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Land prices rising fast

Eurobuild CEE 12 February 2019
POLAND A decreasing supply of attractive land combined with growing prices is forcing developers to Invest in land that already has buildings that either require demolition or renovation, according to real estate consultancy JLL.
Developers in the six largest Polish cities (Warsaw, Kraków, Tri-City, Wrocław, Poznań, Łódź) sold 65,000 apartments. This was 11 pct down on 2017 although this was the second-highest total in the history of the Polish residential sector. However, 2018 saw developers struggling with workforce issues and a rise in construction and material costs, as well as the diminishing availability of attractive plots.

In 2018, developers faced great difficulties when trying to expand their land banks, mainly due to stiff competition for plots and the limited accessibility of available sites. The low supply of land has pushed land prices up to levels that is preventing many developers from maintaining their profit margins. The price of apartments on the primary market has risen by a double digit percentage.

In 2018, the office market in Poland expanded by 744,000 sqm of modern office space, with major markets outside Warsaw accounting for over 500,000 sqm. As a result, the total volume of space nationwide now exceeds 10 mln sqm.

The high level of leasing activity and the falling vacancy rate in 2019 will maintain the optimism of investors interested in purchasing office plots and older buildings that require renovation.

2018 ended with 435,000 sqm of new retail space coming onto the market with shopping centres accounting for 266,000 sqm. Total retail space in Poland now stands at over 14 mln sqm gla. 2018 saw a lot of consolidation on the retail market with a number of mergers and acquisitions. These included Emperia, the owner of the Stokrotka chain, being acquired by Maxima Grupe, and Eurocash purchasing the Mila chain.

JLL claims that over 2019 demand will be focused on plots for developing small retail parks ranging between 3,000 sqm and 10,000 sqm gla. Over 2018 more than 30 companies were actively seeking locations in Poland for the construction of hotels. That demand is pushing up the prices for land including greenfield sites. There is still room for the hotel market in Poland to grow. JLL predicts that in the next three years, the number of beds in the country will increase by 30 pct. However, the further expansion of the industry will be hindered by higher land prices and more expensive building materials, as well as a deepening shortage in the construction workforce and skilled hotel personnel.

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