The total stock of the institutional rental market (PRS) in Poland at the end of May 2023 amounted to approx. 12,000 residential units. The sector is slowly but steadily developing, m.in in Warsaw, Wrocław, Poznań, Kraków, Łódź, Tri-City and Katowice. According to developers’ announcements, by 2027 the sector’s offer should be enriched by another 21,000 apartments. In the last few months, average rents have also increased by about 20-30% in PRS investments, similarly to private rents. 

Resources of the PRS sector in Poland

At the end of May 2023, the total stock of the PRS sector in Poland amounted to approx. 12,000 apartments, an increase of approx. 40% in more than half a year (data from AXI IMMO, September 2022). According to the announcements of developers and funds, another approx. 9,000 apartments remain at the stage of preparation or construction, and approx. 12,000 are in the investors’ plans for the coming years. In total, the total stock of the sector should increase by about 21,000 residential units in the next four years. Today, Warsaw remains the largest Polish PRS market with approx. 5,000 units for rent, followed by Wrocław (approx. 2,250) and Poznań (approx. 1,700). These three cities account for 75% of the total stock in the sector, and the capital alone for 42% of this market.

“Among the local PRS markets, we should pay attention to the development of the sector in Łódź. As of today, the resources of this city do not exceed 5% of the total volume. At the same time, according to our calculations, along with the successful implementation of all announced projects, this market should grow and reach a share of 12% in the structure of resources, which will mean the highest growth rate over the next four years in all regions in Poland. Nevertheless, the situation in the PRS sector is so dynamic and heterogeneous that the purchase of a large package of apartments by one larger entity or the decision to build a block of flats can quickly verify the announced distribution of the size of local markets,” analyses Lidia Zawiła, Manager in the Market Research and Analysis Department, AXI IMMO.

The largest number of new residential units in the pipeline and plans are in Warsaw (8,500), Łódź (3,300) and Kraków (3,000). The pool of cities where the pace of institutional lease development is noticeable also includes the Tri-City and Katowice. In these locations, there are a total of 2,500 PRS apartments under construction.

“We expect that along with the professionalization of the institutional rental market, PRS’s offer will expand, and new emerging locations will appear on the map of Polish. Examples include Szczecin and Elbląg, where PFR Nieruchomości is planning to launch projects with apartments for long-term lease,” says Joanna Lewandowska, Associate Director, Capital Markets Department, AXI IMMO.

Largest PRS platforms

In the PRS sector in Poland, there is a stable group of about 20 platforms, among which the largest entities with portfolios consisting of over 2,000 apartments are the Resi4Rent platform owned by R4R Sarl and Echo Investment, the market part of the PFR program – the Apartments for Rent Fund and Vantage Rent controlled and developed by the TAG Immobilien fund. On the other hand, in the group of platforms with the largest number of projects in the pipeline, it is worth mentioning LifeSpot (Griffin Real Estate, Ares, Murapol) and Heimstaden.

“It is worth noting that more and more developers are deciding to diversify their business strategy and open up to cooperation with institutional entities in various forms. Some decide to build flexibly, creating projects that meet both the preferences of investment funds and the needs of individual buyers,” explains Joanna Lewandowska.

Rents in PRS – how much for rent?

In the last few months, the institutional rental market, similarly to the private rental sector, has seen an increase in rents by about 20-30%. The most expensive unit in the list is a 4-room apartment (+65 sqm) from the premium segment in Warsaw, where prices exceed even PLN 10,000 per month. Rental costs in regional cities remain at a similar, lower level. Utilities should also be added to the rent, as well as the optional cost of renting a storage room or parking space (even PLN 500-700 per month). Invariably, the standard duration of a lease in the PRS sector is usually between 6 and 12 months, with some entities remaining more flexible in terms of the length of the contract.

What’s ahead?

“In the coming years, the PRS sector will face challenges related to legal and tax uncertainty, high interest rates in the euro area and the need for sustainable building solutions. In addition, the introduction of the low-cost mortgage program may make the situation more difficult for funds that want to enter the Polish PRS market. On the other hand, the high interest in renting is due to two factors: the increase in the number of refugees and the limitations in the creditworthiness of people interested in buying real estate. The decisions of market operators will also be shaped by the introduction of a programme to limit mass purchases of flats. Despite this, institutional rental is gaining popularity, which is confirmed by numerous PRS projects planned for the coming years and the high level of commercialization of these projects, which often reaches 100%,” sums up Grzegorz Chmielak, Head of Capital Markets and Valuation Department, AXI IMMO.

About AXI IMMO

AXI IMMO offers advisory services in the field of commercial real estate. These include the lease and management of warehouse and office space, real estate valuations, as well as the purchase and sale of investment land. As part of the offer, the company provides B2B and B2C chain management services. The greatest advantage of AXI IMMO is the combination of international service standards with reliable knowledge of the local market. In 2023, the company was awarded the title of the Best Local Agency of the Year in the prestigious international SEEQA competition. In addition, nine times, between 2012 and 2019 and 2021, it received the title of the Best Local Agency of the Year in the prestigious CiJ Awards competition organized by the CEE CiJ Journal magazine. In the same competition, it was twice awarded the title of the Best Team in the Warehouse Sector in 2016-2017.

 

A special publication “PRS sector in Poland – on the path of growth” was created for the needs of a business brunch organized by AXI IMMO Group, Norton Rose Fulbright and Paczuski Taudul Tax Advisors.

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