CITY GREEN COURT
Skanska Property will start construction on its City Green Court project in Prague 4-Pankrác toward the end of this year. Skanska Central Europe Holding bought the 9,000 sqm site from ECM in May for CZK 200m (€7.87m), whose name for the project previously was City Court, with planning and construction permits.
Skanska project manager Pavel Knězů says the only changes to the building will be the addition of green technologies, that will help it meet LEED certification, without requiring changes to the existing permits.
City Green Court will offer 15,000 sqm of A class office space and is scheduled for completion in the first half of 2012. Knězů says the green standard will make the project more competitive, as Skanska Property will be able to charge rents similar to those in other projects in the area, while lowering operational costs by 25 percent.
Britta Cesar, Skanska Property’s CEO, says,“We are today able to construct energy-efficient buildings, which are not more expensive compared to the standard ones.”
Construction will be financed by Skanska’s own equity, which means the project can start on spec, or with few preleases, but leasing manager Alexandra Tomášková isn’t worried.
“In 2012 there will be hardly any other office building coming on the market, so we are convinced it will attract enough interest from potential tenants,” says Tomášková. Skanska is currently in the process of choosing the leasing agents.
FURTHER TO FALL FOR CZECH RESIDENTIAL
The second residential auction organized by Gavlas auction company and Professionals in Prague at the end of May lacked the drama and market insight some had hoped for. Just 56 buyers came to bid for 30 homes in 13 projects, and the gavel never even came down on six of them.
All of the apartments developer Finep put on sale in the British quarter (Stodůlky, Prague 13), Nová Harfa (Prague 8) and Malý Háj (Prague 10) sold. But AAA Realitní fond units offered at Dobronická (Libuš, Prague 4) and ED Group’s flats in Prague 3 attracted no interest whatsoever.
The 40-percent discount off catalogue prices was more realistic than in the first auction (which offered 60 percent off), but the decision may be behind the lower turnout.
That’s the opinion, at least, of Ivo Gavlas, owner of Gavlas auction company. “Last time, some of the 131 bidders really believed they could buy an apartment at 40 percent of the catalogue price,” he says.
Some flats ended up being sold for up to a 30 percent discount on the developer’s catalogue price, but with others, like those by Finep, the discount was minimum. One seasoned market observer believes Czechs should be expecting another wave of price reductions on properties, as new forced auctions start hitting the market. “The number of enforced auctions of homes has risen by 300 percent year-on-year in 2010,” he says.
DOM DEVELOPMENT SALES BACK TO PRE-CRISIS LEVEL
Dom Development’s first quarter results for 2010 showed the company is Warsaw’s residential sales leader, with a 15.9-percent share of the market. The company sold 343 flats in the first quarter, a major increase from the 106 it sold during the same period in 2009. The company’s sales are back to the levels achieved in the first half of 2008 before the collapse of Lehman Brothers. The company’s turnover and net profit figures, however, have yet to catch up with its increasing sales. Dom Development’s turnover decreased by 16.1 percent to PLN 159.9m (€39.84m), whereas its net profit shrank by 71.6 percent to PLN 11.8m (€2.94m). “The lower profit figures are because sales are still dominated by low-margin projects carried out during the crisis,” says Dom Development CEO Jarosław Szanajca. Sales on the high-end project Grzybowska Park, which delivered last December, are stalled. Only 40 percent of the project’s apartments have sold.
IPD: INDUSTRIAL SECTOR SUFFERED MOST IN 2009
Investment on Central and Eastern European commercial property markets delivered a -6.5 percent total return in 2009, according to the IPD CEE Annual Property Index, compared to a positive 0.6 percent in 2008. The IPD said that this was the first time the multi-country index – made up of 429 properties in 27 portfolios worth €9.1bn from Poland, Czech Republic, Hungary and other CEE countries – delivered negative annual total returns in its five-year history. At the headline sector level, the top performer was offices with a total return of -5 percent, followed by retail at -5.2 percent. Industrial returns were the worst sector, managing just -9.7 percent. According to IPD, Poland was the best-performing market followed by the Czech Republic. Hungary delivered the worst returns. Poland had the steepest capital falls but highest relative returns in the region, with annual capital depreciation at -10.6 percent, according to IPD. The industrial sector suffered the most in 2009 with rental value growth sitting at -11.2 percent, while yields moved out by 130 basis point to 8.6 percent. Capital depreciation in the industrial sector was at -15.5 percent, while retail was at -8.7 percent and office at -7.6 percent.
BONARKA UNREST ALLEGED, UNCONFIRMED
There’s allegedly unrest among the tenants of Bonarka City Center, a 90,000+ sqm retail development from TriGranit, which opened in November last year in Kraków. Some tenants attracted the attention of the local media, blaming Bonarka management for an ineffective marketing campaign that now has tenants suffering poor turnovers, even 70 percent lower against the figures assumed on the mall’s opening.
According to local press in Kraków, there are about 100 disgruntled tenants in the scheme, though not one name surfaced, besides Jacek Wąsik, operator of a McDonald’s outlet in Bonarka. Wąsik said that his outlet’s “turnovers [were] far worse than predicted,” but refrained from providing actual figures, citing “corporate practice.” Asked to comment, McDonald’s headquarters in Warsaw didn’t respond by press time. According to TriGranit, there are only 15 tenants that have become confrontational.
“A new center always has difficulties in the first six to 12 months, and this is nothing out of the ordinary apart from the fact that we are also in one of the world’s worst-ever recessions, and a lot of the tenants also have strain on their existing business and cash flow, which normally supports their new stores through the start-up period,” says Simon Bayley, TriGranit’s chief development officer.
That said, Bayley goes on to say that tenants going public with complaints about the mall, won’t help them much. “We will deal with tenants on a one-to-one basis to provide them with any assistance to get them through this difficult period, if we think it is justified and the tenant is worth helping. But any tenants that have been supporting negative actions against us will not get any support from us,” he says.