In the investment land market, substantial changes have been taking place recently. The expectations of landowners are still exorbitant, but now buyers are willing to pay more for plots prepared for the construction of multi-family residential projects. When an attractive plot goes up for sale, there are many interested parties. Developers are intensively looking for land as the demand for apartments, fueled by government incentives, does not decrease, and the market offer of new apartments is diminishing.
Simultaneously, the slowdown of the warehouse sector means that the prices of land for large logistic projects are not increasing as dynamically as in the case of the residential real estate market. The lower investor activity in this area is a result of decreased demand for space and a large number of tenants resigning from preliminary agreements, which were not finalized last year. The number of new warehouse projects has decreased by over half recently.
The implementation of warehouse and manufacturing investments is now strictly dependent on the amount of contracted space. Either dedicated build-to-suit projects are implemented, such as the Intel factory in Miękiny near Wrocław. The Semiconductor Integration and Testing Plant, which will be located on a nearly 300 ha area, will be the largest foreign investment in Poland and in the high-tech industry in this region of Europe.
Alliances
The third, interesting trend in the land market are innovative forms of settlements, which are based on dynamic economic changes. The number of alternative forms of settlements is growing, such as barter exchange, shares in developer projects, or joint ventures of landowners and developers. This allows landowners to achieve higher final values, and enables developers to optimise the costs of debt service, which is still very high.
An example of such a solution might be a letter of intent signed by Develia with a company controlled by pension funds to establish an entity that will build 90 thousand sq. m. of residential and service space in Gdynia. The developer will have a majority stake in exchange for a monetary contribution and will be responsible for management and implementation. The project will be executed with partners, Semeko Group, and investment funds.
The investment land prices are stimulated by a very limited supply of land for investments in attractive locations in the country’s largest agglomerations. Following stabilization in 2022, last year’s valuations of investment plots once again soared. This was driven by a buying spree fuelled by the Safe Credit 2% program. This year, the residential market continues to thrive. Developers are intensifying their land searches. They want to meet the unprecedented demand, which is ensured by another government support program, “Housing for Start”.
Land for housing
The most sought-after plots are those where construction can be started quickly, located in areas with developed infrastructure. Such plots are now extremely rare. When they appear on the market, the offer is often exceeded. A plot measuring just under 5,000 sq. m. located on Cynamonowa Street in Ursynów, Warsaw, was recently auctioned off for over PLN 82 million. The buyer paid more than twice the starting price. Transactions of purchasing plots of record value are recorded in Warsaw. Parcels are still bought for over PLN 150 million. For example, in Wrocław, a plot of several ten thousand square meters was sold for more than PLN 50 million.
The largest development companies in the country have secured land for construction for the next few years. Leading companies can build several tens of thousands of apartments on them. Developers, however, are looking ahead and constantly building their land arsenal. Smaller entities also declare their willingness to buy land, as the demand for apartments significantly exceeds the supply.
Meanwhile, new construction regulations due to come into effect in April this year will further limit the availability of suitable construction land for housing. Changing technical conditions will mean that plot parameters that make the investment feasible and profitable will change to the disadvantage of investors, and some plots from developers’ banks will lose their investment value. This could ultimately result in a further increase in suitable land prices, given the new rules.
Land for trade and mixed-use projects
Land is also sought for projects intended for institutional rental. In the PRS sector, we do not observe spectacular transactions, but its resources are constantly growing. Companies like Echo Investment, Vantage, Develia, Murapol, or Cavatina continually enlarge their rental property portfolios. According to the announcements of companies active in the PRS area, they collectively plan to deliver tens of thousands of rental apartments over the next few years.
Investment land is also in demand for retail parks, which are springing up all over Poland. The implementation of projects in this format attracts high return rates. Retail parks are currently of particular interest to private investors. Entry barriers are lower in this sector, and building is less time-consuming.
Single land transactions for mixed-use investments are also recorded on the market. For instance, Cavatina purchased a one-hectare site located in the center of Warsaw on Chmielna Street for more than PLN 145 million for a mixed-use project to be completed by the end of 2023.
Bartłomiej Zagrodnik, Managing Partner, CEO at Walter Herz
