Paweł Staromłyński, Investment Director at Trust Investment, talks about the situation on the construction market, the impact of the pandemic and the war in Ukraine on this market, as well as the prospects for its development.
In the current economic situation, when we observe rising prices and galloping inflation, investing in real estate should seem to be a relatively stable and reliable business. Is this really the case?
This is indeed the case, because looking at the current economic situation, you may come to the conclusion that keeping free money in your account is risky. These funds are disappearing rapidly, which translates into nervous movements of investors.
Investing in real estate is a stable business, but you need to specify what type of property you want to invest in. Attractive land will always be a good way to invest capital, at least due to its limited availability. A way to obtain certain security is also capital invested in an attractive apartment.
Of course, customers who use loans nowadays will have great doubts about this way of investing. The Monetary Policy Council raised interest rates several times from October 2021 to November 2022. This shows how inflation affects borrowers, making it difficult to invest consciously.
At the same time, it is worth remembering that hard times create strong people, and economic fluctuations and crises will always appear cyclically. You need to be aware of this and invest in a way appropriate to the situation.
How has the Covid-19 pandemic affected the situation on the construction market and the investment behavior of Poles?
March 2020 was a turning point for everyone. What seemed unreal and improbable became reality. No one could predict that society would be subject to such orders as wearing masks, checking body temperature, limits on entry to stores, closing borders or canceling concerts and family celebrations.
Like other companies, ours also had to find its way in a new situation, especially since we were implementing many projects. In spring 2020, we opened the first retail park in Małogoszcz to our key tenants. In parallel, we started an investment in Bytom where we achieved a very good result regarding the deadline. Within 8 months of taking over the construction site, we were ready to hand over the keys to our clients.
In turn, in 2021 and 2022, we completed several commercial facilities for tenants such as Stokrotka, Pepco, Rossmann and Lidl. Also in 2021, we launched our flagship residential investment in Kielce. Today, after 15 months, we are preparing the building for acceptance and preparing for the process of handing over the keys to the customers who have trusted us.
What is most important to us and what we want to characterize us is the ability to act unconventionally. In case of difficulties related to rising prices or limited access to proven and trusted contractors, we require creative activity. Only this approach allows you to find attractive partners in difficult times.
Due to the pandemic, there has been a trend in the housing industry of moving from cities to the suburbs. Many Poles became interested in finance, economic mechanisms and ways of investing. Almost everyone I had the opportunity to talk to was thinking about building a cushion of financial security.
The war in Ukraine caused our sense of stability to be shaken for some time. Did this have an impact on the real estate market and investments in this industry? On the other hand, the inflow of a large group of refugees from across the eastern border may be a solution to the lack of workers in many industries, including construction…
Unfortunately… we learned the hard way that war is just around the corner. In such moments, reflection comes quickly and everyone quickly begins to analyze what to do.
The last 10 months have been difficult for the construction industry. Supply chains were disrupted, and the price increases for steel and concrete, i.e. key materials used to create the building’s structure, were astronomical. Today, fortunately, we are seeing a stabilization of the already high prices.
Everything related to the Covid-19 pandemic and the armed conflict in Ukraine has happened over the last 30 months. None of us can say what will happen in the next 30 months, and from the point of view of the construction market, this is how much time is needed to construct buildings that can help protect capital.
When it comes to refugees, we must first of all understand that these people are burdened with enormous trauma. They left their homes, families, and life plans. Of course, we should look for opportunities to employ them, but this will require a lot of commitment on our part, verification of their skills and proper training.
The construction market in Poland is developing. However, many analyzes present rather moderately optimistic forecasts. For example, a report by the research company Spectis indicates that the construction industry recorded good results in the first half of 2022, but it does not predict a boom for 2023. What it comes from?
We are pleased that the first half of the year recorded good results. However, it is difficult for me to refer to such specific forecasts for 2023. As I said earlier, none of us could have predicted that in the last 30 months we would experience a pandemic and the escalation of hostilities beyond our eastern border. I do not dare to forecast and predict whether the market will be a bull market or a bear market. As Warren Buffet used to say: “the more stupid the market behavior, the greater the opportunity for the business investor” – and let’s stick to that.
Can you predict how the real estate market will develop?
Paweł Staromłyński: Of course, yes. Poland is a developed country and very attractive for investment by foreign capital. Diversification of activities in the real estate market will be the key to success. Logistics real estate, renewable energy sources and the trend of ecological construction will constitute the strength of our real estate market.
I hope that thanks to the developing communication infrastructure, our country will gain in the eyes of large logistics and distribution operators. Logistics real estate has enormous investment potential.
Government programs involving the construction of wind or photovoltaic farms also seem to be a long-term investment idea.
Which construction industry has development prospects – is it residential construction or rather commercial construction? Can you identify any noticeable trends in this regard?
For residential investments in the next ten years, we see investment potential in smaller cities. Large centers are already feeling short of breath and oversaturated with too many apartments. In turn, a well-prepared commercial investment, properly located, will always be attractive. Every company wants to rent spaces in line with the latest trends, which will be their showcase.
The construction industry must focus on new solutions that will help optimize projects. Complete digitalization is as inevitable as thinking about prefabricating key building elements. 3D printing technology has a bright future ahead of it.
In the world since the late 1990s, while in Poland over the last 5 years BIM technology has been gaining popularity, which is worth investing in and training specialists in. It is a digital ecosystem that shows the life of the entire project in real time – from concept and design, through execution to operation.
I don’t have a single answer to this question, but if I had to give it, I would say that innovative construction has the best development prospects.
Paweł Staromłyński – graduate of the Kielce University of Technology, the Technical University of Vienna and the Military University of Technology in Warsaw. The largest completed investments: construction of a new Power Unit in Kozienice and the Q22 high-rise building in Warsaw. Experience gained directly by supervising construction and finishing works. Hobbies: sports, music, learning foreign languages.
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