Poland Residential market ready for consolidation

The Polish residential market, one of the largest in Europe, is on the verge of significant consolidation. Over the past five years, Poland accounted for 52 pct of the total housing supply in Central and Eastern Europe. The scale of investment is enormous – in the Warsaw region alone, almost as many apartments were built during this period as in all of Bulgaria.

In 2024, nearly 200,000 apartments will be completed in Poland, slightly fewer than in Germany (215,000) and significantly more than in the United Kingdom (184,000). Despite cyclical economic fluctuations, the sector retains high demand, stable financing with large developers of sound standing.

At the same time, the market remains highly fragmented. Hundreds of residential developers operate in Poland, from listed leaders to small, often family-owned companies developing single projects.

Acquisitions - the fastest route to expansion

Under such circumstances, mergers and acquisitions become the easiest way for companies to quickly scale their operations and enter new regional markets.

Dom Development acquired Euro Styl and Euro Styl Development in 2017, and then acquired Sento four years later. Due to both of these transactions, the developer quickly and effectively expanded its operations into the Tri-City and Krakow. While Sento's assets were absorbed by DD, Eurostyl, due to its solid brand and reputation in the Tricity market, continues to operate under its existing name.
Krystyna Pietruszyńska, director of living investments, JLL Poland

Acquisitions allow companies to bypass the barriers typical of organic expansion – building a local brand, team, or network of business relationships. Buying an existing developer will give immediate access to the market, projects, and clients.

Land: the Most Valuable Asset

Access to attractive land in major cities is also a growing challenge for developers.

M&A transactions are a strategic move, allowing for the rapid and rapid expansion of one's land bank. These are often plots purchased by the acquired company many years earlier at significantly lower prices, providing a significant cost advantage and securing a project portfolio for many years to come.
Katarzyna Żółcińska, counsel at Crido

Larger scale of operations and new market segments

Consolidation also allows for economies of scale – from better conditions with contractors to easier access to financing. Develia chose this path, purchasing the Polish branches of French development companies Nexity in 2023 and Bouygues Immobilier two years later for a total of over EUR 166 mln. Through these acquisitions, Develia not only expanded its land bank and entered Poznań, but also significantly expanded its operations in cities where it was already present.

Mergers and acquisitions can also be a way to quickly enter new market segments, such as PRS. This strategy was adopted by the German investor TAG Immobilien, which acquired Vantage Development, creating the Vantage Rent platform, and then purchased the developer Robyg, expanding its operations in both the apartment sales and rental segments.

Succession – a key driver of change

One of the most important drivers for the sale of development companies in the coming years will be succession issues.

Two-thirds of Polish family businesses are managed by the first generation, so succession will be a significant challenge for the Polish economy in the coming years, especially since while 85 pct of seniors plan to pass on family businesses to the next generation while no more than 15 pct of successors are interested in taking over. This creates a significant risk to the continuity of these companies, but at the same time, it presents a unique opportunity for strategic investors.
Krystyna Pietruszyńska.

Joint Ventures as an Alternative

Companies are increasingly turning to joint ventures, which allow them to develop projects jointly with a financial or industry partner.

Over the past decade, with apartments selling quickly, developers financed land purchases primarily with their own funds, and financed their ongoing operations with customer deposits in escrow accounts. However, longer sales cycles mean a greater need for capital, as well as debt. For many smaller developers, which may have limited access to bank financing, the natural direction is to seek a partner to help develop a project.
Katarzyna Żółcińska.

Such partnerships have already been formed by Develia and Grupo Lar, Grupo Lar and Hanner, ECE and GH Development, and Echo Investment, Archicom and AFI. In many cases, joint ventures become a first step towards further market consolidation.