Poland’s unique real estate landscape has been shaped by the large-scale privatisation and surge in new development made possible by the transition to a market-based economy following the collapse of communism during the early 1990s, which invited private investment and created dynamic market conditions. The government has worked to align its regulatory framework with that of the EU to promote legal security for global investors, particularly in large cities, and real estate prices remain lower than in neighbouring Western European markets.
The Polish real estate market continues to be influenced by a myriad of historical, economic, and regulatory dynamics that have seen the economy stabilise since joining the EU in 2004 and becoming increasingly integrated into European supply chain ecosystems. However, it has not been immune to the economic uncertainty blighting markets around the world; elevated inflation and ensuing interest rate rises, coupled with the dominance of international capital, have increased transactional risks, and driven lower levels of real estate investment.
Government policy and macroeconomic conditions will influence how the real estate market reacts in 2024, but factors such as the anticipated fall in financing costs, growth in tech industries, and continued infrastructure development are positive signs. To understand the key dynamics within each asset class, below we look at each of the main ones individually:
Logistics & industrial
Following a disappointing performance between mid-2021 and mid-2023, the logistics and industrial market showed signs of recovery in the third quarter of 2023. Geopolitical factors have led to a demand for shorter supply chains, particularly for last-mile warehouses and courier hubs located close to urban centres.
Despite approximately 4 million sqm of new warehouses being completed in 2023, the outlook for 2024 suggests a decrease in new warehouse space, attributed to higher interest rates and developers aiming to stabilise or increase rents. E-commerce will continue to be a key driver for the warehouse market, supported by declining inflation and increased consumption.
Retail
Tenants in shopping centres have faced challenges managing the impact of high inflation in 2022 and 2023, resulting in decreased consumption and significant increases in rents and service charges. The retail market is also contending with mounting competition from e-commerce, higher utility costs, ESG requirements, and the rise of e-mobility.
The anticipated economic recovery in 2024 is expected to stimulate consumer interest in leisure, dining, and retail, thereby improving conditions in the retail market and mixed-use developments. However, evolving consumer behaviours, including a shift towards e-commerce over in-store shopping and a preference for shared experiences in entertainment and dining, are prompting landlords to remodel, repurpose, and reposition their assets to maximise returns.
Residential
Factors such as mobility, flexibility, and evolving attitudes towards ownership have given rise to a noticeable trend in people preferring renting over purchasing. Poland has a substantial student population and therefore faces heightened demand for rental properties in major economic and cultural hubs and university cities such as Warsaw, Krakow, and Wroclaw, which offer improved infrastructure, greater access to employment opportunities, and a wider selection of amenities.
The growing trend for modern, energy-efficient apartments and family homes has driven a significant need for affordable housing, particularly in areas facing shortages in such properties and prices are subsequently higher as a result. In addition, an increasingly ageing population has resulted in higher demand for senior housing with lower maintenance needs, especially in more developed urban centres with proximity to healthcare facilities.
Despite potential disruptions in the financing of PRS projects, the living sector in Poland is currently thriving, as evidenced by the repositioning or redevelopment of numerous projects from retail or office functions to residential purposes.
Offices
The supply of leasable space is gradually increasing, with commercial experts' reports for Q3 2023 indicating a notable rise in demand compared to Q3 2022, as evidenced by an increase in completed transactions. However, the total office stock in Poland was estimated to exceed 12.8 million sqm, meaning 2023 saw low levels of new office supply.
With almost 3 years of hybrid working, employers are better placed to assess their needs, with many identifying an opportunity to reduce their footprint. Whilst the reduced availability of new premises and resulting slowdown appears to be temporary, there is a strong likelihood of continued investor interest in properties located in city centres featuring cutting-edge PropTech solutions and aligning with their ESG strategies.
Hospitality
The hospitality sector in Poland is steadily rebounding from the challenges posed by the COVID-19 pandemic and subsequent concerns arising from the crisis in Ukraine. The adoption of technology for virtual business meetings has also significantly impacted the frequency of business trips, which has added further complexity to the recovery process.
However, the sector faces the challenge of increased hotel financing costs. On a positive note, the easing of travel restrictions and growing interest in the hospitality and hotel sector among office investors are expected to provide a favourable impetus for the industry's resurgence.
