Poland: Is it profitable to build flats on land zoned for office or retail development?
In the context of land scarcity, do developers plan to build flats on developed land under the lex developer formula? Under what circumstances is it profitable to develop multi-family buildings in place of office or retail buildings? Are companies considering such a solution to increase the scale of residential investments? Which projects have recently purchased land for?
Tomasz Kaleta, managing director of sales and marketing at Develia:
The limited supply of land in large cities will in some cases force developers to carry out investments under the lex developer formula and this is inevitable. We expect this type of project to increase. We, too, are carefully reviewing properties with the potential for residential development to replace existing older commercial or post-industrial development through the lex developer route. This is a process that takes several years and is complex, which is why within the structure of our group there is a specialised company, Develia Land Development, set up for this purpose. We are currently conducting several such processes concerning real estate located in the largest Polish cities.
One of the examples of estates that have been developed under the lex developer formula is Lizbońska in Warsaw. We realised it with the developer Grupo Lar Polska as part of a joint venture. Our partner was responsible for preparing the investment according to this procedure and it was the first project of its kind in Warsaw. The realisation of Lizbońska was carried out from the very beginning taking into account the findings of the public consultation. The aim was to maintain coherence with the surroundings and concern for the environment.
Mateusz Bromboszcz, Vice-President of Atal:
The special law did not meet the expectations that developers had placed in it and did not significantly generate new areas for development. Its rather insignificant impact on the residential situation in Poland is evidenced by the relatively small number of decisions issued under this procedure, which will probably translate into ca. 35-40 thousand sq.m. of PUM on a nationwide scale. PUM at the scale of the whole country, which is not much for a period of 6 years. Now, in view of the planning reform and the end of lex developer, the fate of this instrument is sealed. Unfortunately, to the detriment of the development of the housing market, after all the land for which this tool was adequate was most often located in good locations and, as, among other things, post-industrial or commercial, was equipped with the necessary utilities and convenient communication.
Practice has shown that, from the investors' point of view, lex developer is a very tedious, risky and inefficient process. It was not only the adoption procedures that proved to be a shortcoming, including frequent negation of municipal resolutions by other bodies, but also regulations that were not adapted to reality, e.g. the top-down imposed parking ratio (1.5 spaces), particularly unjustifiable in city centres. Another problem has often been the lack of experience on the part of cities with effective and transparent ways of conducting social dialogue or with rules for investor participation in the development of necessary infrastructure; not only network infrastructure, but also educational and other infrastructure. As a result, the potential and benefits that this tool had for municipalities in terms of housing development were not used, despite the wide field for consultation and participation. The special law itself can be an excellent tool for cities and conscious administrators to shape urban spaces in a way that reconciles stakeholders in investment processes and residents, with it being up to them to select the tools and conduct the entire process in a way that builds trust in the municipality and the investor.
Nevertheless, there are attractive areas with great potential, worthy of transformation and the increased effort and time that demolition and change of function entails. A good example of this is the Atal investment in Gdynia on Kcyńska Street. We acquired a site there after one of the operators of commercial space, which ceased its operations in Poland. We are realising a large residential project there called Atal Symbioza. The site's advantages are its good location and transport links, and, given its previous activities, the availability of infrastructure and utilities. These are both pluses that could convince developers to make this type of investment.
Damian Tomasik, CEO of Alter Investment:
The lex developer formula, which allows for the implementation of residential investments on land previously used for office or retail development, opens up new prospects for the real estate market. Such projects can be particularly profitable in locations with a high demand for housing, where access to attractive, undeveloped plots is limited. We are considering the use of the lex developer formula as one way to scale up investments. Given the growing demand for housing and the limited availability of attractive plots of land, this type of solution could be an important part of our development strategy. Building on land under the lex developer formula is a strategic direction that can significantly increase the scale of our operations, especially in cities with high demand for housing. We are ready to adapt our projects to these new opportunities, bearing in mind the profitability and quality of our investments.
Dawid Wrona, Chief Operating Officer at Archicom:
In our opinion, the construction of city-creating, multifunctional and modern investments in places that have so far been characterised by less aesthetic and functional buildings is a good idea for sustainable urban development. As part of the Modern Mokotow investment in Warsaw, we have committed to building not only residential or commercial buildings, but also a public school and a linear park. In doing so, we are making a revolution in the post-industrial area of Służewiec, an area to which the patch of the so-called capital's Mordor has been sewn for years. By demolishing the office buildings in the vicinity of Wołoska and Domaniewska Streets, we are transforming the concreted spaces into a green and vibrant project with flats, services, restaurants, a linear park and zones for recreation and leisure.
We are also currently at the stage of public consultation on the further development of the space at 14 KEN Avenue in Warsaw's Kabaty district. Our ambition is to create a new local centre for Kabaty in this location, which will become a comfortable place to live, meet and rest with a central point in the form of an urban square - the Kabaty Market. We are a beneficiary of this kind of approach to urban transformation because we see great urban potential.
Mariola Żak, sales and marketing director at Aurec Home:
The shortage of land for residential development is a major problem facing the entire housing industry. As a strong and stable developer, we have our land bank and are currently investing in projects that are under development. We already decided to buy up old buildings and convert them a few years ago, when we purchased 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 are under the protection of the conservation officer. On the plot of 2.5 hectares, the construction of approximately 800 flats, ranging in size from 35 to 100 sqm, located in 6-7 storey residential buildings has already begun.
Two new projects are on the horizon, namely the My Forest and My River estates located in Warsaw's Białołęka district. In the first case, residents will have a private forest at their disposal, in the second case, a river.
Andrzej Gutowski, Vice-President, Sales Department Director, Ronson Development:
The Act on facilitating the preparation and realisation of housing investments and accompanying investments, known as lex deweloper, is a tool for us to support the realisation of housing investments. We are taking advantage of the benefits of this law by implementing a project on the site of the former Ursus factory hall. There, we plan to create nearly 1,500 modern flats and accompanying infrastructure, such as a school, crèche, kindergarten and cultural space.
However, we know from current law that the amendment to the Planning and Development Act, which implemented the planning reform in autumn 2023, reduced the duration of lex developer by three years, i.e. until the end of 2025. Due to the limited duration of the Act, we are not considering the purchase of new residential land associated with this law. If the law is extended, and such discussions are ongoing, we are considering the possibility of expanding our investment activities in this area.
Joanna Chojecka, sales and marketing director for Warsaw and Wrocław at Robyg Group:
In June 2024, TAG Immobilien Group, which owns Robyg and Vantage, invested PLN 390 million in a land bank across Poland. The Group's land bank includes the potential to build more than 25,000 units across Poland. We have one of the largest land banks among developers in Poland. Our land is very well located in the five agglomerations where we operate: Warsaw, Wrocław, Poznań, Łódź and the Tri-City.
We are constantly looking for new land, because the demand for flats is growing and we would like to put new investments on sale even faster. The availability of land in the largest cities is currently lower, but there is still a huge potential for the development of urban spaces and the provision of interesting residential offers by developers. With regard to the so-called developer lex specula, we are analysing several such projects.
Source: dompress.pl
Photo: Lizbonska, Develia
