A decreasing supply of attractive land parcels combined with growing prices are directing investors' attention to areas with objects that require either demolition or revitalization. Multi-functional projects are still gaining popularity.
The favorable macroeconomic situation in 2018 led to bullish investor sentiment and encouraged positive decisions regarding the acquisition of land and the commencement of new projects. The limited availability of plots has led to an increase in land prices as well as a greater openness of developers to analyze sites requiring demolition, remediation work and restoration. Multi-functional projects which avoided the division of urban space into mono-cultural zones of housing, work and leisure were highly popular. However, the growing prices of land and costs of building materials and workforce represented a significant challenge to investors.
Daniel Puchalski, Head of Land Advisory Services, JLL
Land for residential development
In 2018, developers faced great difficulties when trying to expand their land banks, mainly due to stiff competition for plots and the limited accessibility of available sites. The low supply of land has pushed land prices to levels which have prevented many developers from achieving their expected profit margins. This, combined with the increase in development costs, has resulted in double-digit percentage increases in the prices of residential units available on the primary market. Flats on the secondary market have become more expensive as well. As a result, the difference in average prices for the primary and secondary market has been diminishing, with this trend most evident in Warsaw.
Daniel Puchalski, Head of Land Advisory Services, JLL
Average prices of residential land in 2018
| Area | Price (PLN / sq m PUM*) |
| Warsaw, city centre | 3,000 – 5,000 PLN |
| Warsaw – other districts | 1,000 – 2,500 PLN |
| Cities with more than 400,000 residents | 650 – 2,500 PLN |
* PUM – Residential Usable Area / Source: JLL
Land for office development
In contrast to the residential land sector, the office sector was rather stable. However, there were development space hot spots in cities such as Kraków, Gdańsk and Warsaw, where plots in good locations, with a relatively risk-free legal status, were in such short supply. Due to the robust development of the office segment, and the decreasing supply of land, average land prices for office projects increased in 2018.
Daniel Puchalski, Head of Land Advisory Services, JLL
Average prices for office land in 2018
| Area | Price (PLN / sq m PUB**) |
| Warsaw, CBD* | 3,500 – 4,500 |
| Warsaw, CBD fringe* | 1,300 – 2,300 |
| Warsaw, other | 600 – 1,300 |
| Gdańsk | 1,000 – 1,400 |
| Wrocław | 1,000 – 1,400 |
| Kraków | 1,000 – 1,400 |
*CBD - Central Business District / **PUB – Office Usable Area / Source: JLL
There is significant interest from international co-working networks and serviced office operators in the Polish market, which is further fuelling the development of new office projects. Strong demand for office plots in the next few months will be seen in all major regional cities, with the Tri-City, Kraków and Warsaw leading the way. We believe that these markets in particular may see further increases in land prices in 2019.
Joanna Kieszczyńska, Senior Consultant, Land Advisory Services, JLL
Land for retail development - smaller towns and smaller concepts of value
These characteristics of the Polish retail market, have encouraged investors to look for development sites and retail space in multifunctional projects for small concepts of up to 10,000 sq m of leasable area that complement an existing retail offering. One should note that they did not exclude from their analyses cities with fewer than 50,000 residents.
Joanna Kieszczyńska, Senior Consultant, Land Advisory Services, JLL
Taking over the facilities of competitors and re-branding them is an alternative way of gaining space for further expansion. A good example of this is the OBI DIY concept that launched stores in several buildings which used to house Praktiker stores. Furthermore, Jeronimo Martins and Carrefour both took over some of the stores previously operating under the name Piotr i Paweł, as part of that network’s restructuring plan. The next few years will bring further consolidation in the retail segment, as well as more purchases of retail locations and plots from competitors.
Daniel Puchalski, Head of Land Advisory Services, JLL
Average prices of retail land in 2018
| Area | Price (PLN / sq m PUU*) |
| Warsaw, land designated for large-scale shopping malls | 2,000 – 5,000 PLN |
| Warsaw, land designated for retail parks and stand-alone stores | 1,500 – 2,000 PLN |
| Cities with more than 400,000 residents | 400 – 1,200 PLN |
*PUU – Retail Usable Area / Source: JLL
In the case of investment sites, demand will be focused on plots for developing small retail parks ranging between 3,000 and 10,000 sq m of leasable area. This applies in particular to locations where there is a supply gap in terms of retail space. In addition, older retail facilities and those that are surplus to requirements for an investor’s portfolio have a chance to find new buyers in 2019. These buyers will modernise or demolish existing buildings in order to develop new projects.
Daniel Puchalski, Head of Land Advisory Services, JLL
Land for hotel development - high potential
According to our data, in 2018 more than 30 companies were actively seeking locations in Poland for the construction of hotels. That demand has heightened the expectations of sellers with regard to the prices of properties. As well as greenfield sites, investors were also interested in tenement houses and other buildings suitable for redevelopment into hotels in Poland’s major cities. Investor activity is also propelled by the dynamics of the development of the office sector, which generates business traffic in hotels and eliminates the problem of so-called seasonality. In addition, more projects combining office buildings with hotels in a single project, such as the Warsaw Hub, have appeared on the market.
Daniel Puchalski, Head of Land Advisory Services, JLL
The boom in condo developments is a response to the high levels of interest from individual investors in this type of investment. Due to the low interest rates offered for bank deposits as well as market uncertainty, more and more people are looking for alternative ways to invest their capital. At the same time, the rapid development of tourism has led to a situation, where in attractive leisure or business locations, a higher yield is obtained from short- rather than long-term rental.
Daniel Puchalski, Head of Land Advisory Services, JLL
Prospects for 2019
In 2019 we will see continued interest in revitalization and multi-functional projects, which contribute to the establishment of cooperation between investors across various market segments. A further, slight increase in land prices across all segments of the market, especially in Warsaw and Tri-City, is expected. Investor optimism may cool down due to conditions in the construction industry and the tightening of the banks' criteria for granting loans, both in relation to individuals and commercial investors.
Daniel Puchalski, Head of Land Advisory Services, JLL
