The construction industry proved to be an industry extremely resistant to COVID-19 in 2020. I am writing this article from the perspective of a Ukrainian who has been living in Poland since 2014, observing the construction boom there and benefiting from Polish infrastructural success. This country is building its road and rail infrastructure all of the time, as well as industrial and warehouse facilities. The development market currently remains stable due to low interest rates and the desire to preserve the value of money in real estate.
Warehouses and industrial construction
This has been the segment of construction to have experienced most growth of late. Changes in distribution are forcing the demand for warehouse space used by companies trading and servicing online sales as well as industrial processing plants which increase production and exports.
Poland’s road infrastructure will be developed in accordance with the new EU and Polish national budget, and this perspective will provide many new contracts for the construction industry. The General Directorate for National Roads and Motorways plans to announce tenders in 2021 for the construction of more than 660 km of new roads and the modernization of existing road networks, and wants to spend about PLN 20 billion on this (around EUR 4.5 billion). Many plans also apply to the EU budget for 2021-2027. Tenders for new EU plans are set to be successively announced. This segment promises to see a constant boom and lots of orders.
Investment in this area promises to be extremely rich. Experts estimate that in 2021 the construction and modernization of the Polish railway network is a cake to the value of about PLN 14 billion (EUR 3.2 billion) which will be distributed to construction companies, and it is expected that these outlays will be at such a high level for the next few years. The Polish government confirms the continuation of the project to build the Central Communication Port (airport, rail and road infrastructure), it will not be a large budget next year, however, until 2034, it is gradually planned to spend in excess of PLN 80 billion on this construction (EUR 18.1 billion).
In my view, this is one of the most damaged sectors, which still remains with quite a high range of price per square meter, probably due to long term contracts and warm interest on the part of global players to locate here their Business Process Outsourcing or Shared Service Centers to Poland.
Anyway, office space is definitely less popular now, and the main reason for this is the popularity of remote working (which has started to be real even for banking institutions like Citi Group, JP Morgan and other banking players). Measurements of higher work-from-home efficiency have led many corporations to permanently abandon office space. Increasingly popular short-term rental and office space sharing services do not meet demand for long-term rental of office space. Banks increased the estimated risks associated with investments in office space and, therefore, in 2020 experts spoke of a possible decline of 5-10%, though these are quite cautious forecasts.
Anticipating the development of suburban open shopping centers and the construction of discount stores. Expansion in 2021 will continue in towns and municipalities, including Dino supermarkets, building several hundred new stores annually. This format of the store is the most popular, and competitive chains do not locate stores in closed shopping malls and large formats (hypermarkets). Many smaller local chains have announced expansion plans to construct new stores and some even distribution centers. However, the development of online trading can change their investment strategies, especially taking into account the strong development of food delivery services that Frisco (online supermarket) now offers, and which other retailers like Biedronka (largest discounter shops chain in Poland), together with food delivery service Glovo, offer.
Hydro and energy
Hydro construction and energy. The estimated construction investments in ports, storage reservoirs, the Vistula Spit ditch and other expenditures in the hydro technical segment exceed the sum of PLN 30 billion (EUR 6.8 billion) in the next 10 years.
Changes in the energy sector aimed at closing the coal-fired energy sector and increasing the share of solar and wind energy are a large, though not yet precisely priced but noteworthy segment for construction companies. We can see, as proof of high interest in the solar market, the share price movements of Columbus Energy SA on the Warsaw Stock Exchange, which offers solar panels.
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