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September 2024 Newsletter
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September 13, 2024
The real estate sector is undergoing a profound shift, as highlighted during the recent Places and Spaces event hosted by ULI Poland in Warsaw. The event underscored a growing industry consensus: passive investments are a thing of the past. Speakers emphasized that real estate today demands active management and strategic operations, with increasing complexity driven by emerging sectors such as PBSA and co-living. Discussions revealed how digital innovation, tenant relations, and operational expertise are now key drivers of value in modern real estate.
Marcin Juszczyk, Chair of ULI Poland
On September 5th – a hot afternoon in late summer – many from the real estate world gathered for in the Kinogram cinema within the Norblin Factory for the Places and Spaces event organised by ULI Poland. The event began with a tour of the former factory complex, now transformed into a bustling mixed-use centre with offices, retail outlets and even a food hall and it played the perfect backdrop for the talks that were to follow. This was because the topic that had been chosen for meeting was the importance of operations for real estate. The event kicked of with Marcin Juszczyk, the chair of ULI Poland flatly stating that, “There is no such thing as a passive real estate investment anymore.” Real estate is no longer about simply leasing out space to tenants and collecting rents. It can no longer be purchased as an asset to be forgotten about. It now requires some form of active management.
Simon Chinn, the vice president of research and advisory services for ULI Europe
To expand on this subject, Simon Chinn, the vice president of research and advisory services for ULI Europe was invited to take to the stage. The real estate industry is growing in complexity. Based on industry surveys conducted by ULI and PwC, investors used to concentrate only on the core sectors such as offices, retail and warehouses, but over time their focus has broadened, and more sectors have been added to the list. Nowadays many newer sectors such as PBSA and co-living are outgrowing more traditional sectors and in the opinion of the ULI they will continue to do so. This is clearly illustrated by the arrival of major funds that are targeting such investments such as Blackstone raising USD 30 bn and Harrison Street with a fund of USD 2 bn. “Common themes that are emerging from these capital raising exercises are sectors that have ten times shorter and more flexible leases a fragmented tenant and occupier base and then there’s an acute need for asset management,” he explained.
Carl-Johan Collet a partner of Thylander Gruppen and a co-chair of ULI Europe Operational Real Estate Forum
The mike was then passed over to Carl-Johan Collet a partner of Thylander Gruppen and a co-chair of ULI Europe Operational Real Estate Forum. For him operating real estate is to take a property and target it at a defined set of customers. Then you service those customers as well as you can and by using proptech you can build up a brand. The results of such activities are five-star service and customers prepared to pay more. He illustrated this with a company called Nord Collection. The company began by managing AirBnB apartments, but they soon changed their business model and moved into managing apartment hotels. He stated that the company now has 90% occupancy with half the cost base of a normal hotel company. The company operates no front desk or back offices. Everything is managed digitally. But still the customer service is superb, because if you write an email to them they will reply within a minute from a centralised reception in Copenhagen. Two of their hotels are now among the highest ranked in the city. He described the role of an operator as disintermediating the tenant and the landlord and he stated that this was happening because operators were able to provide a much better product than the landlord.
Carl summarised by saying that real estate was being commoditised and what was important was how landlords reacted to these changes.
Of dogs and burgers
Later he went on to quote Marc Andreeson, who said that software is eating the world. He admitted this remark was made fifteen years ago but added that the real estate industry was about fifteen years out of date. As an illustration he talked of Rikke Rosenlund who founded a company called Borrow My Doggy. She realised that thousands of people were prepared to take care of someone else’s dog for free so she created a website and signed up over 85 people on her first weekend. Although raising venture capital proved difficult, she now has a business of over 4,000 fee paying subscribers. Despite the business being centred around dogs, it is more about building connections between people. He also talked of James Donaldson, better known as Mr Beast, who on November 10th 2020 launched a restaurant serving Beast Burgers. Within three months he had set up 300 virtual stores throughout the US. One of the first real estate industries to be disrupted by the internet was the hotel industry. Its response has been to fragment into a myriad of new brands each to serve a more selectively targeted customer group.
Conall McGuire the CEO of Leach & McGuire
Early birds win the PRS game
Conall McGuire the CEO of Leach & McGuire was next to step up on the podium where he chose to talk about when an operator should be engaged on a PRS or PBSA project. Over the past twenty years his company has supervised thousands of residential fit outs. He stated that there were around 15,000-20,000 PRS apartments on the market in Poland with another 15,000-20,000 coming onto the market. However there are a further 1.2 mln rental units in the hands of single private landlords. If a institutional landlord/developer hires an operator for a PRS project when a building is ready to be handed over, he will have a pre-lease level of 0% whereas according to Conall, a PRS project should start off with a pre-lease level of around 20%. Moreover, it will take many more weeks work before the building can be filled with tenants.
If an operator is engaged two months earlier, they need to prepare the marketing and advertising materials. However, at this stage the building will be in the hands of the fit out company who will most often be reluctant to allow marketing people to traipse round while they are busy trying to meet their deadlines and almost certainly no mock up apartments will have been prepared. If a tenant wants to sign up, you need to already have a rental agreement. And this needs to have been prepared even earlier. When a PRS operator is brought in twelve months prior to a launch he can talk to the interior designers to give them their specifications. Costs can also be cut if the operator takes responsibility for some of the procurement. “You don’t want 200 washing machines arriving on the same day,” pointed out Conall. Indeed, in his opinion, the operator needs to be engaged on a project from day one so that he can be involved in such tasks as specifying the requirements for the architectural design of a building.
(from the left) Simon Chinn, John Gabrovic, Kinga Nowakowska, Carl-Johan Collet, Conall McGuire
Location, location, management
The final formal part of the event was a discussion moderated by Simon Chinn. Carl-Johan Collet and Conall McGuire also came back to the stage, but this time they were also joined by Kinga Nowakowska the COO of Capital Park Group, the owner and developer of Norblin Factory where the event was being held, and also by John Gabrovic, the managing director of the Inspire Real Estate Agency. During the discussion it was stated that Warsaw is at the forefront of how mixed-use developments are managed.
“We are advising outside investors based on what is happening here in Poland. Warsaw really is the epicentre of mixed-use projects,” proclaimed John Gabrovic. It also transpired that proper management is essential in securing bank financing. According to Conall McGuire banks had on more than one occasion made it a condition for investors to work with his company before they would grant them a loan.
However, Kinga Nowakowska pointed out that managing unique concepts comes with risk. “Flexibility is the future so I think everyone has to adapt, including investors and banks. Of course this is a part of risk but it is also a chance to earn more so it’s a game,” she explained. She went on to say that Capital Park organised many activities in their communal space at the Norblin Factory to maintain the life in the centre.
Technology is critical for customer relations. Unique concepts entail a lot of risk which is why we organise so many other activities such as concerts in the summer. Carl-Johan Collet made the point that location was still a major factor, but success was now determined by who has the better operator or who is the better operator. “We see a range of models: the vertically integrated model where investment managers handle operational roles, hybrid models where some functions are managed in-house while others are outsourced, and fully outsourced models where operational management is subcontracted,” he added.
With the end of the panel discussion, we all went out for a glass of wine as well as to make new contacts and renew old ones. You can mark your calendars for November 27-th. That’s when the next Places and Spaces will take place.
A special thanks to our partners for their invaluable support. Your partnership makes these events possible and benefits us all.
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
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ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024
ULI Poland Places + Spaces: Operational Real Estate – September 2024