Polish rental housing the bright light on the horizon
Things have changed little in the real estate markets in a year and while there was a lot of hope that by the end of 2023 things would have improved, the market is still challenging according to TREI Real Estate CEO Pepijn Morshuis.
He said that at MIPIM in March, the story was the same as last year: Expectations are that later this year things might change and investors will be back and development will start again. “We’ll see,” he told Real Asset Insight’s Richard Betts.
“We’re still in the same three countries that we were in last year – Germany, Poland and the US – and I have to say, some markets are doing better than others, with Germany being an enormous challenge.”
He said that development and construction costs have gone up by about 40%, since the covid pandemic began.
“In addition, there are an increasing number of ESG requirements, not just from banks and investors, but also from legislative bodies.” These have increased construction costs by a further 15%, he said.
“It’s almost not feasible to develop in Germany any more,” Morshuis added.
Morshuis said construction and land costs need to come down significantly. “As long as that isn’t happening it’s very hard to do something in Germany.”
The US turned the corner more quickly, although the major challenge there is financing. “American banks still have large portfolios of office loans that they need to get rid of somehow,” he added.
“Poland’s is a country where there’s much more opportunity,” he added. One reason is the increased population, not least because of the two to three million Ukrainians that have entered the market there.
He said that there is scope to develop retail parks and smaller cities of 50,000 inhabitants need retail infrastructure.
“But what’s probably even more interesting is that there’s increasing demand for rental housing,” he added. He explained that Poland has traditionally focused on housing for sale, but as this has become less affordable the rental housing market has begun to grow, expanding from nothing to around 20,000 apartments in three years.
