Expo Real, Germany's growing real estate investment fair, drew sector professionals from all over the world-and this time Poland got plenty of attention.

More than 17,000 real estate pundits, professionals and observers from 30 countries set new records for attendance and the number of exhibitions at the Seventh International Real Estate Exposition in Munich, Oct. 4 to 6. This year's Expo Real event was not only the biggest to date, but became something of a debutantes' ball for new EU states, acting as a showcase for what the region has to offer. And the belle of the ball in Munich was Poland.

The official statistics painted a booming fair, with attendance up 10 percent on last year's figures at 17,700, and a 35-percent increase in visitors from outside Germany. This year's Expo not only broke records, but marked a return of confidence in the real estate sector. Moreover, with Poland, the Czech Republic and Russia all in the top ten of visitors' country of origin, Expo Real established Central and Eastern Europe as a region of intense interest to global investors. Poland's presence at the event could not be missed as it was well received and represented a concerted effort by not only sector players, but also Opportunity Poland, to promote the country as a competitive and attractive place to do business.

Among the many discussions and presentations, the first day's discussion at the Forum area was devoted entirely to "EU Newcomers" with Poland the first to take the stand. In a panel discussion designed to present the country not t rough rose-tinted glasses but in the harsh light of straight-talk, speakers from Warsaw's real estate circles spoke frankly of the country's strengths and weaknesses and answered questions from thefloor on a wide range of issues. The consensus was that the downward trend has come to an end and that the market has turned a corner.

"If we put one of our properties up on the market, we'd have 20 offers within two weeks, " AIG/Lincoln's Brian Patterson told attendees. "We believe we'll sell all our office buildings at around 7 (percent yield) and below 7 [percent] within 18 months. I think warehouse product is going to be in the low eights quite soon."

Patterson pointed to the logistics and warehouse sector as a good indicator.
"In the warehouse market, two years ago there was probably a 25 percent vacancy rate, in six months it was gone during the EU lead-up," he said. "I would say most of the warehouse space in Warsaw is either 95 or 100-percent leased (and) all our product in Poland is 100-percent leased. Usually there's a lag between the industrial and office markets [but] industrial is clearly back and going strong and warehouse rents in Krak6w, Katowice and Poznań are 40 percent higher than they are in Warsaw now. The office market is still soft, but if you look at the absolute amount of vacant space, its not that much; one year's strong demand and it's all gone."

The panel was unanimously upbeat on the market's rebound in the six months since EU accession and equally on the foreseeable future of the real estate market as well the economy in general. Von der Heyden Group Chairman Sven von der Heyden was optimistic about current trends.

"We signed one lease in 2003 and so far this year have signed 14 leases," he said. "Poland as a country has great potential to grow and that's why we've been there for 14 years."

While confirming the upturn in both take-up and investor interest, however, von der Heyden struck a note of caution on the subject of too-much-too-soon in investment activity.

"The total stock of modern office space is 1.2m square meters; this represents the vacancy rate of Frankfurt," he said. "What worries me a bit is this wave of investment. Being German, I've seen how we failed big-time in Eastern Germany and I hope we don't duplicate this and that all this crazy money is not chasing too little product [... I The historic aggregate value of real estate sold in Poland is about EUR Ibn, which is not a lot-single buildings in New York go [for that much] and there's about EUR 5bn chasing product in Poland; that's a clear imbalance."

Despite the note of caution, it was evident from the panel discussion, and also from conversations with not only the prime movers of Polish real estate, but also with foreign investors, that interest in the region and in Poland in particular is keen, and growing. The panel didn't restrict itself to positive PR sound-bites, however. The panel neither shied away from difficult topics, nor minced words when it came to discussing issues such as the lack transparency in public administration, problems with restitution claims and title insurance, or the much-hyped problems with planning permission and building permits. When questioned about the recent problems encountered by ING Real Estate's flagship Złote Tarasy mixed use project in downtown Warsaw, brought to a standstill by an environmental group, DTZ Managing Director Alan Colquhoun was keen to emphasize that the development's location made it a unique case and that it didn't represent the norm in Poland. CMS Cameron McKenna partner Paweł Dębowski, however, was more pointed with his views. While declining to comment on the Złote Tarasy case specifically, for professional reasons, he had plenty to say about Przyjazne Miasto, the organization responsible:
"I know this particular eco-terrorist organization," he said. "These people simply come to developers and demand money for not objecting to their projects. This is an absolute abuse of Polish environmental law. These people simply use the [environmental] law as a mechanism to say, 'if you don't give us a million dollars we will stop your project; we will be obstructive."'

Dębowski had good news, though, for developers and investors alike.
"This has been realized and there is soon to be a change in the law to prevent such organizations from harassing developers and demanding ransom payments," he said. "The legal basis for such action will be removed soon," he said, continuing, "in terms of legal obstacles and investment risk, I don't see any difference [between Poland and other European countries in terms of risk profile."

Reduced risk, increased profitability and political stability, combined with higher yields than in neighboring markets were reiterated as strong points of the country at a second presentation on the last day of Expo. Sven von der Heyden moderated a session for attendees, organized by the Opportunity Poland organizations group of likeminded businesses attempting to redress the country's poor public perception beyond its own borders. Following an overview of the country and market, speakers gave a balanced and frank picture of the country's pros and cons as a place to do real estate business and answered questions from the floor. One interesting point, raised by architect Andrzej Michalik, was that public-private partnerships (PPPS) are a potentially lucrative opportunity which have yet to become an element of Poland's investment profile. PPPs represent a huge opportunity for private enterprises to develop long-term partnerships with the public sector for the rebuilding of schools, hospitals and other public facilities, he told attendees. According to panelist and lawyer Pawel Kuglarz, the PPP law should be passed by 2005, putting an end to the ad-hoc way in which such developments have, to date, had to bypass legal obstacles.

Another theme which echoed throughout the three-day event was that of Poland's human resources potential. One of the country's great prospects according to DTZ's Colquhoun is the fact that Poland has one of the youngest populations in Europe and that the demographic profile is continuing to change to the benefit of business. Not only is the younger generation keen to study, work and shop, he said, but in 10 to 15 years many of the current public officials will have retired or died, giving way to a more business-friendly generation of highly educated and multilingual Poles with a more modern outlook and a will to create change. That same age-group and its prospects were also highlighted by both panels as a key market edge to Poland, making it attractive as an investment location both now and in the future.

A group of Polish hostesses employed by Opportunity Poland to distribute information certainly attracted attention, and were a good advertisement for the country's human resources, though more was made of their looks than their talents, and the fact that they all spoke at least two languages and were studying for higher qualifications was overlooked by most attendees. Despite comments from some at the event that the "hot model" look may have lowered the tone of an otherwise very professional and well-managed national stand, the hostesses gave a fresh and youthful feel to the proceedings and certainly caught the eye. Opportunity Poland's van der Heyden is hoping to find a central theme for next year's stand to draw in passersby and focus attention on the real economic benefits the country has to offer. In the meantime, it is being made progressively clearer to foreign businesses that Poland is more than just a pretty face.

Ewan Jones