More than 1,700 new units were added to the institutional rental housing (PRS) market in Q1 of this year, bringing its stock in Poland to over 13,800, according to Knight Frank. The firm estimates that at the end of March there were more than 7,300 flats under construction located in 29 projects. If developers manage to stick to their plans, 5,500 more will hit the market this year, which would be nearly double the 2022 figure.
“Despite the fact that developers operating in the PRS market face similar challenges to other players in the construction industry, i.e. high inflation, hard to predict as construction costs continue to rise or limited access to finance, we continue to see the sector grow. In the first quarter of 2023 alone, 1,700 rental units were delivered, of which around 37% were in the Poznan market,” said associate director of market research at Knight Frank Bożena Garbarczyk.
At the end of March 2023, the housing stock within the PRS sector was estimated at over 13,800 units. The leader in terms of market share remained Warsaw, where around 5,100 rental flats are located, accounting for 42% of the total stock in Poland.
“It is estimated that at the end of Q1 there were more than 7,300 flats under construction located in 29 projects. If developers manage to keep to their plans, 21 projects will be completed by the end of this year. As a result, 5,500 rental flats would be delivered to the market, which would be nearly double the 2022 figure. The largest new supply is expected in Warsaw, Łódź and Wrocław,” Garbarczyk added.
The PRS sector in Poland is attracting both Polish and foreign operators. At the end of Q1, the largest share of the existing stock was held by Echo Investment (28%), which offers almost 3,400 flats in 12 projects on its Resi4Rent platform. Other key players in the market include TAG Immobilien (2 200 flats within 9 projects on the Vantage Rent platform) and the Housing for Rent Fund (over 2 000 rental units in 19 projects). In addition, TAG Immobilien acquired a 100% stake in the Robyg Group, securing land for approximately 16,500 flats within 14 developments, it was also stated.
“The currently observed economic situation in Poland favours the development of the PRS sector. It is associated with high housing prices and speculation that the cost of buying one’s own flat will further increase in the coming months. Persistently high interest rates are also not conducive to housing purchases. Furthermore, the generational change that is happening before our eyes is influencing less willingness or even avoidance to take on long-term commitments. This may be linked to a change in the ratio between buying and renting. It is worth mentioning on this occasion that the prevalence of PRS projects is often supported by their location in attractive parts of cities,” commented investment broker at Capital Markets Sylwia Jankowska.
Tenant interest in rental flats is reflected in the exceptionally low vacancy rate in the PRS sector, which at the end of March 2023 was estimated to be close to 4 per cent, up by 1 percentage point compared to the end of 2022. The sector is also characterised by a rapid pace of commercialisation, with flats in many cases finding tenants even before the project is completed.
After a significant increase in rents in the PRS sector in 2022, rental rates in Warsaw remained stable in the first quarter of this year. In regional cities, despite higher financing costs for new developments and rising construction costs, rents fell by an average of 6-9% compared to 2022 values.
Source: Knight Frank and ISBnews
