BTR sector has ‘huge potential’ in Poland and Czech Republic

The Build To Rent sector has huge potential in Poland and the Czech Republic, delegates heard at Garbe’s Investment briefing on the Outlook in CE3, which took place online yesterday.

Ben Maudling, MD Central & Eastern Europe, Garbe Institutional Capital

“The market outlook for BTR in these two countries is positive,” said Ben Maudling, managing director Central & Eastern Europe, Garbe Institutional Capital. “It is a sector that can deliver strong income streams, as demand is growing but supply is extremely limited.”

At present BTR stock – professionally managed, ESG-compliant, newly built or refurbished assets – represents a small segment of the market, less than 1%.

Not only is there less available rental stock in general – 13% of residential in Poland and 22% in the Czech Republic, compared to an EU average of 30% – but many of the assets that are on the market are old, Soviet-era buildings that do not meet today’s environmental or quality requirements.

“The lack of suitable rental stock creates an opportunity for investors,” said Maudling. “Strong growth in occupier demand is forecast, driven by economic outperformance. There’s increasing wealth, especially in the young population, which sees renting as more viable.”

Ultra-low unemployment in both countries is fuelling the BTR sector as well. “We’re seeing premium rents being achieved at the moment,” he said. “The growth forecasts are equally strong, for rentals as well as for capital values.”

The forecast is for Prague and Warsaw to be at the top of the rankings in rental growth expected in European cities between this year and 2027, with +25% expected in the Czech capital and +24% in the Polish capital.

The existing pipeline does not come close to meeting demand. Warsaw has 5,000 existing operating units and 15,000 being developed, but the estimated market need is 200,000. The demand is not confined to capital cities: Krakow has 1,000 units and a pipeline of 5,000, but 80,000 units are needed and the picture is similar in other Polish cities like Wroclaw or Tri-City.

“It is difficult to predict exactly how much stock will be needed, but it is not fanciful to expect 400,000 units to be required in Poland, given what has been happening in other markets,” said Maudling.

The BTR sector has seen rapid growth in Europe, most notably in the UK and in Germany. Poland and the Czech Republic are expected to catch up, Maudling said: “It will all change in the next 10 to 15 years, driven by the increasing mobility of professionals and by more people moving into cities”.

The urbanisation trend is set to gather momentum in the next few years, adding pressure to an already undersupplied market.

As the market grows and suitable products are being developed, investors will be attracted by the rental and capital growth projections, he said: “We expect investment volumes to go up substantially in the future as people realise the considerable potential of the BTR sector.”