spichrzów (Granary Island) for almost zl.17 million. The site is one of the best in the center of Gdańsk. Plans include a hotel, an apartment building, offices and entertainment facilities.
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