Land Investment market in Poland

The land investment market for residential and commercial projects continues to attract investor attention, with alternative investments like data centers and private student housing gaining traction for 2024

March 25, 2024
  • Tomasz Lewandowski
  • Joanna Kieszczyńska
  • Karolina Mokrzycka

Taming High Prices in the Housing Market

"The atmosphere in the residential  market is heating up every year. Despite record sales, Poland still lacks about 1.5 million homes. The continuously growing demand, coupled with rapidly declining supply, will force buyers to make even more bold moves. The expected new government subsidy program will certainly contribute to maintaining the demand-supply imbalance, and the lack of land for multifamily projects will remain a key issue in most major cities. There is no indication that property prices will start to decline by 2024. We will undoubtedly hear about several record-breaking and surprising transactions, and we will become accustomed to high prices." - says Karolina Mokrzycka, Senior Consultant, Land and Mid-Cap Investments, Capital Markets at JLL.

Interest in purchasing land in Warsaw, Krakow, and the Tricity area will remain high, and undoubtedly, these will be the most sought-after and expensive transactions this year. Poznan also has the potential to become a significant market due to the dynamic growth in housing prices in the past year. At the end of last year, developers were already showing interest in analyzing offers in the capital of Greater Poland, and the beginning of the year only confirms this trend.

Investors interested in converting offices into residential projects

"This year, we expect developers to continue their interest in purchasing land for residential purposes, especially for build-to-rent projects, due to a lack of supply for residential land as well as a naturally increasing interest in renting as an alternative to buying a home. At the same time, we anticipate a further strengthening of the trend among investors interested in existing buildings, particularly office buildings in prime locations, for future conversion into residential projects (if planning permits) or specifically for build-to-rent projects. Looking at the institutional rental market from an investor's perspective, the prospects for the build-to-rent sector in Poland should also be assessed positively. This is supported by expected decreases in interest rates and the prospect of further rental price increases. For commercial properties, specifically office properties, we do not anticipate an increase in demand but rather the maintenance of the current status quo. Apart from incidental office projects mainly in Warsaw, we do not expect interest from investors and office developers in other regional markets and major cities. We assume that the period of investment stagnation in the office investment market could last several years." - comments Tomasz Lewandowski, Head of Land and Mid-Cap Investments, Capital Markets at JLL.

Warsaw has the most data centers

According to PMR research, by 2030, the size of the data center market in Poland may exceed 500 MW. The conservative scenario and the minimum plan, assuming strong staged investments, will achieve about half of the indicated capacity by 2028.*

"From the perspective of the investment land market, we expect the completion of further transactions for the sale of land for data processing centers. Warsaw will remain the main city of interest for investors, increasing competition among active players in this area. The data center industry will continue to face challenges related to energy efficiency, digital ecology, and cybersecurity. The dynamic development of artificial intelligence (AI) and its impact on data center infrastructure densification and energy demand will remain a popular topic. It is worth noting that already in 2023, we observed a less restrictive geographical approach regarding land for large-scale research and development projects in the field of AI, which gives a chance to attract investors active in this sector to land located beyond the Warsaw agglomeration." - says Joanna Kieszczyńska, Director, Land and Mid-Cap Investments, Capital Markets at JLL.

Investors in the private student housing and senior housing segments compete with each other

The student housing market in Poland is still in its early stages of development. Unsatisfied demand and relatively low competition offer investors opportunities for nationwide expansion as well as attractive returns and capital growth. Additionally, the increasing number of older office properties with the potential for conversion into student dormitories may serve as an attractive alternative to purchasing land and undertaking new developments.

The number of players in the senior housing sector and their activity have remained low for years, and 2023 was no exception. Only a few entities interested in investments in this market actively participate in analyzing land for new projects, with a focus on well-connected land or buildings for conversion located in Poland's largest metropolitan areas. Often, they analyze the same land or buildings as investors in the private student housing or build-to-rent segments while competing with them in the bidding process.

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