This year’s value of transactions on the investment land market in Poland is already record-breaking.
The demand for land for commercial investments has never been so high in Poland. Observing the activity of investors, we are looking a boom on the investment land market. The exceptionally large number of transactions recorded in recent months will bring the sector an absolutely record result. According to Walter Herz's estimates, this year’s value of the transaction volume may be almost 60 per cent higher than in the best years of this segment.
The vast majority, about two-thirds of the land is purchased for residential investments. The biggest battle for plots goes on between the investors who build apartments. Land eligible for residential construction disappears from the market immediately. The purchase process is very fast, shortened as much as possible so that the land does not go to the competition.
"Investors have a large amount of capital, which they invest in land. The land is often purchased for cash. Plots of high value are also popular. More and more contracts are signed for amounts that have not been seen before. Purchases of plots of land at prices exceeding PLN 300 million are being finalized. At the same time, prices are constantly rising. The increase in rates is visible even in the semi-annual statement," says Bartłomiej Zagrodnik, Managing Partner / CEO of Walter Herz.
"Investors are actively looking for land, both on the Warsaw market and in the largest regional cities. Never before have regions enjoyed as much interest as they do now. The plots of land purchased are often intended for long-term investments. Investors are eager to buy land in Poland, because compared to Europe, the main markets in our country offer land at much lower prices. Investments in the real estate market, on the other hand, bring higher rates of return in Poland than in other European Union countries," explains Bartłomiej Zagrodnik.
A huge scale of transactions in land for housing
The size of some investments is impressive. One of the largest transactions recorded on our market was the recent purchase of 62 ha of factory land in Warsaw's Żerań by Okam. Preparing the construction of a multi-stage investment, which is planned in this location, will take several years. Meanwhile, Walter Herz became involved in the process of commercialization of warehouse, production and office space located in the premises of the former car factory at Jagiellonska Street in Warsaw.
A few weeks ago, White Stone concluded a land purchase transaction in Warsaw's Bielany district, by the Mlociny metro station, thanks to which it became the owner of 200 thousand sq m. of land for a total cost of over EUR 23 million. Among transactions of a similar scale, there is also the purchase of a 12 ha plot in Warsaw's Wilanow district for PLN 263 million by Robyg, with a construction potential estimated at 104 thousand sq m. of useable floor space. This year, Vantage Development, a developer from Wroclaw, has acquired a 4.72 ha plot on the border of Gdansk’s Center and Młode Miasto districts for PLN 222.5 million. Grupa Geo from Cracow has bought land in the area of Wilda district in Poznan valued at PLN 206.1 million. Expensive acquisitions also apply to companies. The Goldman Sachs Group has just put up for sale real estate developer Robyg, which has one of the largest land banks in Poland, with a sales potential of over 23.3 thousand square meters of premises.
Residential developers need land, not only for traditional investments aimed at individual clients but also for projects implemented within the PRS segment. Nowadays, investment funds are keenly interested in this segment. The value of investments in apartments for rent is growing month by month. This sector, which is only developing in Poland, is now seeing record results. Due to the huge investment activity in the PRS sector, even greater competitiveness accompanying the process of purchasing land in attractive urban locations can be expected in the near future.
According to Walter Herz data, the prices of plots intended for residential development in Warsaw, are in the range of PLN 1.5 thousand - PLN 7 thousand for useable floor space. Land for investments in the PRS sector in the largest agglomerations in the country has transaction prices in the range of PLN 1.7 thousand up to PLN 2.9 thousand for GLA.
Hotel and office investments in standby mode
2021 is also another year characterized by a decrease in demand for plots intended for hotel facilities located in large cities. Previously planned hotel projects were suspended and some investments were transformed into residential projects. Transactions in the hotel segment are rare, but they do happen. PURO Hotels brand with Norwegian-Polish capital recently bought a property with a building permit in Warsaw's Center district, at Canaletta Street from Strabag Real Estate. They intend to construct a hotel with over 200 rooms.
On the other hand, plots for resort hotels in attractive seaside locations near the beach and within the most popular mountain resorts are still very popular.
The pandemic also inhibited investors' activities on the market of land intended for office projects. "The office sector shows a steady interest in land in the best, central locations in the largest urban centers in the country. As in the case of hotels, some of the planned investments are redesigned for residential purposes, and more apartments are being arranged in multi-functional complexes prepared for construction", informs Bartłomiej Zagrodnik. "Investors are now willing to buy well-located, older office buildings, planning to change their function in the long term. Instead of offices, they want to offer high-class apartments for rent in these places".
Plots intended for office projects in Warsaw are offered at prices varying from PLN 1.3 thousand up to PLN 3.5 thousand per sq m.
Land for logistics is worth its weight in gold
The logistics sector is the second beneficiary of the new balance of power on the real estate market, alongside the residential segment. Investors are also making every effort to look for land for warehouse projects. According to Walter Herz analysis, the volume of transactions related to investments in land for warehouses increased by at least a fifth this year. The changes caused by the pandemic accelerated the growth of the e-commerce sector, which was followed by rapid development of logistics and, consequently, the warehouse sector. Today, investment plots located on the outskirts of large cities attract a lot of attention. The most popular are Warsaw, Wroclaw, Cracow, the Tri-City and Poznan.
Warehouse investments focus on the construction of small warehouses on the outskirts of the largest cities and less involvement in the construction of large logistics parks. A significant part of projects is initiated in the segment of city warehouses. For example, in Warsaw, a quarter of the space under construction is located within the city limits. Due to the development of last-mile logistics, plots of land for warehouses are also sought after in smaller urban centres.
The highest rates are in the Warsaw agglomeration, the largest logistics centre in the country. In Warsaw, prices are as high as PLN 700-800 /sq m. In Cracow, rents start from PLN 400/sq m. In the Wroclaw agglomeration, where there is a significant increase in interest in investments in the logistics segment, the prices are slightly lower than in Cracow. In Wroclaw, one has to pay about PLN 300/sq m. for the most attractive land for last-mile logistics. In the vicinity of Poznan, land for warehouses is twice as cheap compared to Wroclaw.
Land intended for warehouse projects in Poland in the so-called BIGBOX format, depending on the location, costs from PLN 80 to PLN 450/sq m.
The changes caused by the pandemic also strongly influenced the development of the retail market, limiting investment activity in this sector to retail parks and convenience centres. Investors looking for land for such facilities are now focusing primarily on smaller towns. Retail parks record the largest growth in the history of the market. Most of them are built in smaller cities with under 50 thousand residents.
