News Article alternative build-to-rent Poland PRS report residential
by Michał Poręcki | Report

The development of the Private Rental Sector (PRS) in Poland could have been faster, but it is constantly being slowed down by high demand in the residential market. Developers are not interested in selling the whole building to investment funds, because margins and profits are bigger with sales to individual buyers. However, their faith in high returns and great growth potential of Polish rental market is shared also by developers, which are constantly coping with a lack of good plots permitted for residential development in spatial plans. And buildings with services, like senior and student housing or apartments to rent as a service can be constructed almost everywhere.

A game for seasoned players

One of the unquestioned leaders in growing PRS market in Poland is Resi4Rent, a subsidiary of Echo Investment, the listed property developer. Its portfolio already includes more than 1,200 units in three cities, Wrocław, Łódź and Warsaw, with another 1,400 under construction or in planning in Warsaw, Poznań, Gdańsk and Kraków on plots recently bought from Tesco Group. By 2023, Resi4Rent aims to grow its portfolio to about 7,500 units. What is noteworthy is the fact that the apartments will be offered as a subscription service - they will be rented directly from the company for 12 months with the option to renew. According to Echo Investment representatives, this model may be attractive for singles, young couples and new families – people who cannot afford to own their own apartment or simply don`t want to. Thanks to the product-as-a-service formula they will be able to easily change their apartments to live close to their school, workplace or in the desired area, where prices of the apartments are out of their reach.

Another major player with serious plans is German TAG Immobilien, which acquired a year ago Vantage Development, one of the largest developers on the Wroclaw market. With such acquisition TAG plans to build 8,000-10,000 rental apartments in Poland under the brand of Vantage Rent. The first one should be delivered in 2021.

High activity is maintained by Catella Polska, a branch of the Scandinavian investment fund. After the purchase of a package of apartments in Warsaw’s Zlota 44 apartment tower and a whole investment Pereca 11 in Warsaw (with 193 apartments), Catella bought Trio Kraków, mixed-use project of apartments and student accommodation and declares investing in student housing projects in Gdańsk, Wrocław and Warsaw.

But not only residential developers and investment funds are investing in PRS sector: Atrium Real Estate, one of the largest owners and operators of shopping centres in Poland aims to build a portfolio of 5,000 apartments for rent in Warsaw over the next five years. Together with LRC Group, it bought residential skyscraper with 900 rental apartments that Golub GetHouse is going to build at 59 Grzybowska Street in 2021.

Sunny weather for PRS…

The forecasts for residential rental in Poland remain pretty sunny. The economy remains strong, as well as stable unemployment of 6%, despite the pandemic turmoil. The mythical „apartment gap” remains difficult to assess, but according to different sources, between 800,000 and 2 million apartments are missing on the market. According to „Property Index. Overview of European Residential Markets” research by Deloitte, in Poland, there are only 386 apartments per 1000 people. It is one of the lowest results in Europe – for example in Portugal and Italy there are 581 apartments per 1,000 people or 511 in Germany. Investors are also expected to withdraw the capital from pandemic-troubled retail, hotel and even office property and will look for opportunities on the rental market, which – before the pandemic – guaranteed 5% return on investment.

…But with some clouds on a horizon

A great boost for market development could be an establishment of legal frameworks for real estate investment trusts (REIT`s), allowing small entities and individuals investing in residential and commercial real estate. Plans of REIT creation has been announced by politicians more than two years ago, but not much has been done since then. Perhaps it is a good moment to dig out these plans, as some clouds are gathering over the rental market: as universities remain closed, students are withdrawing from the rental market, continuing their studies remotely from their parents` places; outflow of Ukrainian workers may be a problem too. But the greatest issue is the threat of economic slowdown and rising unemployment. According to real estate agencies, the rental prices has already fallen by 5-10%. With this number rising, the whole attractiveness of the rental market in Poland may bleak in the eyes of investment funds.