Homes, trains and automobiles

According to Cushman & Wakefield, 8,600 apartments are currently being offered for rent by institutional investors in Poland, while a further 15,000 are under construction. These can be found in Poland’s largest cities as well as in the Silesian conurbation. As Michał Gruza, a lawyer on the real estate and construction team at CMS, tells us, the first PRS developments in the country were built next to offices and tourist destinations. “This is understandable. In the initial stage, rental apartments were a niche product. They were often exclusive and targeted at business clients. Investors, meanwhile, were considering various options for commercialising them and separating them into long-term and short-term rentals,” he recalls. However, as time passed, investors began to see the potential of other districts in cities, although they still needed to fulfil a host of requirements in order to attract the necessary capital. “One such requirement for both investors and potential tenants has always been access to public transport and the time it takes to travel to the centre of the city, both via public transport and by personal means,” points out Karolina Furmańska, a senior residential analyst for capital markets consulting and research at Cushman & Wakefield. Other important factors for developers have included the price and availability of land as well as (yet again) adequate public transport connections. Karolina Furmańska shows this by referring to Cushman & Wakefield’s own research into the preferences of both current and potential tenants in the largest cities. For around 86 pct of those surveyed, the quality of the local public transport is crucial. “What’s particularly important is that the public transport does not experience significant delays, even during rush hours – and this includes the rail links,” she reveals. Green areas and places to relax can also make such developments more attractive as well as access to nurseries, schools and stores. “The choice of a PRS location is also affected by what developers offer, When the demand for buying apartments slackens, developers are prepared to sell to PRS investors – even entire projects, and these are often located on the city’s outskirts,” explains Michał Gruza of CMS. Dariusz Węglicki, the country manager for Catella, also emphasises that the number of projects in city centres is very limited and this results in higher prices and lower profits. “Higher rents do not always correlate to higher purchasing prices. Furthermore, districts that are far from the city centre are often well connected, and so many tenants who are used to working remotely won’t have to spend every day sitting in traffic jams on the way to work,” he says.

If not the centre, then ….

Karolina Furmańska concurs that a large number of current and recent PRS projects are not in the very centres of cities. “For example, out of the 50 developments in Warsaw, both completed and under construction, only six are located in the centre of town. The largest number can be found in Mokotów (10), Praga Północ (9) and Wola (8) districts,” she says, while also making the point that PRS sector in Poland has not exclusively restricted itself to prestige locations since its emergence. “The first player was Fundusz Mieszkań na Wynajem, set up by BGK, which was intended to increase apartment rentals, improve the mobility of Polish people and fill in a gap in the market. Its first projects were located next to metro stations (such as Żoliborz and Bielany), but also in locations such as Praga Południe and Piaseczno,” she points out. Now companies such as Heimstaden Bostad and Atrium European Real Estate are developing in even more peripheral locations, including Włochy district. “Similar locations, such as Ursynów, Bielany and Służewiec, cannot be seen as central locations but have still been successful, as the apartments offered there are fully rented out. The high interest in the area that came to be known as Mordor [editor’s note – the nickname for the Służewiec office basin in Warsaw’s office district] is due to the opportunity to acquire land and projects at bargain rates,” explains Karolina Furmańska. But where has that left investors? Artur Kaźmierczak, the partner at Syrena Real Estate responsible for PRS, has not written off the outskirts of cities, but such locations have to meet very stringent conditions. “They have to be near places where people work, such as office centres or large hospitals – and these are not always in the city centre – or they must have good public transport. It is also beneficial for such areas to have good links to the centre of town or to other places from where tenants can make their way to work, which don’t necessarily have to be in the centre. Everything depends on how a particular city functions,” he insists, but also makes the point that there are still differences when it comes to projects on the outskirts that meet such conditions. “Of course, we look more favourably on those that are better served by local infrastructure or amenities for tenants than those where such amenities are only just being created. One example in Warsaw would be Kabaty, which even if there was no metro to this district it would still be more attractive than the former industrial part of Ursus or far-flung Białołęka,” claims Artur Kaźmierczak. He also draws attention to what the definition of city outskirts means, as investors are mainly – if not exclusively – interested in locations on the official boundaries of large cities. “A project in Pruszków or Oława, which in theory could be classified as on the outskirts, can be a particularly difficult proposition for an institutional investor. The satellite towns of large cities are ruled out straight away, even though we are well aware that they have the potential to be highly attractive to individual investors,” comments Artur Kaźmierczak. Resi4Rent is also alive to the potential of non-central locations. “We have developments in our portfolio that are far from the city centre but still attractively located not far from business centres or colleges or with easy transportation links to them. They are always near metro, bus or tram stops and have service and recreational amenities nearby, for example, Poznań-Jeżyce, Kraków-Bonarka and Warsaw-Woronicza,” reveals Sławomir Imianowski, the CEO of Resi4Rent. He also makes the point that all the company’s projects fit into the 15-minute city ideal. “This concept meets the needs of younger generations who don’t want to spend a lot of time in traffic jams on the way to work and would prefer to use municipal infrastructure, like public transport or bicycle paths, as well as attractive green areas for spending time with their families, friends and pets,” he explains, adding that most of Resi4Rent’s tenants are supportive of such environmentally friendly concepts and use public transport, their own bicycles or electric scooters. Only 23 pct use car parking spaces.

What next?

Agata Jurek-Zbrojska, the partner that heads up the real estate and construction team at CMS, believes that we are still at the start of the development of the rental apartment sector and that we are going to see it grow over the years to come. “This is due to a number of economic and social factors. The PRS sector is set to differentiate and divide, for example, into co-living and micro-living. Each of these segments will be targeted at different groups with differing needs, and so they will find different locations attractive,” she says. Karolina Furmańska of Cushman & Wakefield also draws our attention to the projects that are being planned and points out that they are going to appear not only in Warsaw’s suburbs, but also in Wrocław, Poznań and the TriCity. “On the one hand, the greater the number of PRS projects on the market, the more they will clearly diversify; while on the other, the financial situation of Polish people and the current generational changes underway could mean that the tenant profile will undergo permanent changes. Family locations, where apartments are larger and cheaper, are going to enjoy the greatest popularity,” she predicts. Dariusz Węglicki believes that the market is going to pick up steam sooner rather than later. “Having talked with several investors, in the second half of next year there’s going to be a substantial growth in the market and the number of transactions, most of which will be forward purchasing agreements. 2024 will see the first portfolios put together by the developers emerging on the market and this will lead to a marked acceleration when it comes to the number of transactions. One key question is whether the government will introduce half-baked populist policies to regulate the PRS market,” he says. Agata Jurek-Zbrojska also draws attention to the need for the sector to be well regulated. “We can expect certain changes in this regard and let’s hope they don’t hinder the development of the market. I have to draw attention to the fact that rental agreements in Poland are currently safe and suited to institutional rentals, and so they also make secure development possible. What we can wish for when it comes to regulation is faster planning and spatial management, because many urban areas have outdated plans or lack them altogether. This makes planning these projects difficult. ESG regulations are going to be important for environmentally-friendly construction and meeting people’s social needs. Issues such as the provision of affordable housing also cannot be ignored when it comes to the development of this sector,” she concludes.