Race for investment land
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What investments are being planned now? What projects are investors looking for?
First of all, there is demand for land designated for warehouse, production and residential projects. A particularly optimistic signal is the growing number of inquiries we receive from FDI manufacturing investors who want to relocate production or distribution activities to Poland. Last year, we could also observe package deals regarding the purchase of investment land.
Due to the boom in logistics and the warehouse sector, plots located on the outskirts of large cities are very popular. Especially locations near Warsaw, Wroclaw, Cracow, the Tri-City and Poznan, offering good access to the largest access routes. There is also interest in land located in smaller urban centers, which results from the need to expand logistics for the rapidly growing e-commerce sector.
Residential developers need land for traditional investments aimed at individual clients, but also for projects for investors from the PRS segment, which are more and more active in Poland. We also observe a stable interest of the office sector in plots in the best central locations. It should be noted, however, that investors are moving away from speculative projects in places away from city centers. Nonetheless, the openness to investments within central urban areas has not changed. Some office investments are being redesigned into residential ones, and more apartments are planned to be built in the mixed-use complexes under construction.
Pandemic changed the strategy of many investors. Some developers resell some of their land, in order to focus only on projects in the sector that is their core business. And so, for example, companies that build apartments, but planned office or hotel development before the pandemic are moving away from these plans. Hence, among others, interesting plots for office projects have become available in attractive locations in Wroclaw or Gdansk.
The growing interest in our market from investors who have not yet located their capital in Poland is also noteworthy. This is visible in, for example, the recently announced decisions of the Swedish operator Heimstaden and the American company Nuveen and the announcement of a series of further transactions in the upcoming months.
It is impossible not to notice that the decision-making process is taking much longer. Investors are extremely cautious. Technical and commercial analysis prior to the purchase of land is carried out in an even more detail than before.
Due to the increasing difficulties in obtaining financing from the banks, companies are also looking for alternative forms of land protection, such as JV. At the beginning of this year, we had, among others, the opportunity to provide consulting when creating a JV for a project worth over PLN 140 million. In the last 12 months, it was the third project of this type that we participated in. It also shows that market participants are more and more willing to open up to more unconventional solutions.
What are the prices?
In previous years, we have seen a regular increase in the prices of land for investment in all segments. Currently, rates remain at the last year’s level. However, I am convinced that the prices of the most interesting investment plots will continue to rise in the long term. This is because declining profitability of alternative sources of capital allocation encourages investment in real estate. In addition, there are not many attractive plots of land, so prices will remain high, and in some locations we will see them go up again soon.
The highest asking rates for land for warehouses are in the Warsaw agglomeration, which is the largest logistics center in the country. Within Warsaw, land costs from PLN 450/sq m. up to PLN 650/sq m. Plots located on the main roads, which are located from a dozen or so to about 30 km from the city, are half the price.
Another location where land for warehouses costs the most is Cracow. In the capital of Malopolska Province, prices start from PLN 400/sq m. In the Wroclaw agglomeration, where we are currently observing the greatest increase in interest in investments in the logistics segment, the rates are slightly lower than in Cracow. Prices start from PLN 200/sq m. However, for the most attractive areas for last mile logistics, one has to pay about PLN 300/ sq m. In the vicinity of Poznan, land for warehouses is twice as cheap compared to Wroclaw.
Plots for residential investments in areas with good access to the main roads in the largest cities are still a hot commodity. Again, Warsaw is characterized by the highest prices. Recent transactions include, for example, the sale of plots of land in Warsaw’s Mokotow district, where buyers paid from PLN 14 thousand per square meter to over PLN 16 thousand. Over the last year, despite the pandemic, price of land has continued to grow in the most interesting districts of Cracow and Warsaw.
In the outer districts of Warsaw, prices are lower. Large plots in less urbanized areas are sold for PLN 2-3 thousand/sq m.
Author: Bartłomiej Zagrodnik, Managing Partner/CEO of Walter Herz