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The Warsaw Voice » Real Estate » October 29, 2010
MAPIC 2010
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Prospects Intact
October 29, 2010   
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Ronny Gotthard, Senior Director GRI (Global Real Estate Institute) talks to The Warsaw Voice.

Is the crisis over? What lies ahead for the sector next year?
The good news is that the long term prospects for the region are intact. There is a slow recovery, the growth trend is faster than elsewhere in Europe. The crisis is not over, though there is a consensus that the worst is behind us. With the effort of the IMF and the European Union, a possible economic meltdown could be averted, though there is a lot of debt around, but the pain is easing. However, deflating the bubble will take some time and also depend what is going to happen to the European economies.

Much of the money has been fuelling the property boom, which came to a crashing halt and is still unwinding in most of the regions markets. Those regional markets are at different stages, Poland, Czech Republic, Slovakia are better positioned than Romania or Hungary, where in the foreseeable future there wont be significant pickup in activities. Those with healthier economies, face less credit restrictions and activity has come back, even though at less hysteric levels.

Will loans be easier to obtain or will they only be available for the largest players?
That is of course the Achilles heel. Unlike its western counterparts, Eastern European companies and with that their entire economy - depend largely on bank lending rather than capital markets. With much of the bad debt still around, banks are likely to remain conservative in their lending criteria and their aversion to risk. Which may mean that established companies benefit earlier than others. The lending in Eastern Europe is dominated by foreign institutions, mainly austrian banks and their profits are down. We will continue to face rather slow and uncertain growth.

How is the Polish market shaping up compared to other countries in the region? What are the major obstacles faced by the Central and Eastern Europe commercial real estate market?
The commercial real estate market in Poland has shown remarkable resilience. Polish economy is well on the way to recovery and is likely to continue to outperform many of its regional neighbours.As the largest regional market, Poland benefits from its domestic strength. As such its seen as one of the more established and predictable markets, hence it is most attractive market. Investors focus on Poland and Slovakia. There is a lot of organic growth in these economies, investors are more comfortable than elsewhere. Maturity is associated stability, less so with low yields. The main challenge is and will be for a while the lack of financing available.

Which sectors of the real estate market in the Central and Eastern Europe region and Poland do you think will develop the fastest?
Residential market has been hardest hit and with high unemployment and the lending restraint will still be depressed for a while. But with the economy back to growth, retail sector will fare best, though there is excess space. Office rents on the other hand have dropped significantly, especially in Warsaw. There will be no drastic change but the overall outlook is positive.

Have the upcoming Euro 2012 European soccer championships, to be held in Poland and Ukraine, stimulated investment and interest in the two countries?
Without a doubt. That‚s one of the main reasons for countries to hold such global events. With bn spent on infrastructure and facilities, they always attract interest, investments, prestige etc. Its Challenge is to turn this interest into long term opportunities, after the event has finished. As we just seen at the commonwealth games in India, things can also work the other way round.

The GRI is a club for the real estate industry that runs its activities through a collection of annual, discussion based meetings across the world. The next meeting, the New Europe GRI 2010, Nov. 23 in Prague will focus on real estate in Central/Eastern/South Eastern Europe.
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