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Poland Real Estate Report Q1 2013

Poland Real Estate Report Q1 2013

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Additional Information

Price	$1,175.00
Publisher	Business Monitor International
Date of Report	Dec 26, 2012

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Quick Overview

The Poland Real Estate report examines the office, retail, industrial and construction sectors throughout
the country in the context of the sudden downturn in the construction segment.
With a focus on the principal cities of Warsaw, Krakow, Gdansk, Sopot and Gdynia, the report covers the
rental market performance in terms of rates and yields over the past 18 months and examines how best to
maximise returns in the commercial real estate market, while minimising investment risk and exploring
the impact of emerging cracks in the previously outperforming construction sector.
Our newly collected data in July of 2012, measures market activity and performance over the first six
months of the year. The overall picture continues to be positive whereby, on a regional playing field,
Poland remains one of the stronger real estate teams. Retail and industrial rents in particular have put in a
strong showing for the beginning of the year. Growth in the office sector has been less forthcoming with a
stalled trajectory and even minor contractions noted. While we do not believe that this is an indication of
a turnaround in market fortunes, it is a bellwether for the fact that in spite of market optimism, we need to
be mindful that the Central and Eastern European (CEE) country is not immune from external economic
woes and domestic weaknesses and news from the construction pipeline should also be of concern.
Key Points
Poland's building industry, once a safe haven in Eastern Europe's struggling construction sector, has
all but collapsed, taking the country's largest building companies down with it. A worrying trend of
high competition, poorly structured tendering processes, unsustainably low project bids and a
frontloaded project pipeline had caused us to highlight the cracks in Poland's construction sector for
some time. These have finally played out on the country's construction companies, and threaten to
spill over into other industries and the wider economy.
We maintain our below-consensus forecast for Polish real GDP growth of 2.5% in 2012 and have
revised down our forecast for 2013 to 2.6% from 2.9% as eurozone demand looks set to remain weak
well into next year. Nonetheless, we expect Poland to continue outperforming the CEE region as its
large domestic market and exposure to Germany provide a measure of insulation from the sovereign
debt crisis.
We warn of more downside risks to our already cautious outlook for the Polish construction industry
during 2012 and 2013 (which is forecast to grow by a modest 1.8% year-on-year (y-o-y) and 2.4% yo-
y, respectively) as financial problems of domestic players come to the surface. Between 2012 and
2021, we anticipate the industry to post lacklustre annual average growth of 3.6% - a far cry from the
average 9% y-o-y growth recorded between 2007 and 2011.
We remain bearish on the European building materials market as conditions for firms continue to
deteriorate in light of ongoing eurozone austerity. The sovereign debt crisis, lower domestic demand
from peripheral countries, and tighter financing conditions are constraining our construction outlook
for the region, and will continue to limit growth for the foreseeable future. Overcapacity, increasing
production costs, and falling sales volumes have hit the bottom lines of producers since 2009, and we
see no immediate end to these phenomena. Notable exceptions to this trend are Russia and, to a lesser
extent, Turkey and we expect these outperforming markets to sustain high levels of demand over the
medium term.

Table of Contents

Executive Summary ........................................................................................................................................ 5
SWOT Analysis ............................................................................................................................................... 7
Poland Real Estate/Construction SWOT ............................................................................................................................................................... 7
Poland Political SWOT ......................................................................................................................................................................................... 8
Poland Economic SWOT ....................................................................................................................................................................................... 8
Poland Business Environment SWOT ................................................................................................................................................................... 9
Real Estate Market Overview ........................................................................................................................ 10
Real Estate Market Analysis – Office ........................................................................................................... 16
Supply And Demand ............................................................................................................................................................................................ 16
Rents And Yields ................................................................................................................................................................................................. 17
Table: Historic Rents – 2010-2011 (US$ per m2/month) ..................................................................................................................................... 17
Table: Net Yield, 2011-2012 (%) ........................................................................................................................................................................ 17
Table: Terms Of Rental Contract/Leases – Mid-2011 ......................................................................................................................................... 17
Industry Forecast Scenario ...................................................................................................................................................................................... 18
Table: Forecast Rents – (US$ per m2/month) ...................................................................................................................................................... 18
Table: Forecast Net Yield, 2010-2017 (%) ......................................................................................................................................................... 18
Real Estate Market Analysis – Retail ........................................................................................................... 19
Supply And Demand ............................................................................................................................................................................................ 19
Rents And Yields ................................................................................................................................................................................................. 20
Table: Historic Rents – 2010-2011 (US$ per m2/month) ..................................................................................................................................... 20
Table: Net Yield, 2011-2012 (%) ........................................................................................................................................................................ 20
Table: Terms Of Rental Contract/Leases Mid-2011 ............................................................................................................................................ 20
Industry Forecast Scenario ...................................................................................................................................................................................... 21
Table: Forecast Rents – (US$ per m2/month) ...................................................................................................................................................... 21
Table: Forecast Net Yield, 2008-2016 (%) ......................................................................................................................................................... 21
Table: Poland Retail Sales Indicators, 2010-2016 .............................................................................................................................................. 22
Real Estate Market Analysis – Industrial..................................................................................................... 23
Rents And Yields ................................................................................................................................................................................................. 23
Table: Historic Rents – 2010-2011 (US$ per m2/month) ..................................................................................................................................... 23
Table: Net Yield, 2011-2012 (%) ........................................................................................................................................................................ 23
Table: Terms Of Rental Contract/Leases – Mid-2011 ......................................................................................................................................... 23
Industry Forecast Scenario ...................................................................................................................................................................................... 24
Table: Forecast Rents (US$ per m2/month)......................................................................................................................................................... 24
Table: Forecast Net Yield, 2008-2016 (%) ......................................................................................................................................................... 24
Forecast Scenarios ....................................................................................................................................... 25
Infrastructure Report ............................................................................................................................................................................................... 25
Table: Poland Construction And Infrastructure Industry Data, 2009-2016 ......................................................................................................... 25
Table: Poland Construction And Infrastructure Long-Term Forecasts, 2014-2021............................................................................................. 26
Construction and Infrastructure Forecast Scenario ............................................................................................................................................ 28
Macroeconomic Outlook .......................................................................................................................................................................................... 29
Table: Poland – Economic Activity ..................................................................................................................................................................... 31
Poland Real Estate Report Q1 2013
© Business Monitor International Ltd Page 4
Real Estate Risk/Reward Ratings ................................................................................................................ 32
Real Estate/Construction Risk/Reward Ratings ....................................................................................................................................................... 32
Table: Real Estate Risk/Reward Ratings ............................................................................................................................................................. 32
Poland’s Business Environment ............................................................................................................................................................................... 32
Table: BMI Business And Operation Risk Ratings .............................................................................................................................................. 33
Institutions .......................................................................................................................................................................................................... 34
Table: BMI Legal Framework Rating ................................................................................................................................................................. 35
Infrastructure ...................................................................................................................................................................................................... 36
Table: Labour Force Quality .............................................................................................................................................................................. 38
Market Orientation ............................................................................................................................................................................................. 39
Table: Emerging Europe-Annual FDI Inflows .................................................................................................................................................... 40
Table: Trade And Investment Ratings ................................................................................................................................................................. 41
Table: Top Export Destinations .......................................................................................................................................................................... 42
Operational Risk ................................................................................................................................................................................................. 43
Company Monitor ......................................................................................................................................... 44
Company Profiles ......................................................................................................................................... 46
Atlas Estates........................................................................................................................................................................................................ 46
Plaza Centers NV ................................................................................................................................................................................................ 48
TriGranit ............................................................................................................................................................................................................. 50
Demographic Data ........................................................................................................................................ 52
Table: Poland's Population By Age Group, 1990-2020 ('000) ............................................................................................................................. 53
Table: Poland's Population By Age Group, 1990-2020 (% of total) .................................................................................................................... 54
Table: Poland's Key Population Ratios, 1990-2020............................................................................................................................................ 55
Table: Poland's Rural And Urban Population, 1990-2020 ................................................................................................................................. 55
BMI Methodology .......................................................................................................................................... 56
How We Generate Our Industry Forecasts .............................................................................................................................................................. 56
Construction Industry .............................................................................................................................................................................................. 57
Bank Lending ........................................................................................................................................................................................................... 58
Real Estate/Construction Business Environment Rating .......................................................................................................................................... 58
Table: Weighting Of Indicators........................................................................................................................................................................... 59
Sources..................................................................................................................................................................................................................... 61