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The Warsaw Voice » Real Estate » February 18, 2009
LUXURY APARTMENT MARKET
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Luxury Starts at 100 sq m
February 18, 2009   
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Despite the economic downturn, demand for luxury apartments continues to run high-at least for homes that genuinely deserve the "luxury" tag.

"The real estate market as a whole is reporting a slowdown, and there is a visible wait-and-see attitude in the market's luxury apartment segment," says Anna Terlecka, sales manager in the Residential Department of CB Richard Ellis real estate services company. "Clients are still interested in luxury projects, but they expect more flexibility from developers-price negotiations, extra discounts, finishing on attractive terms."

For some time there has been a debate on the definition of a luxury apartment. Some projects advertised as luxury buildings actually have little to do with luxury homes.

"Recent years have seen some excessive promises on the part of developers who advertised run-of-the-mill dwellings as luxury apartments," says Joanna Iwanowska, development and consulting project director at Polanowscy Nieruchomo¶ci. "This has led to the devaluation of the term luxury apartment, followed by the coining of new-often inappropriate-descriptions of a product, for example as a premium residence. The market is also seeking new names for sub-segments, a recent example being soft lofts, which are hard to categorize."

What is a luxury apartment?
According to the definition offered by the website luksusowe mieszkania.pl, a luxury apartment (or apartament in Polish) has to have a specific layout. It should include a kitchen, a living room (or a living room and kitchen as one space), a master bedroom with an en suite bathroom and closet, a study/guest bedroom/second bedroom, a family bathroom, a laundry room or utility room, and a separate bathroom for every further bedroom. A luxury apartment should be at least 100 square meters in area, so frequent cases of calling 50- or 30-sq-m homes luxury apartments is obviously an abuse of the term. Other requirements include a high standard of finishing, air conditioning, lots of daylight, a minimum height of 2.9 m, and noise proofing. The building should have an elevator, an underground garage, high-standard finishing of communal space as well as a reception desk and security.

A luxury apartment building should have an excellent location and unique architecture. Adjacent sites are also important. There should be a park on at least one side or a green area with a body of water.

Warsaw's high-rises
Marcin Olszewski, head of the analysis department at Polanowscy Nieruchomo¶ci, says luxury goods are those with limited access and expensive but nonetheless appealing to buyers. "Investing in a luxury apartment is like investing in gold, collector's coins or art," Olszewski says.

The luxury apartment segment is restricted primarily by the availability of prestigious, attractive locations, as these are getting scarce.

"Prestigious locations are mainly in city centers and are often subject to restrictions involving the requirements of historic building conservation, neighborly relations and surroundings," says CB Richard Ellis' Terlecka.

"The project takes about two years to prepare. This means you have to have a precisely built financial model for the project to cope with all the obligations."

In Warsaw, the districts attracting the greatest interest are ¦ródmie¶cie and Mokotów, followed by Żoliborz and Ochota. The average price per sq m of a luxury apartment there is several times higher than the average price in the popular segment-the most expensive apartments fetch zl.50,000 per sq m.

Next year should see the completion of the Złota 44 apartment building in the heart of Warsaw, at 44 Złota St., close to the Palace of Culture and Science and next to the Złote Tarasy mall and the InterContinental Hotel. This flagship project from the Orco Property Group was designed by Daniel Libeskind, a world-famous architect of Polish descent. There will be 251 apartments ranging from 62 to 371 sq m in area on 54 floors in this luxury 192-meter high rise. The most prestigious three-level penthouse will occupy the top floors. The entire ninth floor will be occupied by leisure and recreation facilities for residents, including a 25 m swimming pool, a fitness club and a gym, a massage parlor as well as a children's play area and a terrace lined with decking.

The demands of Warsaw's wealthiest residents will also be met by the Platinum Towers building at 63 Grzybowska St. being developed by Atlas Real Estate. The developer has offered its clients a service package of the same standard as that available in a five-star hotel. Residents will be able to order laundry, cleaning, shopping and dog walking services-and even home minding when they are away. To each apartment, the developer is adding a 10-year membership card to the Holmes Place fitness club located within the complex, which offers a gym, swimming pool and spa. Platinum Towers comprises two 22-story towers in a single complex with the Hilton Hotel. The complex will include 387 apartments from 37 to 100 sq m. The two top floors will be occupied by penthouses ranging from 147 to 216 sq m. The average price per sq m is zl.20,500.

Exclusive appeal and location
CB Richard Ellis's Terlecka says that for a luxury apartment building the most important thing is a prestigious, central location and the site's special character, for example neighboring a park, renowned institutions, cultural and educational centers or the Old Town. "Unique views are important, as well as conveniences for the residents and an atmosphere of inaccessibility and luxury," Terlecka says.

The Klimt House apartment building is located on the quiet Kazimierzowska Street, next to the prewar tenement houses of the Old Mokotów neighborhood. The developer, Echo Investment, plans to complete the project in early 2010. Dreszera and Morskie Oko parks are nearby, and also Pole Mokotowskie and Słonimskiego Square.

The building will have 60 apartments ranging from 41 to 190 sq m, each with a balcony, loggia or terrace. The two top floors will be two-story penthouses. Some of the living rooms on the upper floor are planned with an open space on the mezzanine level, ideal for setting up a library, for example.

The elegant lobby will include a reception desk and armchairs for visitors. The internal courtyard will be a recreation area with vegetation, small architectural features and a playground.

The building and courtyard will be fenced. Cars will be able to park by driving through a remote-controlled gate, and entrance to the building will be via reception only. Residents will have 82 parking spaces in the underground garage, and special carts for carrying their shopping will also be available. The building will have full disabled access. The architectural concept comes from M±ka Sojka Architekci. To live there you have to spend zl.17,000 to zl.26,000 per sq m.

Menolly Poland's Nowe Powi¶le residential complex will be completed late this year. The project is located in an area bounded by Lipowa, Wybrzeże Ko¶ciuszkowskie, Leszczyńska and Dobra streets. It comprises the construction of a new complex of apartment buildings with a modern design and the restoration of the historical Powi¶le Heat and Power Plant architecture. The project is being built in two stages. Stage one involves the residential part designed by the studio of well-known Polish architect Stefan Kuryłowicz. There will be over 27,000 sq m of residential and commercial space here, the latter available on the ground floors of the planned buildings. Buyers can choose from penthouses and large and smaller luxury apartments. The finishing materials will include exotic timber, granite, sandstone, marble, and glass. The smaller apartments in Nowe Powi¶le cost from zl.11,500 to zl.20,000 per sq m, while large luxury apartments and penthouses range from zl.20,000 to zl.35,000 per sq m.

Magnus Group is building two apartment buildings on Piękna Street, Szósty Zmysł (Sixth Sense) and Rezydencja Piękna Nova. Szósty Zmysł is a building located at 28A Piękna St. and tucked away behind the buildings lining Piękna and Marszałkowska streets, right next to Konstytucji Square. This seven-story building will house 41 luxury apartments with balconies and terraces. You have to pay between zl.13,900 and zl.27,800 per sq m of apartment space. Residents will be able to move in in the first quarter of 2010. This is also the planned completion deadline for Rezydencja Piękna Nova at 13/15 Piękna St., with 86 apartments ranging from 45 to 168 sq m (with the possibility of combining several apartments into one). Prices in this building range from zl.13,900 to zl.34,200 per sq m.

Last December Ghelamco Residential obtained a construction permit for its Woronicza Qbik project at the intersection of Woronicza and Racjonalizacji streets in the Mokotów district. This is a "soft loft" project. Unlike classic lofts, these are built from scratch as new buildings. There will be a total of 350 apartments ranging from 36 to 200 sq m there-two-story soft lofts as well as single-story apartments. The lofts' living room space will be 5.8 m high. The soft lofts will take 36 months to build.

Apartments with soul
Besides new apartment buildings, renovated historical tenements are also popular.
"These products are dedicated to two different target groups," says Terlecka. "What these groups have in common is their similar level of affluence, while they differ in their lifestyles. For clients interested in buying an apartment in a renovated building, the history of the location and the building itself is important. Features like the terrace size, apartment layout, view or aspect are less important. The social infrastructure is a major consideration, together with proximity to movie theaters, galleries, cafes, and famous sites."

Ghelamco has been working for many months on a plan to restore historical tenement houses from the late 19th century at 13 and 15 Foksal St., where luxury apartments will be located. Wherever possible, the developer wants to preserve the prewar stucco work, restore the mosaic parquet floors in the apartments and the ceiling paintings in the stairwells. Fifty apartments from 50 to 250 sq m in area will be offered to buyers. No. 13 was built ca. 1898 and was originally very decorative. Well-known Warsaw confectioner Józef Wedel bought the house in the 1930s. No. 15 was also built at the turn of the century.

A Wrocław tenement house from the first decade of the 20th century, at 50 Rynek St., will change its character soon as well. The first and second floors and parts of the basement will be commercial space, while the other four levels will have 11 top-class apartments ranging from 80 to 140 sq m. The investor is Griffin Real Estate and completion is planned for March 2009.

Restaura Górskiego, a contemporary tenement house being built behind Nowy ¦wiat Street, right next to the Wedel drinking chocolate parlor, 800 m from the Palace of Culture and Science, is also sure to attract demanding buyers in search of an original project. The investor is Restaura, a company based in Barcelona that has been operating in Poland since 2005. The architects have designed this project as a building combining the assets of a modern apartment building with the charm of a prewar tenement house. It will include 109 apartments and a two-level underground garage for 128 cars. Completion is planned for the fourth quarter of 2009. Prices start at zl.21,890 per sq m.

Luxury outside Warsaw
According to Emmerson real estate services company, Cracow is number two on the Polish market for luxury apartment projects. It accounts for 23.4 percent of the total number of luxury apartment projects nationwide, while Warsaw accounts for 26.2 percent. Wrocław is third with 14.8 percent, and Gdynia is fourth with 8.2 percent.

Verity Development is redeveloping a building at 8 Rakowicka St. in the very heart of Cracow. Built in 1911, the building lies 530 m from the Old Town and will be thoroughly renovated and expanded. The second floor will be dedicated to high-class offices; the first and third floors will be commercial; while the floors above that will be occupied by luxury apartments. The total usable space will be 1,930 sq m. If all goes to plan, the project will be completed in the first quarter of 2010.

Next summer, the first residents will be able to move into the Marina apartment building in ŁódĽ. This several-story avant-garde building shaped like a ship is being built on a lake in the western part of ŁódĽ's Julianów district. The developer is Varitex SA. The building will include about 100 apartments ranging from 40 to 150 sq m, which can be combined to form larger units if desired. The entrance is via a large lobby leading off to communal facilities including a sauna, gym, pool tables and access to large terraces. The prices of residential space in the Marina building range from zl.9,000 to zl.12,000 per sq m.

Magdalena Fabijańczuk


Opinion
Luxury Still Sought After
Piotr Wójcik, analyst with the Emmerson Research and Analysis Department:

The stagnation on the housing market has also affected the luxury apartment segment (this takes into account all apartments that investors define as luxury apartments even when they do not necessarily meet "luxury" criteria). Developers of apartments that offer nothing special in terms of either architecture or standards are facing a very serious problem trying to sell them. It is noteworthy, however, that luxury apartments are the strongest segment of the apartment market and they are thus much more immune to the current crisis. A large part of the target buyers of such prestigious homes still have financial liquidity and are able to contribute up to 80-100 percent of the apartment's value on their own. People who buy such property are members of the upper, richest class and can afford to pay up to zl.2-4 million for an exclusive apartment in a city center. Besides, in a time of mighty turbulence on the financial markets, a prestigious apartment is a very good form of capital investment. However, while planning to buy an exclusive apartment, the buyer should check beforehand if the apartment in question is genuinely a luxury and prestigious investment rather than a home in an ordinary apartment building but which the developer calls "exclusive."

The prices of homes that meet the criteria of luxury apartments range between zl.11,000 and 40,000 per square meter, while prices are much lower for apartments with enhanced standards (but still advertised as luxury apartments), ranging from zl.6,000-15,000 per sq m.

Due to the slump in the market for real estate, average prices in some projects have dropped, but for now these are very slight declines (up to 5 percent of an apartment's value) compared with economy-class apartments (currently reaching up to 20 percent of an apartment's value).

In the coming months, the market for exclusive apartments will be still susceptible to financial fluctuations and declining demand for real estate. The majority of projects currently in progress will be completed, but the start of new ones will be postponed by several years. Prices of luxury apartment projects will be subject to slight variations, but a sharp decline is not expected. The apartments most likely to be sold and to maintain their price are the most luxurious ones, located in downtown areas and offering much more than just enhanced standards.


Opinion
Market for Vacation Apartments Slows Down

Paweł Grz±bka, chairman of CEE Property Group:
Last year developers increasingly eyed some of the more exclusive segments of Poland's housing market. Enticed by high profit margins, they frequently decided to undertake projects involving high-standard and luxury apartments. But often developers' promises regarding the quality of a given project were not matched by the characteristics of the actual product, such as finishing standards, location, floor height, architecture and so on. This policy resulted in excessive supply on the middle-high-end market.

Last year was a milestone for the vacation apartment market in the most popular tourist destinations in Poland. Many developers decided to start projects in locations such as Kołobrzeg and Międzyzdroje. Others chose smaller resorts, such as Szklarska Poręba, Karpacz, Mielno and Rewal, aware of their potential for development.

The whole of 2007 and the first months of 2008 witnessed an immense interest in high-standard vacation apartments in attractive locations that offered a promise of profit from rental. However, the slump on the entire housing market caused an even greater slowdown on the market for vacation apartments. This sector is particularly vulnerable due to its very nature as a luxury commodity. At a time of a downturn in the economy, vacation apartments are a classic example of a product where demand declines faster than in the case of regular apartments.

In the coming months demand for luxury apartments will depend on several factors: first, on what happens in the economy, second, the availability of other profitable options to invest money, and third, opportunities to rent out apartments and profit from them. Finally, demand for luxury apartments will hugely depend on the quality of the design. Smaller buildings in attractive locations, many of them renovated tenement houses and modern buildings that have replaced old ones, may be popular. The appeal of vacation apartments will also depend on the rental prospects for buyers. New companies have emerged in Poland that manage apartment rental on behalf of apartment owners.


New image for 59 Mokotowska St.
The renovated tenement house at 59 Mokotowska St. will hit the market before the end of February. Prices in this project by Orco Property Group start at zl.21,900 per sq m.

The building includes 14 apartments from 58 to 240 sq m in area and over 3 m high on average. The finishing package includes floors, walls, closets in the hallways, fully finished and f itted bathrooms, lighting, kitchen cabinets, and appliances. Buyers can choose a modern or classic finishing style. The courtyard and garage roof have been planned as green areas.


In the heart of the business capital
In mid-2010 Dom Development plans to complete its apartment building at 4 Grzybowska St., close to Saski Garden.

Buyers will be offered a choice of 287 luxury apartments, including five penthouses. Plans provide for a U-shaped building opening out towards the park. Two 18-story towers on the northern side will dominate the project. The wings running perpendicular to Grzybowska Street will be eight stories tall. The complex will have security and entrance will be through a reception area from Grzybowska Street.
The project will feature a cozy patio with vegetation and a fountain, and a two-level underground garage for residents with access directly from the individual floors. On the ground level there will be retail space separated from the complex's residential part.
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