Description
Since the Iron Curtain was lifted at the end of the eighties, western European planners have acquired a comprehensive overview of the conditions for investment and building in different eastern European countries. A fruitful learning process has taken place, both on our part and on the part of the numerous local partners. A progress report for potential property developers and planners can be given on the basis of projects in the Czech Republic and Hungary, whereby experiences in Poland and Slovakia, in spite of differences due to local specificities, can be seen as comparable.
In general, it can be established that the first phase of euphoria at the beginning of the nineties rapidly led to disillusionment, in particular because of the collapse of the economic structures in the satellite states of the former Soviet Union. It was only in the last decade that any new building projects worthy of note came into being there in the context of the expansion of western European enterprises such as Bosch, Audi, and Siemens. Willingness to invest was not based exclusively on the low cost of labor and the aim of secondary mass production. Investment in the high-tech sector was increasingly frequent. This development was due to local firms’ long tradition of technical competence in the fields of electrical engineering, electronics, and precision mechanics. In addition, the fact that only those who produce locally have any real chances on the market applies here too, as it does in many other markets.
In this second phase, it was possible to reflect on new building and usage designs with flexible development potential. Masterplans for new sites both in the countryside and in the vicinity of existing sites were developed far beyond the volume subsequently realized. Besides broad knowledge of procedures relating to real estate, precise knowledge of the country-specific conditions, mastery of the national language and close collaboration with the local property developers, the public authorities and the communities on the spot were just as important. It turned out that it was much easier to gain local support in rural, underdeveloped regions than in the metropolitan areas. From the approval phase onwards, the development and planning concepts were worked out together with local architects and planning offices.
EXAMPLES FROM PRACTICAL EXPERIENCES
Investments in Central and Eastern Europe can be Fraught with Numerous Problems for Investors
• Restrictions on foreign investment
• Murky real estate markets
• Lack of information on country-specific property purchase and ownership laws
• Differences in the taxation and duty systems
• Differences in the legal basis for property purchase and changes of use
As a rule, every investment is associated with the purchase of land.
Although the laws and taxation regulations in the new EU member states correspond to a large extent to those in the European Union, a closer look is necessary when it comes to the details. With the purchase of real estate, it is still necessary to obtain permissions from the national authorities. Purchasing property in Poland, Hungary, the Czech Republic and Slovakia through foreign legal entities is not possible, or only to a very limited extent. Basically, property is acquired by a property association. As a rule, the acquisition of a building site in conjunction with the erection of a building and the creation of jobs is more easily accomplished in undeveloped areas than in the capital cities and urban centres, because the public authorities (up to and including the mayor) will lend their support.
Land Registry Law and Legal Security
In all capital cities and urban centres in Poland, the Czech Republic, and Hungary, almost all the important buildings and plots of land have been recorded in the land register. The risk of restitution and other encumbrances related to legal obligations should be taken into account. In these countries, legal security with regard to real estate law cases is a given, and in other matters related to legal obligations, the risks are low.
Infrastructure – Media Access – Street Connections
Connecting a building site up to electricity, telephone, water/sewage, gas, and community heating, etc., and linking it to roads can be associated with high costs in many cases.
Building Codes and Permissions
The building codes and standards usually resemble the western European regulations and in part were even taken over from the West. The authorities are in most cases very cooperative, as long as the applications for planning permission are made by local offices. The processes involved with obtaining permissions and the duration of a permit’s validity are also comparable with those in western Europe. As a rule, the procedure is easier in the countryside than in the metropolitan areas and urban centres. With industrial facilities, it is particularly important to start making preliminary enquiries very early on, giving an indication of maximum emission values and other key data. In contrast to expectations, accident prevention and health, hygiene and environmental sustainability are often treated very seriously. This is certainly due to the local authorities’ lack of experience in these areas.
Planning Partners
A prerequisite for getting a plan quickly approved and the project having a successful outcome is the choice of a good local planning partner. In addition to professional and qualitative competence, agreeing on German or English as the language of the project is indispensable. The fees are calculated on the basis of the fee regulation for architects and engineers of the respective countries. However, this is not binding, so that individual agreements are the rule. The fees amount to about 35 % of what one would expect to pay in Germany.
Construction Companies
The building industry has undergone a fundamental transformation. At the beginning of the nineties, big state-run operations, a few small private companies, and some renowned construction companies from the West shared the market, but now there is a multitude of private construction companies, large, medium-sized and small. Many of the companies are owned by large international groups of construction companies.
Construction Costs, Due Dates, Quality
Construction costs depend on the type of building and its location, as well as the standard to which it is fitted out. The labour costs are about 20 % of those in Germany, but high-quality materials are more expensive than they are in Germany. For high-quality office buildings using materials that are imported from the West, the costs are approximately as high as in Germany. Average construction costs for a typical industrial facility are about 80% of what they would be in Germany.
In relation to adherence to delivery dates, a significant improvement can be seen. The prerequisite, however, is that the contracts include fines for failure to deliver on time. The quality of the execution has considerably improved in comparison with what it was in the nineties, and can now compete with the quality of execution on the German market.
Originally published in: Jürgen Adam, Katharina Hausmann, Frank Jüttner, Industrial Buildings: A Design Manual, Birkhäuser, 2004.