Investment sites still in demand

The Polish residential market maintained its dominant position regarding price increases and transaction volume over the period. In the first half of 2019 prices were between EUR 370 and EUR 1,380 per sqm in the centre of Warsaw and between EUR 210 and EUR 400 per sqm of residential space outside the central area.

Residential developers are starting to look at land currently occupied by older office buildings. An example of this is the sale of part of the Empark office park in Warsaw’s Służewiec district for the construction of a housing estate.

According to Colliers International, the continuation of positive macroeconomic trends and low interest rates will keep the residential sector in good health. “The investment site market remains active, predominantly in the residential and industrial sectors. However, as prices of apartments have reached record high levels, developers are aiming to meet demand without flooding the market with supply, especially as high labour and material costs continue to shrink their profit margins. Despite the limited supply of readily-available investment sites, land prices in all sectors remain at a stable level,” explains Emil Domeracki, the director of the land department at Colliers International.

The steady increase in the supply of office space and in tenant activity has kept land prices stable. In regional cities prices range from EUR 80 to EUR 310 per sqm, while in Warsaw they are between EUR 400 and EUR 1,150 per sqm. Average vacancy rates are continuing to fall despite increased development activity, but it is not the office market’s high net absorption ratios that are driving demand for land, as most of the current pipeline is being developed on previously secured land banks. At the same time, expanding IT, outsourcing and business service centres in regional cities are continuing to generate demand for investment sites for well-situated class B buildings and business parks.

For the industrial land market, improvements in motorway, sea port and air transport infrastructure are continuing to drive speculative purchases of industrial sites. However, the most significant purchases are increasingly being driven by secured pre-lease agreements. The growing interest in the east of the country has yet to eclipse traditionally popular regions for industrial development, such as Silesia, Central Poland and the Warsaw region.

The high saturation of retail space in major cities is continuing to dampen developers’ activity in this area. However, there is increased interest in the development of retail parks in smaller cities and in filling retail gaps at a local level. Price levels for retail investment sites remain stable despite the low purchase volume.

Zoning and administrative decisions blocking residential development in service-oriented city areas have led to an increase in apart-hotel development. The sale of such units or of shares in them are increasingly replacing apartment purchases as investment opportunities for high-net-worth individuals.