Boston, MA -- (SBWIRE) -- 02/16/2013 -- The Poland Real Estate report examines the office, retail, industrial and construction sectors throughout the country in the context of the sudden downturn in the construction segment.

With a focus on the principal cities of Warsaw, Krakow, Gdansk, Sopot and Gdynia, the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of emerging cracks in the previously outperforming construction sector.

Our newly collected data in July of 2012, measures market activity and performance over the first six months of the year. The overall picture continues to be positive whereby, on a regional playing field, Poland remains one of the stronger real estate teams. Retail and industrial rents in particular have put in a strong showing for the beginning of the year. Growth in the office sector has been less forthcoming with a stalled trajectory and even minor contractions noted. While we do not believe that this is an indication of a turnaround in market fortunes, it is a bellwether for the fact that in spite of market optimism, we need to be mindful that the Central and Eastern European (CEE) country is not immune from external economic woes and domestic weaknesses and news from the construction pipeline should also be of concern.

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Key Points

- Poland's building industry, once a safe haven in Eastern Europe's struggling construction sector, has all but collapsed, taking the country's largest building companies down with it. A worrying trend of high competition, poorly structured tendering processes, unsustainably low project bids and a frontloaded project pipeline had caused us to highlight the cracks in Poland's construction sector for some time. These have finally played out on the country's construction companies, and threaten to spill over into other industries and the wider economy.
- We maintain our below-consensus forecast for Polish real GDP growth of 2.5% in 2012 and have revised down our forecast for 2013 to 2.6% from 2.9% as eurozone demand looks set to remain weak well into next year. Nonetheless, we expect Poland to continue outperforming the CEE region as its large domestic market and exposure to Germany provide a measure of insulation from the sovereign debt crisis.
- We warn of more downside risks to our already cautious outlook for the Polish construction industry during 2012 and 2013 (which is forecast to grow by a modest 1.8% year-on-year (y-o-y) and 2.4% yo- y, respectively) as financial problems of domestic players come to the surface. Between 2012 and 2021, we anticipate the industry to post lacklustre annual average growth of 3.6% - a far cry from the average 9% y-o-y growth recorded between 2007 and 2011.

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