A strong market in a strong region

In an age of geopolitical unpredictability, how would you assess real estate as an asset class, and in particular CEE real estate?

Real estate remains a fundamentally strong asset class. It can act as a ‘safe haven’ investment, being less correlated to the typical ups and downs of market cycles. This is particularly true in the CEE region, where you can find significantly higher yields compared to more mature Western European markets, and often at a lower initial investment threshold. CEE countries, especially Poland, are generally experiencing faster economic growth and many of their markets continue to develop, offering more room for expansion. You get high-quality properties and the potential for substantial value growth that’s harder to find in the West. Right now, we’re seeing record numbers of sale-and-leaseback deals as well, which offer guaranteed, stable returns for years to come, by ensuring full usage of the properties.

Focusing on CEE, how does Poland compare to its neighbours when it comes to investment flows into our real-estate market?

Poland stands out as the largest economy in the CEE region with the most developed commercial real estate sector. As such, we consistently see the highest investment volumes here. In 2024 alone, the investment volume in the commercial real-estate sector in Poland exceeded €4.8 billion, more than in all other CEE countries combined. However, the beginning of 2025 started with increased investor activity, especially in the Czech Republic, which recorded its best first quarter ever in terms of transaction volume (€1.4bn), temporarily taking the lead in the region.

Another key difference is the level of interest from international investors. Unlike the Czech Republic or Hungary, where domestic capital is a major player, Poland attracts a lot more foreign investment.

Poland and Czech Republic share a direct border with Germany, which is a huge advantage. Many properties in western Poland are used by tenants working closely with German companies.

Finally, Poland’s economic diversity has historically made it more resistant to crises. We have a broad range of industries contributing to our GDP. According to the latest EU Commission forecasts, Poland is projected to remain the fastest-growing large economy within the European Union in the coming years, making it a stable, attractive place to invest.

What trends are you noticing in Polish real estate right now? What’s driving the market?

In addition to mega-trends like decarbonisation and wider ESG, we observe various interesting patterns across different market sectors. One of them is undoubtedly the aging of assets such as office and retail properties, and consequently, the increasingly frequent conversions of these buildings and changes in their functions. This trend has been visible for many years in the US and Western Europe. The broadly defined living sector is the primary beneficiary of these changes. According to JLL data, around 1.1 million m² of planned, existing, modern retail, office, and other spaces in Poland have been converted to residential use (including alternative projects such as PRS or student housing) over the past five years. The largest ‘donors’ of space for housing were office projects (a total of 0.7 million m²) and retail/service facilities (over 0.3 million m²). These figures include the following types of buildings and projects: demolished; modernisation of existing structures; under construction; and planned (where investors have announced changes to investment plans for the site). This is a very interesting trend that will stay with us for years. Today, there are no more simple plots for development and developers must increasingly focus on brownfield projects. These are often much more difficult and complicated than standard developments, requiring greater time and financial commitment. That’s the reality of today’s market – we’ve moved beyond the era of easy wins.

In the retail sector, what drives the market today is the development of offerings in smaller cities through the implementation of retail parks and convenience centres. Developers are moving into increasingly smaller urban areas that are not yet saturated with retail offerings. In large agglomerations, we will continue to observe further development of mixed-use projects that align with trends related to the fifteen-minute city concept. Food and entertainment offerings, which are sorely lacking in many places in Poland, will also develop very rapidly.

In the warehouse market, we observe a calming of sentiment after a phase of very dynamic growth and high activity of both developers and occupiers. The warehouse sector has now entered a phase of slight activity slowdown. We observe a considerable reduction in speculative investments, and developers’ attention is mainly focused on the largest and safest markets. The key trend has become the renewal of existing lease agreements. Tenants are much more likely to decide to stay in their current locations, which represents a clear change from previous practices.

Our members in the shared-services sector say that housing employees from abroad and indeed other parts of Poland is one of their bigger HR challenges; PRS projects offering accommodation-as-a-service is seen as an answer. PRS [private rental sector] is seeing rapid growth from a low base, but there’s still plenty of upside here – is this a demand investors and developers are answering?

Institutional investors and developers recognise the significant opportunity created by Poland’s persistent housing deficit and growing workforce mobility. This trend is particularly evident in major business hubs where shared-service centres drive employment demand. The combination of record-high property prices, elevated mortgage costs, and robust employment opportunities in the BPO/SSC sector has generated substantial demand for flexible housing solutions among international talent. Despite this clear market need, institutional rental options remain notably limited, creating a compelling investment opportunity.

Market leaders such as Resi4Rent, LifeSpot, and Vantage Rent are actively expanding their portfolios, yet our analysis reveals that the current institutional PRS stock stands at merely 22,000 units – representing less than 0.2% of Poland’s total housing stock. This rate falls significantly below Western European standards.

Co-living concepts, exemplified by NREP’s NOLI brand, are emerging as effective solutions for employers facing talent acquisition challenges. Strategic partnerships between shared-services employers and PRS operators present a valuable opportunity to develop customised housing solutions tailored to international employees’ needs, potentially offering companies a competitive advantage in attracting and retaining top talent.

Another rapidly growing part of the market is data centres. To what extent is lack of energy – in particular energy from renewable sources, grid connection and suitable locations an issue?

Poland is systematically gaining importance among European data centre markets as the traditional FLAP-D hubs (Frankfurt, London, Amsterdam, Paris and Dublin) reach saturation. Limited land supply and difficulties in securing high power connections in these locations are prompting operators to look for new business development locations. Currently, Poland is classified as a Tier-2 market, competing with Madrid, Milan, Berlin, and Scandinavian countries. The IT power available in Polish data centres is approaching 200 MW, with projected growth to 500 MW by 2030. The Warsaw metropolitan area remains the dominant centre, accounting for about two-thirds of the country’s power capacity.

The Polish market still offers available land, and the limited regulation of data centres in building codes allows for the location of facilities with various purposes: service, warehouse, and production. A challenge in the process of searching for locations for new facilities is the limited power availability in desired locations, both in terms of reserves in transmission networks and the costs and procedures enabling the construction of appropriate infrastructure. Therefore, current knowledge about the state of the local power grid and focus on locations with prospects for adapting the supply of available power to needs is crucial in the land-search process.

High energy prices and an unfavourable energy mix, leaving a high carbon footprint, are certain barriers to market development today for the foreign data centre operators. However, we have real prospects for improving the situation over the next decade or so. The energy transformation includes applications such as offshore wind farms in the Baltic Sea, already implemented plans for nuclear energy development, and increased use of natural gas as a transitional fuel. The Polish data centre environment has also undertaken an initiative to use waste heat from server rooms to supply municipal heating networks.

Poland is distinguished by its central location in Europe, guaranteeing good connections with other European centres and low latency in data transmission. The second distinguishing feature of the market is relatively low average air temperatures, which allows for reducing cooling costs compared to most European markets. This latter factor will gain importance due to the trend of technology development to serve artificial intelligence needs, characterised by a large increase in power ‘density’, which translates into the need to design new, efficient cooling technologies for infrastructure.

How is the post-pandemic return to the office going – has remote working settled down to a new level, and how is this affecting demand and supply for office space in Poland?

2025 marks the sixth year of companies testing different working models. The range of possibilities is wide, and the lack of established patterns has caused each organisation to develop its own strategy. Few tenants have opted for extreme solutions, such as 100% remote work or a full return to the office. The majority have adopted a hybrid model, which is currently the most popular format of work for office employees in Poland.

JLL research shows that employees in Poland work in the office on average 2.4 days per week. There are, however, quite significant differences between various industries. For example, employees in construction/real estate spend in the office three days per week, while for the BPO/SSC sector – it is only one day. Those differences only confirm that that there is no one-size-fits-all solution.

Each organisation needs to find its own ‘sweet spot’, often through trial-and-error approach. For many tenants, assumptions and decisions made in 2021 or 2022 have already been verified and office portfolios require further adjustments in terms of the amount of leased space or the fit-out arrangement and the necessary equipment. Therefore, tenants are holding back from making long-term as well as capital-intensive decisions. Operating on a shorter time horizon of three to five years allows for greater flexibility and more efficient optimisation of an occupied space.

This uncertainty related to future working model, and shifting office policies, was mirrored in office demand. From 2021 onwards, the share of lease renewals in total take-up has increased significantly, to more than 40%, across key Polish office markets. What’s more, new space requirements were 20-30% smaller as compared to pre-pandemic levels (yet, still with expansion options guaranteed in the lease agreement).

Occupiers’ wait-and-see approach with regards to portfolio strategy had an adverse effect on development activity. Many planned office projects have been put on hold due to a slowdown in leasing activity and also extremely volatile economic conditions. Currently, there is around 0.4 million m² under construction in Poland, significantly below the 2018 volumes, when we saw 1.8 million m² under construction. As a result, nearly all office markets in Poland will record subdued new completions levels over the next two to three years. This new supply gap combined with a steady demand for prime quality space will drive rental growth in the prime segment of the market.

The hybrid adoption is still evolving. We predict that the adjustments to hybrid policy and corporate office portfolio will carry on over the next few years.

Unnoticed by many living in Poland’s main cities, there has been a mini-boom in construction across small-town Poland, with retail development leading to visible change across the country. Is this sustainable, or will the market soon reach saturation point?

There has been an unprecedented boom in the development of new retail space across small cities and towns throughout Poland. Over the past three years, more than 500,000 m² of retail premises have been delivered in cities with fewer than 50,000 inhabitants, accounting for around 30% of total retail development activity in Poland. This trend continues to be supported by an additional 208,000 m² of new retail space under construction in cities of this scale. This expansion aligns with the ongoing momentum in retail parks and convenience centres, which have dominated market development in recent years.

Poland’s retail market still exhibits significant untapped potential, particularly in smaller cities and non-urban areas. Importantly, some 10 million inhabitants (over 25% of Poland’s total population) live in towns with fewer than 50,000 residents. Currently, the nearly 2 million m² gross leasable area of modern retail space in these smaller towns represents only a fraction of Poland’s total retail stock of almost 18 million m², highlighting the substantial growth opportunity. Development in small towns and cities is therefore likely to continue, though potentially at a gradually reduced scale and pace. As new projects enter smaller urban areas, the size and format of properties must align with local market potential.

Additionally, numerous small towns surrounding major agglomerations are increasingly viewed as satellite communities. Driven by ongoing suburbanisation, these locations have also become attractive destinations for local retail developments, evidenced by developers’ activity and the construction of nearly 100,000 m² of retail parks and convenience centres there.

The retail market in Poland has yet to reach saturation. Numerous cities of various sizes across the country either lack substantial retail options or possess only limited offerings. While not every town requires retail development, in many smaller towns, one or two modern retail parks appear to be sustainable. What remains clear is that the pursuit of new retail opportunities is becoming more challenging and requires deeper understanding of competition, micro-location factors, and local market dynamics.

Poland’s lack of real-estate investment trusts (REITs) has been holding back Polish capital from investing in Polish real estate on an equal footing with foreign REITs. What are the current prospects of legislative movement in this subject?

I believe that a fully-fledged proposal for the Polish REITs legislation has been fully developed, and we anticipate that the relevant regulatory framework to move through the approval process in the near future, however the next weeks will show the direction and pace of that process.

Analyses conducted by JLL and Bank Pekao indicate that Polish retail and institutional investors could allocate around 20 billion złotys to domestic REITs over the next few years. This amount equals the total transaction volume recorded in the Polish commercial real estate market in 2024.

Currently, domestic capital accounts for only a few percent of these investments, making Poland the country with the lowest ratio among Central and Eastern European countries. The introduction of REITs thus creates an opportunity to significantly increase Polish investors’ involvement in this market.

The emergence of an additional stream of local capital could also encourage foreign investors to increase their activity, contributing to the dynamic development of the entire sector. The implementation of REITs should positively affect Poland’s economic credibility and strengthen the conviction of foreign partners about the development of the Polish real estate market also in the regulatory dimension.