What's happening in the construction industry?

The construction sector in Poland at the end of 2024 is in a state of marked change and challenge, related to both the macroeconomic situation and global trends. Residential, industrial, warehouse, volume or modular construction are facing different dynamics and problems that affect the future prospects of the industry.

Variable housing

Poland's residential segment has seen considerable volatility in recent years. The record number of pandemic residential developments has given way to a marked slowdown triggered by rising interest rates and limited access to mortgages. Despite an improvement in housing sales in the second half of 2023, the sector currently continues to face barriers due to high financing costs.

Thus, in 2024, the residential construction sector in Poland faced challenges related to the high cost of materials, limited availability of raw materials and the effects of high interest rates, which limited the availability of mortgages. Despite this, the situation began to stabilize in the second half of the year. Noted:

• New developments: the number of housing units started in October 2024 was 23,352, up 21.4% month-on-month and 18.4% year-on-year.
• Building permits: more permits for new construction were issued compared to the previous year, which may indicate a rebound in developer investment.
• Profitability issues: developers continue to look for ways to optimize costs and are implementing green technologies and digital tools such as BIM to improve efficiency.

However, forecasts for 2025 call for a recovery in this segment of the construction industry, thanks to the normalization of interest rates and the introduction of new government programs to support access to housing. Next year promises to be a period of slow growth in the housing sector, with key factors likely to affect the market:

• Lower interest rates: forecasts indicate that lower interest rates could improve credit availability, which should increase demand for housing.
• The 2% Safe Credit program: while its scale is not sufficient to completely transform the market, it could provide a boost for some developers to resume stalled projects.
• Stabilization: experts predict that the market will stabilize in the coming years at a lower level than before the pandemic, but more predictable than in 2022-2023.

Nearshoring at a premium

In the area of industrial and warehouse construction, Poland maintains a strong position in Europe. The segment is benefiting from the global trend of “nearshoring” - the transfer of production from Asia to Europe. Intensive investments in logistics centers, factories and data center facilities are a response to the increase in demand resulting from digitization and green technological changes. Examples of such investments include Intel's factories and data centers of major technology corporations.

In 2024, this sector of the construction industry in Poland maintains dynamic growth, being one of the most important segments of the construction market. Key data and trends are:

• The development of the aforementioned nearshoring: in the face of geopolitical tensions, many companies are choosing to move production closer to their target markets, increasing demand for warehouses and industrial facilities in Poland. Poland is becoming an attractive location due to its strategic location and developed infrastructure.
• New warehouse space: more than 1.4 million sqm of modern warehouse space was delivered this year, bringing the total supply to 32.3 million sqm. Projects are concentrated in major centers such as Warsaw, Wroclaw and Lodz.
• Green building: investors are placing increasing emphasis on buildings that meet ESG (sustainability, energy efficiency) standards. Such projects are becoming a priority for both tenants and owners.
• Stabilization of vacancy rates: the market has reached a balance between supply and demand, which contributes to the stability of rents, especially in prime urban locations.

2025 promises continued growth in this sector, albeit with some challenges and key trends:

• Sustained demand: retail and e-commerce will continue to be the main drivers of growth in demand for warehouse space, supported by the development of automation and robotization.
• Increased involvement of foreign investors: Poland remains a key market for international investment funds. Examples include investments in logistics parks in cities such as Krakow and Wroclaw.
• New technologies: the development of data centers and infrastructure for the green industry, including factories for heat pumps and batteries for electric cars, will continue, further specializing the market.

All in all, Poland's industrial and warehouse construction sector remains one of the fastest growing in Europe, with optimistic prospects for the years ahead. Support for innovative and sustainable projects further strengthens its potential.

The volume sector, which includes commercial, office and public buildings, among others, also shows mixed trends. While investments in modern warehouses or logistics centers are dynamic, the office and shopping center segment is still struggling with the consequences of pandemonium, falling demand and delays due to longer investment cycles. At the same time, increasing environmental requirements and the need to modernize older buildings may stimulate future growth in this area.

Construction of the future

In 2024, the market experienced moderate growth in Poland, reaching a value of PLN 4.9 billion. This is an increase of about 7% year-on-year. It was driven mainly by the single-family construction segment, which accounted for the largest share of the market (about PLN 2.5 billion in 2023). The popularity of prefabricated 2D and 3D modules is growing, with 2D dominating the market due to lower production and assembly costs.

Key factors driving this market are:

• Faster project completion times compared to traditional construction.
• High housing prices and difficulties with availability of traditional construction.
• Environmental pressures and the popularity of technologies that meet ESG standards, especially in commercial and public projects.

In contrast, major challenges include:

• High interest rates limiting investment financing.
• Rising costs of raw materials, such as steel, concrete and wood.
• Delays in the mobilization of EU funds, including funds from the National Reconstruction Plan, which may affect the pace of project implementation.

However, the modular construction market is expected to accelerate significantly in 2025, with projected double-digit growth rates of 16-17 percent. The main factors supporting this market are:

• Intensification of investment supported by EU funds, with emphasis on rapid construction technologies such as prefabrication.
• There is growing demand for energy-efficient modular buildings, both in the residential and commercial segments.
• The housing gap persists, as well as pressure to develop green and low-cost construction.

Projections indicate that the modular construction market in Poland will reach PLN 8.7 billion by 2029, making it one of the more dynamic segments in the construction industry.

A general recovery in the construction industry is forecast for 2025, supported by new infrastructure investments and EU funds. In the longer term, the residential and industrial sectors may benefit from improved credit availability and further digitization of the economy, while engineering and volume construction will face stabilization with an emphasis on renovations and sustainability.