Land prices are rising and will continue to rise. What kind of plots of land are most in demand?
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The demand for investment land is still very high. Plots of land are sought mainly for warehouse and residential investments, as well as small retail projects such as retail parks. Attractive plots in the largest cities are still of interest to housing developers, including companies with extensive land banks. There are also enquiries from investment funds, mainly from the Far East and South Africa.
Companies building flats are primarily looking for plots in large cities, well-communicated with the city centre, with a regulated legal situation and development plans that allow for the construction of a large housing estate. Due to the lack of such land, they are also interested in more difficult plots, which require longer preparation for construction or implementation of additional infrastructure. They also take into account post-industrial areas with buildings to be demolished, provided that they are attractively located.
In turn, land for warehouses is most sought after on the outskirts of cities, where the so-called last mile logistics is developing. Investors are interested in land in the vicinity of the largest urban agglomerations, mainly Warsaw, Wrocław, Kraków, Poznań and Tricity, with good access to motorways and expressways. They are also interested in locations where new road infrastructure and transport hubs are being developed.
What are the prices of investment land?
Developers who need well-located plots in the largest cities pay even several thousand zlotys per square metre. If land is offered, on which construction can be carried out immediately, the prices are so high that its purchase is often unprofitable, because the offer rate per square metre of a flat, with a good margin, would exceed average market prices for a given location.
Nevertheless, development companies continue to purchase centrally located land at exorbitant prices. Most transactions of this type are concluded in Warsaw. Plots in the Warsaw district of Mokotów, for instance, are sold for PLN 14-16 thousand per sq.m. Such prices are not exclusive to Warsaw.
Such prices are not only a domain of Warsaw. In one of the most attractive locations in Gdańsk, Wyspa Spichrzów, transactions of land purchase are also being finalised at prices exceeding PLN 14,000 per square metre. Despite the pandemic, prices of investment land continue to rise in major agglomerations in Poland. Over the last year they have increased significantly in attractive districts, especially in Warsaw and Krakow.
In the outer areas of the cities, the rates are not as high as those closer to the centre. In more remote districts, large plots of land can be found at the price of PLN 2-3 thousand per metre. Investors decide to buy them, as today flats close to nature in the largest agglomerations are much more sought after. The key issue here is only the amount of additional outlay required to secure the necessary infrastructure on such land. And what level will be reached by the total construction cost, and thus what margin can be assumed for the planned investment.
The prices of land for warehouses are also the highest in the Warsaw agglomeration, which is the largest logistics centre in Poland. Within the city limits one has to pay an average of PLN 450-650 per square metre. Plots located along main roads, distant from Warsaw by a dozen or so to about 30 kilometres, are already half cheaper, and the further away, the lower the rates are.
Krakow is also among the most expensive locations for warehouses in the country, where land prices start at PLN 400/sq.m. It is not cheap either in the Wrocław agglomeration, where land costs from PLN 200/sq.m., but for the best-located land for last-mile logistics one has to expect PLN 300 per sq.m. And it is in Wrocław that we observe the biggest growth of interest in investments in the logistics segment. Near Poznań, land costs twice as much as in Wrocław.
The expansion of roads in Poland brings new opportunities. A promising perspective is the eastern wall, or Zachodniopomorskie Voivodeship. These regions offer a much larger choice of land at lower prices.
In which direction are developers’ investments going?
In the current situation, companies are mainly withdrawing from office projects in favour of residential ones. Also multifunctional investments are being redesigned to take on more of a residential character. Also small, older generation office buildings are being demolished in the Tri-City to make room for housing estates.
It is worth noting that some developers have started to dispose of land, because they do not want to build speculatively. In the centre of Gdańsk, interesting plots for office projects have recently been put up for sale. One of the most famous transactions concluded recently in the city was the purchase of a hectare plot in Gdańsk Oliwa, which is the largest office district in the Tri-City, for over PLN 50 million. Interesting land for office buildings can now also be bought in the centre of Wrocław.
In addition, the decision-making process is taking longer. Investors are more cautious, but the demand for investment land is not decreasing. Unfortunately, attractive plots are scarce. Hence, their prices will remain at the current high level, and in some locations they will continue to grow. The rate of growth will depend, among others, on the expected influx of new investors.
Author: Agata Karolina Lasota, Managing Director LBC Invest