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News Release

Warsaw

Revival of the Polish land market

Residential land segment is a market growth driver in 2013- 2014, Warsaw remains the most popular investment location, according to the latest report by Jones Lang LaSalle


Warsaw, 14 January, 2014 – Jones Lang LaSalle has summarised 2013 and identified key trends for the next 12 months in the residential, office and retail land market in Poland.

Daniel Puchalski, Head of Land Advisory Services, Jones Lang LaSalle, commented: "In comparison to the years 2009-2012, 2013 saw a significant revival in the investment land market in Poland, combined with an increase in developer activity, who moved from the negotiations phase to the actual execution of sales and acquisition transactions. This trend is going to continue into 2014 and market growth will be driven mostly by the residential land market sector, supported by numerous transactions in the office land segment. We estimate that, in the next 12-18 months, investors could spend approximately PLN 1,5 billion on office, retail and residential land.”

Residential land segment as a growth driver
The recovery in the residential land market in 2013 was especially noticeable in Q3. The record demand in the primary market, generated by such factors as low interest rates, the activity of ‘cash’ purchasers and buyers taking loans for 100% of the property value in the months preceding the introduction of the SIII Recommendation, helped developers to sell their units and sparked interest in new land offered for sale. Following the adoption of the new government programme Accommodation for young (Mieszkanie dla młodych) for 2014-2018, developers reconsidered lands for lower and medium standard residential schemes and became interested in suitable locations.
It is worth highlighting that before the financial crisis, a 6 to12 month negotiations process was par for the course and concluded with a preliminary sales agreement being signed. The signing of a final agreement often depended on receiving a building permit and verification of the property’s legal status. In 2013, the market registered transactions finalized after only a few weeks of negotiations even when properties had unclear legal status.

"The exceptionally short process of finalizing a sales deal, as well as a more flexible approach to properties of unclear legal status, are the most distinctive features of the transactions concluded in Poland's residential land market at the end of 2013. This was because the record sales of apartments in the primary market meant that developers and investors were encouraged to conclude new land purchase transactions and secure conveniently located investment properties for future residential projects regardless of the legal status of the properties”, Daniel Puchalski explained.

Residential and office land at the centre of attention - Warsaw is the most popular location, but Wrocław, Kraków and Poznań are also in the game
In 2013, land located in Warsaw enjoyed the greatest popularity among investors from the residential and office sectors. Three types of investors seeking opportunities to start residential projects in Warsaw can be identified. The first type includes companies interested in development of projects comprising 30 to 100 apartments in prime locations (City Center, Mokotów, Powiśle, Szczęśliwice). The second type are investors focused on projects comprising 100 to 300 apartments, in a single stage, in all residential areas of the city and preferably in proximity to the second underground line. The third type of investors are companies interested in the development of large investment schemes (30,000 sq m of residential usable space or more).
The office sector is searching for plots that would accommodate schemes for 5,000 – 15,000 sq m of office usable space in one phase. It should be remembered that there are also investors willing to purchase land, which allows for development of 60,000-100,000 sq m of office space. Interestingly, last year in the office investment land segment, the inflow of capital from smaller towns to Warsaw could be observed. The plots situated in the Central Business District of Warsaw, close to Wola and Powiśle, remained the most popular.

Wrocław and Kraków are also locations where we currently observe a great interest in land, both for residential and office investments. The revival is also visible in cities such as Łódź, Katowice and the Tri-City.

Retail investment land on the developers’ radar
Despite the planning of a number of new projects, Warsaw continues to be an important target for investors looking for retail land. On the national scale, the most attractive locations are those with relatively low retail space density, those where outdated projects can be replaced with new ones or where new projects can be added to the existing objects. In addition, there is a sustained interest in land designated for large format retail facilities.

Increasing investment land supply
2013 saw an increased supply of new investment land, which can be put down to investment funds and developers changing their business strategy. An additional source of new investment plots supply were properties that were foreclosed due to unpaid bank loans.

Forecast for 2014 – increase in residential land prices
Jones Lang LaSalle’s analyses shows that in 2014, the demand for office and retail investment land will remain stable while interest in residential land, including less attractive investment lands designated for lower class residential buildings, will increase. These apartments could be purchased within the Accommodation for young government programme.

In 2014, an increase in demand for residential land supply can be expected.
In the next 12 months, land prices will remain stable in both the office and retail sectors. In the residential sector, there is a clear upward trend, which, however, is not expected to exceed 5-10% per year.

"It is worth noting that the main reason for the current increase in residential land prices do not result from the number of transactions but prior decline in land prices during the financial crisis, as well as the sale of apartments on the primary market, which is stimulating developers’ interest in new investment. Therefore, if prices go up significantly, the pace of new sales transactions will most likely slow down”, Daniel Puchalski summarised.