Poland: Are difficulties in acquiring land prompting developers to buy built-up plots

Are difficulties in acquiring land prompting developers to buy built-up plots? What are the pros and cons of developments based on the demolition or revitalisation of buildings? Will we see this type of development on a wider scale?

Anna Bieńko, Sales Director at Wawel Service:
Given the difficulties in acquiring new land, we forecast that this type of realisation, i.e. the purchase of developed plots and their transformation, may actually become more common on the market next year. We are also considering this type of development. Demolishing existing buildings and building new properties in their place can reduce the development time compared to building from scratch on undeveloped land. Often, developed plots are also located in attractive locations, close to the city centre or other important points, which can be advantageous from a property demand perspective.

If a developed plot of land is purchased, it is possible to make use of the existing infrastructure, potentially saving money compared to building from scratch. On the other hand, the process of demolishing and clearing the site generates additional costs that need to be taken into account in investment calculations.

It can also involve obtaining the relevant approvals, which is often a complex and time-consuming process. Existing, old buildings may hide unexpected structural problems, which increases investment costs.

We are aware of both the benefits and challenges of such investments and carefully review each proposal for cost-effectiveness and compatibility with our development strategies.

Angelika Kliś, Atal board member:
Such an investment model can only be considered as a small part of the business of developers who predominantly operate on the basis of a traditional scheme. Nor do I think it is set to gain in importance.
Nevertheless, there happen to be attractive sites with a lot of potential that are worth the increased effort and time that demolition and change of function entails, among other things.

A good example of this is our investment in Gdynia on Kcyńska Street. We acquired a site there after one of the retail space operators ceased its operations in Poland. It is an older facility whose operations are gradually being phased out. We have already started demolition work on it and will be realising a large residential project at the site. The site's advantages are its good location and accessibility, and, given its previous activities, the availability of infrastructure and utilities. These are both pluses that can convince developers to make this type of investment.

Andrzej Oślizło, President of the Management Board, Develia S.A.:
We are of the opinion that we will see brownfield developments more and more often in the coming years. In the centres of the largest Polish agglomerations there is a shortage of free land for development. Developers who do not want to build in less attractive locations on the outskirts of the city are increasingly willing to reach for developed plots and demolish existing facilities.

In 2023, we bought land with existing buildings on Legnicka Street in Wrocław's Popowice district or on Kopernika Street in Redłowo, Gdynia. We also signed a preliminary agreement for the sale of the Arkady Wrocławskie shopping centre. The new owner, the Vastint company, is planning to demolish the building and build an investment with other functions in this location.

Cezary Grabowski, Sales and Marketing Director of Bouygues Immoblier Polska:
Our criteria for selecting land for a new investment are based primarily on an attractive location, which includes good accessibility to the plot, proximity of green areas, as well as the presence of shops and service outlets in the vicinity. We consider both developed and undeveloped land.

The best example of land on which we revitalise former buildings is the plot at Sienkiewicza Street in the centre of Wrocław. This is where the Sienkiewicza Résidence, a residential building in two styles, one of which is a historic tenement house we are renovating, is being constructed. Not only are we adapting the old walls to a residential function, but we are also restoring the entire block to its pre-war form of a multi-pitched roof. Projects such as this are more time-consuming than the realisation of flats in an undeveloped area, but they have their additional advantages. Above all, it is the 'soul' of the building that gives the project its unique atmosphere. Such projects, due to the form of development, have thicker walls, for example, which is appreciated by many customers.

Małgorzata Ostrowska, Director of the Marketing and Sales Division at J.W. Construction:
Definitely, such developments are justified at a time when we have such limited access to attractive land. We already have experience in converting existing buildings, both in the context of hotels, I mean the Dana Hotel in Szczecin, and multi-family buildings. Next year we are planning another such project. This time in Krakow, where we will be revitalising the former PKO BP building on Wielopole Street, transforming it into an exclusive hotel. The challenge associated with this type of investment is undoubtedly cooperation with the conservator.

Mariola Żak, sales and marketing director at Aurec Home:
Indeed, the lack of good land for residential development is a big problem for the whole housing industry. We have our land banks and are currently investing in planned projects that are waiting to be launched or are in the pipeline. We decided to buy up old buildings and transform them already a few years ago, when we bought post-factory land for the construction of the unique Fabrica Ursus development. Part of the residential development will be formed by fragments of the former Ursus factory, which remain under the protection of the conservator of historical monuments. On the plot of 2.5 hectares we plan to build 800 flats ranging from 35 sqm to 100 sqm, located in 6-7 storey residential buildings.

Post-industrial areas are places with great potential for the development of urban centres, historic buildings are part of the cultural identity of the regions. Many of them are historical buildings, permanently inscribed in the urban landscape. In Poland, the leader in industrial investments is post-industrial Łódź, while in the capital the Aurec Home estate will be one of the few investments of this type. We are well aware that investments in historical or post-factory areas are not easy. Complex projects involve many state and local government institutions and entities that watch over the fate of abandoned and neglected buildings. Nevertheless, the attractiveness of the site, its interesting history and the atmosphere of the newly created investment are able to compensate for the difficulties associated with revitalisation.

Rafał Zboch, board member at Archicom:
I am convinced that the limited supply of attractive land will remain one of the biggest challenges for developers in the coming months. Certainly, the market circumstances will require representatives of the development sector to look for new approaches to the purchase of plots and out-of-the-box solutions. In the case of each potential property, we analyse its current status and future potential on a multi-level basis. Whether or not it remains developed is of secondary importance to us, as long as the location enables us to build flats that fit in with our philosophy of creating unique places to live. In view of this, we are very much open to purchasing also developed plots.

Andrzej Gutowski, Vice-President and Head of Sales Department, Ronson Development:
Property conversions are becoming an attractive investment alternative. The biggest advantage of such projects is their location. Post-industrial sites are usually located in attractive communication points. This represents an added value for future customers. In addition, the development plot is usually a developed plot. This eliminates the need for additional development, i.e. the connection of utilities.

However, the procedures related to the allocation of post-industrial land for new purposes require a time-consuming process due to numerous legal regulations and administrative approvals. Developers also have to reckon with the risks associated with such projects due to demolition and land transformation.

Despite this, the observed trend of replacing older buildings with new ones will continue to strengthen, especially in view of the limited availability of empty plots in attractive locations.

Damian Tomasik, CEO of Alter Investment:
Since the beginning of our company, we have been interested in projects in attractive locations that can be adapted to current market needs. One such investment was the purchase in 2016 of a service building in Gdynia on Wrocławska Street in a location where a modern multi-family building was built after the property was sold to a local developer. Another investment that tempted us with its history and passion for revitalisation was a tenement in Gdańsk on Trakt św. Wojciecha Street. The entire Orunia district has undergone a process of revitalisation in recent years, and we expect to obtain a building permit in the next two years to restore the former glory of this magnificent property.

Such projects are much more demanding and time-consuming to prepare project documentation and can hide many surprises. However, completing them gives unique satisfaction but also allows you to gain valuable experience. Therefore, although buying land seems simpler in principle, when viewed from this perspective, and taking into account the fact that there is less and less undeveloped land in prime locations, it can be assumed that the trend of transforming the function of existing buildings will strengthen.

Source: dompress.pl
Photo: Develia - Malta Point