The Polish development market will face a wave of consolidations and acquisitions in the coming years, both from large Polish development companies and those implemented by international capital according to JLL.
“The intensive development of the Polish housing market and the great interest of global investment capital in Poland stimulates the processes of consolidation and acquisitions in the housing sector. Recently, the sale of several large, well-known development companies on the Polish housing market has been loud. According to JLL, this is not the end yet. Over the years, the Polish development market will face a wave of consolidation and acquisitions, both from large Polish development companies looking for growth opportunities, but also through international capital appreciating the potential and attractiveness of the Polish housing market, including the rental market.
Land banks of many developers have shrunk in recent years, and the limited availability of land for development does not allow for a quick increase in the number of prepared investments. In such a situation, one of the paths of growth is geographic expansion. It is worth recalling that, contrary to appearances, the development market is fragmented and strongly local. Out of over 640 development companies active in the 6 largest Polish residential markets, only a small part of them operate in more than one city.
“The acquisition of a local real estate development company could be a way to solve two key entry problems. The first is related to the acquisition of a land portfolio and, equally important, local competences allowing experienced local developers to acquire building plots more efficiently. The second is to obtain administrative decisions. The frequently observed discretion in official decisions makes it easier for local developers experienced in contacts with architecture departments to conduct administrative processes. well-known in the city for years, strengthened by a strong brand of a nationwide company, it often gives more potential than the organic building of presence on the local market,” said Paweł Sztejter, director of the JLL Housing Department.
All this means that transactions such as between Dom Development and Euro Styl in the Tri-City, the acquisition of Krakow’s Sento planned by the same company, the purchase of Archicom by Echo Investment, or Wrocławskie Przedsiębiorstwo Budowlane by Robyg are just the beginning of the consolidation process of the development market.
However, not only larger nationwide developers are responsible for the takeovers of real estate development companies, but also international capital. Examples include last year’s acquisition of Murapol by the Ares investment fund, the purchase of Echo Investment by the Hungarian real estate company Wing, or the acquisition of Budimex Nieruchomości.
The ‘European Living Investor Survey’ conducted earlier this year by JLL in cooperation with the Aberdeen Standard among global investors shows that 63% of them plan to expand geographically in 2021, and nearly 60% plan to increase their investments in the Living sector, which represents an increase of over 55% compared to 2019. Investors are interested in purchases in Poland due to the huge potential of our housing market, opportunities for further development and the profitability of the development industry. 25%, added Sztejter.
Interest in investing in income-generating housing is growing worldwide and the living sector is already the second largest asset class – both globally and in Europe. The main limitation of the rapid growth of the PRS segment in Poland is the lack of real estate portfolios ready for purchase in this segment. Difficulties with launching new housing projects, in turn, explain the low propensity of developers to deal with funds, especially in view of strong demand from individual buyers. In this situation, having a development company is a bridgehead for building a platform for investing in apartments for rent, and this type of investment is one of the priorities of international funds.
“Investment funds are so interested in investing in the rental market in Poland that they are ready to buy development companies with a view to transforming them, at least partially, into companies that build and manage a portfolio of apartments for rent. Development by the German TAG Immobilien,” explained Sztejter.
Source: ISBnews and JLL
