Investors in commercial real estate may see some positive things in Poland, but they should not be overexcited about the economy, according to the consensus at a panel discussion at the Real Estate Committee meeting in March. Panelists included Mirosław Szydelski, Investment Director and Board Member of AIG; Maciej Tuszynski, Executive Director of WestImmo and John Banka, Partner and Director CEE Investment Services of Colliers International.

According to Banka, it is true there was some hesitation in the leasing and development markets, and there were some problems with new development financing, but in general, Poland is viewed as a good place to invest. In fact, the leasing market should pick up strongly in Warsaw: “not to sell and hold, but to wait for the next 16 months, where we think there will be more pressure on rents and on occupancy rates before properties will be offered to the highest bidder”, he explained.

With this as a general background, Poland is regarded as a very good market by investors in America. And it is a market that has been confident in the crisis because it is not so much export-oriented as other smaller countries in Europe. This gives the market confidence, which is the key when you look at its business prospects. “In real estate we have a very long road to go before the market is saturated in any sense of the word”, Banka said. In his view the market is up to another cycle of growth, and investors are very bullish on the future yield of properties with good leases. The development market, however, needs some more time to pick up.

According to Tuszyński, although there are strong underlying fundamentals such as positive growth of Polish GDP, investors should not forget that tor the most part it was generated through domestic demand, which may go flat in time. Another problem Tuszyński pointed to is that a significant portion of Polish exports have been generated by the weak zloty versus euro. Tuszyński said that part of the problem is that banks are very cautious about issuing loans to developers, and if they do, they stick to very conservative guidelines. Thus, it is still hard to move into large-scale office development, even in Warsaw.

Szydelski said that banks to some extent are to blame for the slowdown in the development front. Some of them were too hesitant to finance, while others, even though they could finance development projects, were not given to go-ahead form their headquarters abroad. The reluctance stemmed from issues with euro financing, as the euro was losing value against the Polish zloty.

Szydelski noted that if, as many people believe, 2011 is to be a year of market growth, the investments should be starting now, but that is not happening. Tuszyński disagreed with the notion that the market is nearing a bubble, arguing that a range of 5-8% is normal for a mature market such as the one in Warsaw. He concluded that rates of such levels are set by the market, not speculators.

All the speakers agreed that fluctuations in the PLN/EUR exchange rate pose some risks to investors, especially when it comes to long-term business planning. Although they may peg rents to euro, investors have to pay in zloty for labor.