Dire State of the Construction Sector: Awaiting KPO Funds and Opportunities in Ukraine’s Reconstruction

The construction market in hibernation. Not all companies will see better times.

The decline in the number of public tenders, fewer started developer investments, a significant increase in insolvencies in the construction sector, and a large increase in suspended or optimized companies. The construction sector is grappling with a huge crisis that currently affects both companies involved in constructing residential buildings, roads, and broadly understood infrastructure. “Entrepreneurs associated with the Northern Chamber of Commerce believe that things are neither rosy nor dark. However, they view the situation with great concern, as stagnation can be seen in almost every investment field,” admits Hanna Mojsiuk, President of the Northern Chamber of Commerce in Szczecin.

The KPO and the reconstruction of Ukraine are opportunities for the Polish construction market

The stagnation in the construction sector is widely discussed by Polish entrepreneurs. Developer investments are being implemented more slowly, and companies interested in public tenders are willing to negotiate prices and undertake tasks they did not previously deal with, such as maritime economy-related tasks.

“Expectations were high, but reality has seriously verified them. The year 2024 is one of the hardest for the construction industry in two decades since Poland joined the European Union,” says Hanna Mojsiuk, President of the Northern Chamber of Commerce in Szczecin.

“Many construction companies see their opportunity in the reconstruction of Ukraine and in carrying out investments related to the National Recovery Plan. It’s still a somewhat distant perspective, and business is run here and now. Many companies had to optimize or look for ‘quick contracts'”, adds Hanna Mojsiuk.

“Every few years we witness some crisis. The most important thing is whether we can adapt to it, diversify our businesses.

Looking at the major players on the market, it seems that their order books are full. The construction industry is not only about developers, it also includes industrial, infrastructure, hydrotechnical, and road construction. In hydrotechnology and road construction, there is work for a decade. Of course, major players will bid for tenders but the so-called “construction workers” rely on a series of subcontractors,” adds Łukasz Zemski, Chairman of the Construction Cluster at the Northern Chamber of Commerce in Szczecin.

Real estate market in hibernation. This is the effect of the confusion with the “Start Credit”

The development market also admits that the investment stagnation is noticeable. In the second and third quarter of 2024, flat sales fell by up to 70% in some cities. This must be reflected in the situation of entrepreneurs.

“The difficult situation in construction is a fact. Several key factors contribute to the difficult situation. High interest rates reduce the number of potential borrowers and investors in real estate. Credit is very expensive and increasingly difficult to obtain. Many consumers planning to buy real estate have put their plans on hold, waiting for planned government support. Another factor strongly affecting the entire construction industry is the still unlaunched National Recovery Plan. Activation of these funds will translate into orders across the construction industry,” says Łukasz Szykuć, CEO of TLS Developer.

“However, we cannot state that nothing is currently being built in Poland. Investment processes in construction take quite a long time, which means that projects that have received permits during a period of greater prosperity in the real estate market are currently being implemented,” he adds.

“Developers do not give up on their investments, but they make realistic plans related to their implementation. Entrepreneurs expect a clear declaration: the ‘Start Credit’ program or ‘0% Credit’ will either be or will not be and we close the topic. Meeting with clients every day, we hear discussions about this. Many customers are still convinced that they should wait for government decisions, which prevents transactions. Political discussions have caused the construction market and real estate turnover to go into hibernation,” adds Mirosław Król, real estate market expert.