POLAND Trends and Developments Contributed by: Radomił Charzyński, Kamil Majewski, Olga Durawa and Filip Widuch, Greenberg Traurig LLP
The main challenges for PRS investors in terms of finance are high construction and land acqui - sition costs (the cost of constructing 1 square metre of a new multi-family building have increased by 50% in the past seven years) and financing costs (given the fact that tenants typi - cally only accept rent paid in Polish zloty, while financing is generally available in euro – although some PRS operators have been testing euro- denominated rent structures). A number of leg - islative changes may affect the PRS market and the viability of business models. These include newly adopted zoning regulations and changes in the technical requirements for buildings, such as the minimum size of the residential premis - es. Despite these challenges, the PRS market is still perceived as attractive and – according to surveys conducted by commercial advisors – more than 20% of investors in the CEE region are considering investments in the PRS sector. The potential of this market is also confirmed by very low vacancy rates in the existing PRS stock. The student housing market has strong devel - opment foundations as the demand for student accommodation remains high (due to – among other things – the growing number of foreign students, the decreasing affordability of accom - modation on rental market and the increasing popularity of modern private student dormito - ries already operating on the market). The latest announcement of the joint venture transaction between Signal Capital Partners, Griffin Capital Partners and Echo Investment for the launch of a new student housing platform (which awaits merger clearance at the time of writing (April 2024)) supports this trend. In respect of senior housing, the institutional market is currently at a very initial stage. How - ever, according to the latest research (eg, the report prepared by CBRE in co-operation with
Greenberg Traurig entitled “Senior Housing in Poland”), there is an increased interest in this market among investors, who are currently assessing the market’s potential and investment opportunities. Owing to demographic changes, it is expected that the senior housing sector will boom in the coming years. The authors will therefore monitor future developments in this area with curiosity. Office Sector The office sector accounted for 20% of the investment volume in 2023. Sellers who have decided to market office assets from their port - folios are generally reluctant to sell at the higher yields being offered by potential buyers. This price conflict usually leads to a situation where the seller decides to keep the asset and carry out certain quality improvements to prepare the asset or portfolio of assets for a more favourable market – for example, in terms of ESG aspects, technical conditions, and tenant mix. While such demanding market circumstances usually discourage more cautious, regulated investors with a more conservative approach, they at the same time attract opportunistic buyers looking for strategic purchases; in this respect, 2023 brought new players to the Polish market. The above-mentioned sellside-buyside price expec - tation mismatch is expected to stabilise in the near future. The limited new supply of office space (approx - imately 61,000 square metres in Warsaw) has already been almost fully leased and approxi - mately 221,000 square metres is currently under construction in Warsaw. Within the planned office investments, a new category of properties undergoing refurbishment is becoming increas - ingly visible on the market, posing an alternative to completely new office space.
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