A balanced approach and creative thinking make ING a leader among developers
ING Real Estate Development has been active on the Czech market since 1990. The company opened a Prague office in 1997, and has been busy in local residential, retail and office development ever since. While most of ING’s projects have been in Prague, the company is starting to expand to other Czech cities. It completed a mixed-use building in Ceské Budejovice in 1994, and is currently working on a retail complex in Liberec.
In Prague, ING is busy with the Nová Liboc residential project in Prague 6, and is offering more than 180 apartments and four villas in the A7 Arena Holešovice Brewery, a mixed-use office and residential project in Prague 7. ING Real Estate Development Managing Director Ludik Schmidt sat down with The Prague Post recently to talk about the company’s past, present and future on the Czech real estate market.
The Prague Post: Tell us about some of your current projects.
Ludik Schmidt: We are currently expanding our activities in three property segments — residential, retail and office developments. I believe we are one of the market leaders in residential and retail, and we intend to continue our business expansion throughout the Czech Republic.
Currently, we are working on a shopping center in Liberec called Nisa. We are redeveloping an existing building and doubling the size, adding more retail and leisure activities and enlarging the parking. It’ll be one of the largest shopping centers in the country, and definitely the largest in the region at 50,000 square meters [538,200 square feet].
In Prague, we have about 1,000 residential units under construction and are looking for more opportunities. We are also completing an office and residential complex in Holešovice. Another large project is the redevelopment of the Masarykovo railway station. We are also working on new office projects, and in general aim to have comparable investment volumes between our residential, office and retail developments.
TPP: Why the focus on three market segments rather than one?
LS: Our presence in all these segments helps to cover the market and balance the business. If one segment slows down, like the office market did a few years ago, we have the other segments for balance. The whole property market is extremely competitive; there’s enormous competition in all products. The Prague market is hot, and there are quite a few significant parties we have to outperform.
Not only in the Prague market, but also in larger Czech towns, we believe there is an opportunity for good companies to deliver good products. We want to expand all segments, and are actively seeking new opportunities. It’s not necessarily about volume, but we prefer properties that are well-located and attractive to the market.
TPP: What are some of the challenges you face?
LS: There’s a lot of competition, a big run for the best spots. I don’t think the market has ever been as competitive as it is now. To outperform, you need invention and creativity.
The planned increase in VAT at the end of 2007 will also affect the residential segment. I think there will be a slowdown, and it’ll start before 2007. Properties that are currently under development and may not be finished by then may face some difficulties. That part doesn’t concern us, as we’ve planned to finish all current properties before the increase. The effects may only be short-term, but we have to be prepared. The well-located commercial properties will remain attractive to investors, but it will depend on interest rates, the rising attractiveness of other East European markets and other factors.
TPP: How does the Prague market compare to others in Eastern and Central Europe, like Warsaw or Budapest?
LS: Prague benefits from being central and from its beauty and charm. Many companies have decided to move here because it’s a nice place to live.
Each market has its pros and cons. Warsaw and Budapest are larger cities, so to some extent that makes for a larger market. Prague offers many positives to developers and customers. It’s an especially attractive target for investors, and I believe it’ll remain that way for at least the next couple of years.
TPP: ING Real Estate is a worldwide company. How does your branch work with headquarters?
LS: We have a very positive relationship with the ING Group — we deliver good results! We are autonomous in judging projects; if a project makes sense, we submit it for approval and they provide financing. We are independent in making decisions on structures, concepts, etc. Internal advice and support is available as needed, but the decision-making is local. Because we are part of such a big group, we have excellent access to financial and other resources and have a good chance to grow further as a result of that backing.
TPP: Where do you see the Prague real estate market heading?
LS: The residential market is continuously growing. There is more and more demand for quality, and some of the products that have sold in the past few years will be perceived as secondary. Customers are making more subjective decisions, looking at design, quality of materials and location. There will always be a segment for luxurious, well-located properties, but preparing any development will require lots of discussion about whom to target. In the past, you may not have needed such distinction — if you had a reasonable spot, quick-build and it was sold. We’ll all have to think about what we will offer to customers [to ensure that] we succeed.
The retail market is getting dense, but there’s still room for either central or well-established locations. The competition is to secure a good location; different concepts must be considered if the location is secondary. There’s room to grow, but you’ll need something different to attract and keep customers.
The office market is all about location, location, location. Certain areas in Prague will always lease and sell well — Prague 4, the center between Prague 1 and 8, and some parts of Prague 5.
TPP: What about outside of Prague?
LS: Eventually, there is going to be more demand in the residential and office markets. It’s already happening in the larger towns like Brno and Ostrava. The question is how fast demand will develop, and when.
TPP: What is ING’s business philosophy?
LS: We want happy customers. We want to be distinct from the competition in quality and in delivering long-term value. We try to be fair and keep our promises, even after the transaction is completed. If we sell the flat or the commercial property, that doesn’t mean the book is closed. We will support the buyer and continue to be in touch. Giving and being reasonable pays back.
TPP: And how would you describe your business strategy?
LS: Selective shopping — not buying everything that comes by. A very important part of it is conceptual thinking. No matter what you are developing, you have to look at the site and ask what the customer wants there. It’s really thinking individually about each product; there’s no formula you can apply. You have to consider design trends, demographic trends and what will appeal to the customer’s lifestyle. You must be flexible and creative and be able to speak to your customer, so your project will stand out among competing ones. Look at the project like a customer and give it your best shot.