The residential market overtook the industrial-logistics sector in 2023, once again securing the leading position. This is largely due to the increasing expectations associated with the government mortgage program and changes in credit assessment procedures which have quickly exhausted the supply of new flats in large cities. As a result, developers have shown an increased interest in land purchases, indicating new possibilities for the real estate market in the long term.
Residential land: dynamic rise in demand surprises the market
In 2023, the revival observed in the residential land market was a response to surprisingly high demand for apartments – so high that it significantly exceeded experts’ predictions. Changes in credit assessment rules and the implementation of the government program “Safe Mortgage 2%” led to a dynamic increase in consumers’ purchasing possibilities.
“The heightened demand for apartments, resulting from improved credit conditions of buyers, collided with a slow supply of new residential properties,” explains Dariusz Forysiak, Director of Investment Services at Colliers. “A relatively small number of new construction projects was in response to the market slowdown in 2022. With the shortage of available listings, there was a record increase in property prices. In 2023, transaction prices rose by over 10% in most large cities, up to 20% in Warsaw,” added Dariusz Forysiak.
Residential land prices in the capital in 2023 ranged from 350 to 750 EUR/m², and even up to 2,500 EUR/m² outside the city center, with central locations commanding the highest prices. In other large Polish cities, prices ranged from 200 to 900 EUR/m².
The limited availability of residential land, especially in attractive city districts, pushed the market towards revitalizing industrial-service areas and converting existing buildings into residential units, particularly in the student rental and PRS (Private Rented Sector) markets. The growth of the rental market was also stimulated by the willingness of residential developers to sell entire buildings more quickly, at prices lower than those on the market. The ongoing implementation of spatial planning regulations also factors into the situation. Plots with valid construction permits and established development conditions are becoming more desirable.
“In 2023, amendments to the spatial development regulations were introduced, which have the potential to benefit both investors, by simplifying and accelerating the process of obtaining a decision for land development conditions and construction permits, and the public interest by facilitating communities in achieving harmonious, sustainable urban development,” explains Krzysztof Chyla, Transaction Manager in the Investment Advisory Department at Colliers.
Office land: stabilization despite high vacancy rates and changing buyers’ preferences
There was an observable stabilization in the office market, despite high vacancy rates in key locations. Significant costs associated with maintaining and adapting office space, as well as tenant preferences influenced by hybrid or remote work models, kept the interest in land for office and service investments low. Office land prices in Warsaw ranged from 210–410 EUR/m² outside the city center, up to 380–1400 EUR/m² in the most attractive locations. In other large cities, the price per square meter ranged from 110 to 310 EUR. Expansion agreements and renegotiated office leases dominated the market last year, while developer activity remained at levels similar to the previous year.
Industrial and warehouse land: price correction and developers’ response to rising costs
The industrial and warehouse sector in 2023 showed slower growth and fewer new investments than previous years. This trend resulted in a lower transaction volume, which in turn led to a minor price correction. In Warsaw, the cost per square meter ranged from 130 to 220 EUR, while in other locations in the Mazowieckie province, it was 60 to 125 EUR. In other regions of Poland, the highest prices were noted in Krakow (40–85 EUR/m²) and Upper Silesia (35–75 EUR/m²), and the lowest in Bydgoszcz and Toruń (20–50 EUR/m²), Rzeszów (20–55 EUR/m²), and Szczecin (30–50 EUR/m²).
Rising costs have prompted developers to look for new forms of project implementation, including partnerships as part of joint ventures. This led to an increase in warehouse production, especially in the last quarter of 2023, potentially signaling an upcoming wave of land purchases in this industry.
Significant development in the energy sector in the industrial real estate market (photovoltaic and wind farms) is a response not only to expected legislative changes but also to demand from energy consumers. This is also the result of increasingly frequent inquiries from transnational entities about this segment in the context of a standard investment product.
Retail and service land: high market saturation impacts lack of demand
The commercial land market in large agglomerations continues to feel the effects of market saturation with commercial retail space. This is particularly evident in the continued popularity of retail parks and medium-to-large discount stores with easy consumer access. Combined with the limited availability of attractive land in central locations, this contributes to a lack of demand for new, typical shopping centers.
Retail and service land prices in central Warsaw in 2023 ranged from 410 to 1170 EUR/m². Outside the city center, this value was significantly lower, ranging from 115 to 525 EUR/m². In other large cities in Poland, the price range was quite wide, ranging from 80 to 400 EUR/m².
Transactions in this market were dominated by the purchase of medium and small-sized plots, particularly in cities with populations of 50,000 to 100,000. Average transaction prices remained at a similar level to those seen over the past five years.
Market forecasts for 2024
“A fascinating experiment will certainly be the matter of Integrated Investment Plans, which are supposed to replace the ineffective special housing law procedure,” admits Krzysztof Chyla from Colliers. “In the short term, confusion may be caused by the restriction in issuing land development conditions decisions to areas designated by the municipality as ‘infill development areas’. As a result, the value of properties whose decisions were issued under the old rules will significantly increase,” adds Krzysztof Chyla.
The revival of developer activity observed in the residential market and the increase in demand for land in the industrial sector in the last quarter of 2023 predicts an increase in the dynamics of purchases and land prices.
The growing interest of institutional investors in renewable energy as an alternative commercial product has the potential to develop this market niche, which till now was marginal.
“However, when it comes to the total volume of purchases, the housing sector will maintain its leading position, and a lack of supply of plots in attractive, large city locations will again motivate developers to implement complex revitalization projects,” concludes Dariusz Forysiak from Colliers.
[1] The values refer to the price per m² PUM (in the housing sector) or GLA (in the commercial sector).
