PRESS ABOUT US

Money in the Rubble

Poland Monthly 12/06/2006

As the volume of real estate investment capital worldwide continues to grow, investors are increasingly searching for new high-growth sectors. And one of the latest buzzwords in real estate is “urban regeneration.”

One of the most ambitious development projects to be announced at this years MIPIM property fair in Cannes was the Thames Gateway regeneration initiative in southern England. Plans to breathe new economic life into the Thames estuary’s former industrial and docking districts are estimated to cost GBP 20bn and take up to 15 years. The challenges, like the project’s proportions, are vast. But experience in the UK suggest that redevelopment schemes so far conducted on a smaller scale have outperformed other real estate sectors.

The UK’s Urban Regeneration Index shows that offices in regeneration areas outperform the rest of the market, yielding returns of up to 15 percent, with retail in such projects performing similarly to city-center locations. The cautious world of investment finance has yet to react on a large scale to the potential of regeneration across Europe, an in Poland the idea is still in its nascent stages of development. “It’s happening piecemeal,” says Ryszard Urbanowicz, director of architecture firm AukettFitzoryRobinson in Poland. “But through commercial initiatives rather than policy initiatives.”

Poland’s regeneration potential was brought into sharp focus in May with the opening of Apsys’s landmark Manufaktura development in Łódź. Reviving the site of a former textile factory, the project caught the attention of the press and public alike. Other projects like Stary Browar In Poznań and Katowice’s Silesia City Center have proved equally popular with the public. To date, however, such initiatives have mostly been taken by developers rather than by public authorities and have extended only as far as individual projects, rather than to large areas. Development in Gdańsk, however, may break that mold.

Young town, old town…..

Młode Miasto (Young City) may represent a turning point in Polish urban renewal. The project in its entirety aims to revitalize more than 70 hectares of former shipyard and heavy industrial wasteland in one of Polans’s most historically important areas. Two thirds of the site’s one-million-square-meter capacity is to be devoted to mixed-use retail, office, recreational and residential development with the remaining third earmarked for a technology park. Clear title to the land has been established and in May, Danish real estate investor Baltic Property Trust (BPT), through its Luxembourg real estate investment fund BPT Optima, acquired five hectares of the site, earmarked as the core part of the new city center environment. The purchase was the first step in taking over management of 27 hectares for regeneration, and pumping around EUR 300 m into the area’s development over the next decade. The development work will be tendered out by BPT, who will remain 70-percent stakeholders in the area outside the former shipyard. In addition to the city’s historical and commercial significance, Gdańsk also has an attraction to the city’s historical and commercial significance, Gdańsk also has an attraction few Polish municipalities can boast – regeneration plan.

In order to apply for EU structural funding for a previous project- the renovation of disused Napoleonic forts- Gdańsk city authorities were obliged under EU rules to create detailed regeneration  plans for the entire city. And detailed master-planning, along with a forward-looking administration, makes the difference between potential and reality, according to BPT optima’s country director for Poland, Tomasz Tomer. “Do you know any developer who could do this alone?” Tomer says. “The city of Gdańsk has been very proactive in this deal. It’s not the money [that matters]. We have a wall of money. It’s the permitting and organizational issues.”

On the other side of Gdańsk’s Old Town, a second redevelopment is being proposed by Gray International. The plan, to revitalize Wyspa Spichrzów (Granary Island) is also ambitious, and the existence of a master plan was a significant factor influencing Gray’s desire to invest there, though not the only one. “The existence or otherwise of detailed master plans for the city plays a decisive role when projects concern individual sites,” says Gray International President Ryszard Leśnewski, “but that was definitely not the reason Gray was attracted to the city. The reason was the city itself – its splendid potential and vivacity, and the unexplored potential of the Granary Island.”

Architects, planners and developers seem to agree that Poland has a wealth of potential sites for similar regeneration projects to those in Gdańsk. Hungarian developer TriGranit has specialized in the past in regenerating both inner-city sites, such as Budapest’s West End center, and former industrial land, such as Silesia City Center, a retail and entertainment complex on the site of a former coal mine in Katowice. And TriGrant’s Zbigniew Dzrewiecki sees huge potential for such projects across Poland. “We are very interested in old railway stations in Poznań and Wrocław which can be converted into thriving city centers involving not only a railway station, but shopping centers, cultural institutions, theaters, whatever the city needs,” says Drzewiecki. “Poznań is especially interesting. There is the main railway station and 23 hectares behind it, old disused tracks which can be developed into a beautiful center of new Poznań.”

The real estate sell-off of national rail company PKP will doubtless catalyze further development potential across the country. But without a national policy, such works will always be at the initiative of individual developers and as such, will be entirely marked driven. This may mean that those areas most in need of regeneration will remain the last attractive to investment capital, leading to a Catch 22 situation for deprived areas. And here there are lessons to be learnt from the experiences of other countries. One possible model could come from France, believes Gray International’s Leśniewski. “French experience is very constructive as concerns the regulations of public-private partnership,” he says. “They create a special legal form known as Groupement d’Interet Economique (GIE) . […] This institutional know-how is absolutely necessary if we want to make cooperation between the public and private sectors transparent.”

With benefits for investors as well as communities and local economies, regeneration may be a win-win solution. AukettFitzroyRobnson’s. Urbanowicz believes it is an important opportunity. “Poland has tremendous potential in terms of city-center restructuring,” he says. “It allows an initiative to have a very deep and long-term influence on the whole city. And that’s an opportunity that shouldn’t be wasted.

Ewan Jones

back