MIPIM 2010, Lesson no. 2:Investor’s attention is focused on Poland. Why it looks better than Romania today

The “investment clock” of CEE countries

As many major European investors explain, the previous Real Estate expansion on the Central Eastern Europe (CEE) was clockwise: It started from Poland and then Czech Republic followed. Slovakia and Hungary were the next ones to join the party. Every phase of this “Real Estate invasion” lasted for several years, as the “clock” was moving as well. Before the investors to enter in a new market, they had previously made sure that they had established a solid basis on the previous country. Eventually in 2004 – 2006 Romania’s and Bulgaria’s turn arrived as well.

Several experts noticed that when a new country was becoming “the hot spot” for investors, the previous one was reaching maturity. Prices stopped rising, the market was more mature and the circle moved to the “frozen” period, if not to a downwards trend. So while the Romanian market was… exploding, the Polish one was more or less stable, the Hungarian one was falling etc.

MIPIM 2010 sets the new start

This year’s exhibition had less visitors comparing to 2009, more skepticism but also some clear messages:

• Most people bet that 2011 will be the year when we will be “busier” and investments volume will rise.
• Investors are focused on their own markets. England, France and Germany attract the majority of cross border transactions in Western European markets.
• The ones who know insist that it is easier to go for fund raising in USA than Europe.
• The criteria for an investor to choose an investment are very strict.
• The most popular words were “country risk”. For the moment most of the investors would avoid moving Eastwards. Except…
• Poland. The “star” of this year’s MIPIM. Looks like the “investment clock” started its move again…

Why Poland became again the no.1 investment destination between CEE countries?

The exhibition was really quiet, except the part dedicated to Poland. Suddenly most of people were talking about it, asking for projects, opportunities and deals. Looks like a new “circle” starts. But why did this happen this year?

• Poland was one of the very few countries which maintained an economic growth even during 2009. +1,5% sounds appealing, when almost every other country was down.
• The country is considered “safe” for someone who wants to find bigger opportunities than his home market.
• It is very close to Germany and it has many advantages because of this (German investments worth tens of billions of euro). In the same time I was told that Polish people want to prove that they are not inferior comparing to Germans and other big countries. And they try this by increasing their productivity.
• The country is big, with many big cities and plenty of options for an investor.
• It looks like there is also a supply of interesting projects to be sold.
• The Real Estate market looks organized.
• The legal frame is good and the business environment is considered very good.
• There is strong potential for the years to come, but some already wonder if it is late to enter in the market.
• Last but not least, the expected European Football Cup organization (2012) has increased the country’s optimism and mainly its “prestige’ in the eyes of foreign investors. Psychology is always important…

Romania versus Poland: What is missing from the country’s Real Estate market comparing to the “hot” Polish one?

• Romania is big, but comparing to Poland it is small.
• The market used to be completely disorganized and this needs time to change. Polish Real Estate market looks better, at least nowadays.
• I asked for their level of expertise and professionalism, but I did not receive any major negative feedback for Polish Real Estate professionals. We can not claim the same for Romania (thank God there are plenty of exceptions).
• In Romania, we still live in the period when most of the projects are frozen, postponed or canceled. Just at MIPIM I calculated over 50 Polish projects, available to attract investments.
• Romania’s supply of well priced, good properties is limited, even after the crisis.
• Poland arrived at MIPIM very well organized. Cities and regions had their own stand, which looked just… fine! Many companies were there too, plus too many multinational players focused on their Polish activities. Romania’s presence was not good.
• Poland is considered “ready to absorb” new major investments. Romania is not.
• Poland looks like “the first step to East”, while Romania used to be “the last”.

Definitely Romania is not Poland. Frankly, except the improvement of seriousness and the increase of professionalism, the business environment is not so bad in Romania too. But the clock is set to the beginning again and Poland is the first one to benefit.

PS. I also heard people claiming that Poland rose too fast and it will soon be overheated again. Let us wait and see…

On Tuesday: Where does Romania stand in the European Investment map?

Who invests in Romania today?

On Wednesday: Memories from Cannes