The BPCC’s Real Estate & Construction working group meeting for Q4 2024 was held on 22 October at the offices of Kochański & Partners in Warsaw.
The meeting format is popular among members from the sector as it offers participants a unique cross-section view of market sentiment from investors, developers, contractors, engineers, building materials producers and real estate agents, representing the supply side and the demand side. As always, the meeting is held under the Chatham House rule to encourage open sharing of insights.
After a welcome and introduction from the host. Paweł Cholewiński, partner and head transactions and real estate at Kochański & Partners, participants introduced themselves and their companies, and then described the state of Polish real estate and construction market as they currently experience it.
The main themes dominating the discussions included the long wait for borrowing costs to go down and the resultant stagnation in the sector, and factors beyond Poland’s borders, such as Germany’s economic slowdown, and the ongoing war in Ukraine continuing to create uncertainty among investors. Among the bright spots in the overall landscapes were said to be data centres (especially those with prospects for being powered by renewable energy), small-scale retail parks in Poland’s smaller towns, the private rental sector, academic and senior housing.
A continuing trend in office development is the shift of corporate tenants from edge-of-town offices to smaller spaces but in more prestigious locations and high-quality buildings in city centres. Hybrid work is still seen as here to stay, with four days in the office and one day working from home being a fond dream for most landlords – the reality is the ‘camel week’, with either Tuesdays and Thursdays or Tuesdays to Thursdays being the reality for most offices.
AI is driving the data centre market, although the tech firms’ needs are constantly changing, leading to revisions during the construction of the building. Meanwhile, older buildings are being repurposed, in particular offices into residential. Poland’s former ‘two-speed market’ – Warsaw and the provinces – is flattening out with less difference in construction between the capital and cities such as Poznań, Katowice and Kraków, while small towns are also seeing an uptick in projects.
Poland’s Central Transport Hub (CPK) project is a source of hope for the construction sector, eyeing up not only the main terminal but the hundreds of ancillary buildings required, as well as the high-speed railway lines linking the airport to main cities.
There was much discussion around ESG and the need for compliance with reporting requirements; the market remains uncertain as to definitions in the EU taxonomy and how buildings’ energy usage will be audited, although this also creates opportunities around thermomodernisation of older buildings.
Changes to Poland’s spatial planning regulations were also discussed; regional differences in obtaining planning permissions were noted, with Warsaw being particularly difficult.
Hopes that the government would finally introduce a law allowing real-estate investment trusts (REITs) to function in Poland were mentioned. The prospect that Polish retail investors and pension funds could invest in Polish real estate on an equal footing for foreign investors look better than for many years.
There was similar consensus around hopes that legislative stability and fiscal predictability in Poland would encourage investors, foreign and domestic, to the market. More and more speculative funds are engaging in construction projects, with Scandinavia and the Baltics being reported as sources of new capital.
All in all, participants were of the view that 2024 was not a good year for the sector – following on from bad year in 2023 – but there are reasons for optimism that next year will see some improvement. The most widely used metaphor was ‘we are seeing swallows’.
There was time for networking after the round-table discussion. The Real Estate & Construction group is one of the BPCC’s most active groups, and the round-table meetings are held quarterly to map out topics of interest for future substantive events. The next one will be held in January 2025.