Construction sector in Poland, H2 2011

The report presents trends for the entire construction market, as well as broken down into individual segments:

• residential construction
• non-residential construction
• civil engineering.

An important section of the report is the profiles of top ten construction companies in Poland, which includes an analysis of their current financial situation and their strategies for the next years.
 
For the purposes of the report we have conducted a survey of top 200 construction companies in Poland. Its summary contains aggregated assessment of construction firms relating to the market and the market situation of the analysed companies.
 
Another strength of the report is regional analysis describing the Polish economy as well as the construction market and its segments by region, including historical data and forecasts.

Key issues

• an analysis of the construction market as a whole and interpretation of trends in the area of salaries, employment level, financial condition and number of construction firms, cement production, EU subsidies etc.
• results of the survey of top 200 construction companies in Poland focusing on the condition of analysed businesses, as well as their opinions on construction market trends
• an analysis of the situation in individual segments of the construction market; forecasts until 2014
• an analysis of top 10 construction companies on the Polish construction market, including their financial results for the first half of 2011, financial forecasts, the newest trends in market strategies, and the newest contracts obtained by the companies
• a regional analysis – macroeconomic forecasts and forecasts for residential, non-residential and civil engineering by region, until 2014
• forecasts for the value of construction and assembly production until 2014, broken down into individual segments of the market
• forecasts for the number of completed apartments, by individual segments of the market.

 The questions the report answers

- What is the current and forecasted value of the Polish construction market and its segments?
- What are the forecasts for residential construction in the area of construction permits and new investments?
- How many apartments are going to be completed in 2011-2014 in private and developer housing?
- How are the prices on the Polish construction market going to develop over the coming years?
- Which regions are going to demonstrate the highest dynamic of new construction investments over the next years?
- How many kilometres of motorways and express roads are currently under construction, and how many will be completed by 2015?
- What are the most recent financial results of the top ten construction companies in Poland?
- What key legal changes have impacted the Polish construction market in the last six months?
- What are the current trends in the sub-segments of non-residential construction?

The report is useful when:

• setting up activity on the industrial construction market in Poland
• entering a new segment of the construction market
• carrying out an M&A transaction on the construction market
• planning company strategy
• analysing investment opportunities on the construction market in Poland
• monitoring the competition on the construction market
• estimating own share in the construction market
• forecasting the demand for construction materials applied in industrial construction
• preparing own analyses for the management or shareholders.

The report is addressed to:

• the managers, executives, and marketing departments of the following:
• producers and distributors of construction materials
• producers and distributors of construction machines
• contractors active in Poland
• foreign construction companies investing or planning to invest in Poland
• firms designing and managing construction investments
• consulting, research and analyst companies
• government institutions, embassies, universities, research institutes
• chambers of commerce, industry organisations, media houses, PR agencies
• financial institutions (banks, brokerage houses, investment funds).

Companies mentioned in this report:

Mostotrest, Transstroy, Globalstroy Engineering, Stroytransgaz, E4 Group, Mosinzhstroy, Mosmetrostroy, Mospromstroy, Engeocom, DSK Avtoban, LSR Group, Glavstroy, HeidelbergCement, Saint-Gobain, Inteco, Lafarge, PIK Group, Gazprom Invest, YIT, MirLand, Setl City, RGI International, Sun Group.

Extract from this report

• In April 2011, Russian President Dmitry Medvedev announced that 38 airports in Russia will be reconstructed or supplemented with new constructions this year.
• At the beginning of 2011 total housing stock in Russia stood at slightly more than 3.23 billion m², which is 1.6% more than the figure one year earlier.

Market commentary by expert

Owing to the efficient and intensive implementation of road construction investments, in 2011 the construction sector grew beyond the market expectations, raising hopes that the positive trend is going to continue in 2012 as well. However, the expected cuts in public spending, a lack of clear recovery in commercial construction, and turbulent global financial markets make the further steady development of Polish construction highly uncertain.

Bartłomiej Sosna, Head Construction Analyst  

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1. Methodology p. 11

2. Executive summary p. 17

3. Macroeconomic overview p. 23

   • Gross domestic product (GDP) p. 23
   • Gross value added in construction p. 24
   • Gross fixed capital formation p. 24
   • Capital expenditure on buildings and structures p. 25
   • Foreign direct investments p. 26
   • Inflation p. 27
   • Macroeconomic outlook p. 28

4. Construction overview p. 29

   • Construction market value p. 29
   • Construction and assembly output p. 30
   • Construction firms – number and type p. 33
   • Employment and wages in construction p. 35
   • Construction prices and financial standing of construction companies p. 36
   • Business confidence in construction p. 38
   • Cement production p. 39
   • Legal changes relevant to the construction market p. 39
     • Adoption of the developers’ act p. 39
     • Enabled purchase of TBS dwellings by tenants p. 40
     • Local road reconstruction programme to continue p. 40
     • Concept to establish Social Housing Groups p. 40
     • Secondary market excluded from the “Family’s Own Home” scheme p. 41
     • Anti-spread act passed by the Sejm p. 41
     • Construction of waste incineration plants made easier p. 41
   • Development forecast for construction and assembly output in 2011-2014 p. 42

5. Results of a survey among the 200 largest Polish construction firms p. 45

   • Introduction p. 45
   • Assessment of the situation on the Polish construction market p. 46
   • Overview and market standing of the largest Polish construction firms p. 60
     • Current and planned activities of Polish construction companies on foreign markets p. 68

6. Civil engineering construction p. 71

   • Situation on the civil engineering construction market p. 71
   • Environmental protection-related projects p. 74
   • Road transport p. 77
   • Railway transport p. 81
   • Air transport p. 85
   • Gross fixed capital formation in the heavy industry p. 87
     • Gross fixed capital formation in the power sector p. 87
     • Gross fixed capital formation in the refining and chemical sectors p. 88
       • PKN Orlen p. 88
       • Lotos p. 89
       • PGNiG p. 89
       • Gaz-System p. 90
   • Development forecast for civil engineering construction in 2011-2014 p. 91

7. Non-residential construction p. 93

   • Situation on the non-residential construction market p. 93
   • Industrial and warehouse construction p. 96
   • Retail and service construction p. 99
   • Office construction p. 103
   • Hotel construction p. 107
   • Public utility construction p. 110
   • Development forecast for non-residential construction in 2011-2014 p. 113

8. Residential construction p. 115

   • Housing stock p. 117
   • Building and dwelling completions p. 118
     • Individual investors p. 119
     • Developers p. 120
     • Housing cooperatives p. 124
   • Building permits and housing starts p. 124
   • State-funded housing schemes p. 126
   • Housing prices p. 127
   • Mortgage loans p. 127
   • Development forecast for residential construction in 2011-2014 p. 129

9. Overview of voivodships p. 133

   • GDP, capital expenditure and population p. 133
     • GDP by voivodship p. 133
     • Capital expenditure p. 135
     • Area and population of Polish voivodships p. 136
     • Demographic forecasts p. 137
   • Construction and assembly output p. 138
     • Construction and assembly output per capita, by voivodship p. 138
     • Construction and assembly output per construction firm employee, by voivodship p. 139
     • Forecast for construction and assembly output in 2011-2014 p. 140
   • Civil engineering construction p. 141
     • Road networks in voivodships p. 142
   • Permits for road construction projects p. 143
     • The size of the market for public procurement in road construction p. 144
     • Rail network by voivodship p. 145
     • Development forecast for civil engineering construction in 2011-2014 p. 146
   • Non-residential construction p. 147
     • Development forecast for non-residential construction in 2011-2014 p. 149
   • Residential construction p. 162
     • House completions p. 162
     • Building permits and forecast number of home completions in 2011-2014 p. 163
     • Development forecast for residential construction in 2011-2014 p. 165

10. Voivodship profiles p. 167

    • Voivodships in figures p. 171

11. Profiles of the largest construction companies p. 173

    • Budimex SA p. 173
    • Polimex-Mostostal SA p. 175
    • Strabag Sp. z o.o. p. 177
    • Skanska SA p. 178
    • PBG Group p. 180
    • Mostostal Warszawa Group p. 182
    • Warbud SA p. 185
    • P.R.I. Pol-Aqua SA p. 187
    • Mostostal Zabrze-Holding SA p. 188
    • Trakcja Tiltra p. 190

12. List of graphs p. 193

13. List of tables p. 199

14. About PMR p. 203

15. Contact PMR p. 204

List of graphs

1. Forecasts for construction and assembly output growth in Poland, by type of construction, 2011-2014      19
2. Voivodships’ shares in construction and assembly output in Poland, 2010      21
3. Construction and assembly output in Poland, by voivodship, average annual growth rate, 2011-2014      22
4. GDP growth in Poland (%, y-o-y), 2000-2014      23
5. Real Gross Domestic Product growth in Poland (%), 2002-H1 2011      24
6. Gross fixed capital formation in Poland (%, y-o-y), 2000-2014      25
7. Corporate capital expenditure on buildings and structures in Poland, 2000-H1 2011      25
8. Value of foreign direct investments (FDI) in Poland (€ bn), 2002-2011      26
9. Average annual inflation rate for Poland (%), 2000-2014      27
10. Value (PLN bn) and change (%) of the construction market in Poland, 2005-2011      30
11. Nominal change in construction and assembly output in Poland (%, y-o-y),  Jan 2009-Aug 2011      31
12. Structure of construction and assembly output in Poland, by segment, 2005-H1 2011      32
13. Growth in net revenue and net profit posted by construction firms in Poland, H1 2003-H1 2011      35
14. Employment in construction in Poland (‘000), 2007 – Jan-Aug 2011      35
15. Average gross monthly wage (PLN) in construction and wage change (%) in Poland, 2005 – Jan-Aug 2011      36
16. Inflation rate and prices in construction and industry in Poland (%, y-o-y), Jan 2006-Aug 2011      37
17. Net sales margin in industry and construction in Poland (%), 2005-H1 2011      37
18. Cost to revenue ratio in industry and construction in Poland (% of revenue), 2005-H1 2011      38
19. Business confidence in construction in Poland, Jan 2010-Sep 2011      38
20. Cement production in Poland (million tonnes), 2000-2012      39
21. Total construction output in Poland, 2007-2014      42
22. Assessment of the current situation in the Polish construction industry      46
23. Projection for the situation in the construction sector in Poland in the next 12 months      47
24. PMR Construction Confidence Indicator, Jul 2004-Sep 2011      47
25. Most attractive segments of the construction market in Poland in the next two years      48
26. Barriers to doing business on the construction market in Poland      49
27. Comparison of proportions of responses indicating given factors as impeding business in the Polish construction industry, Sep 2010-Sep 2011      50
28. Factors facilitating doing business in the construction industry in Poland      51
29. Has your company participated/been participating in construction projects related to Euro 2012?      51
30. How will the situation in the construction industry change in the next few yeas after Euro 2012?      52
31. Measures planned or implemented to achieve a competitive advantage on the construction market in Poland      53
32. Measures planned or implemented in response to the crisis in the construction sector      53
33. Headcount reductions as a means to overcome the crisis in the construction industry in Poland      54
34. Does your company plan to increase or reduce headcount in the next 12 months?       55
35. Does your company plan to expand its production capacity in the next 12 months otherwise than by increasing its workforce?      55
36. How does your company plan to expand its production capacity in the next 12 months (otherwise than by increasing its workforce)?      56
37. Percentage of companies participating in projects co-financed by the EU, Jul 2004-Sep 2011      56
38. Is your company concerned about competition from foreign construction companies which offer cheap labour and lower prices?      57
39. Competition from which country are you most concerned about?      57
40. Does your company plan to increase/reduce the prices for its services in the next 12 months?      58
41. Do you expect the prices of building materials to increase or fall in 2012?      58
42. What measures does your company take with regard to general contracting in order to execute contracts below the investor’s cost estimate?      59
43. How long do you think the practice of offering prices lower than the investor’s cost will last?      60
44. Key construction segment for your company      60
45. Proportion of work delegated to subcontractors by construction companies      61
46. Most common types of subcontracted work by construction companies in Poland      62
47. Proportion of total contracts secured by construction companies performed by small-size companies       63
48. Which criteria are decisive when selecting a subcontractor in the construction business?      64
49. What is the current standing of your company?      64
50. Comparison of the company’s financial standing this year relative to the prior year      65
51. Compared to the end of 2010, financial standing of your company at the end of 2011 will be…       66
52. Assessment of the size of the company’s current order book      66
53. The company’s order book now compared to last year’s…      67
54. Does your company conduct projects or sell products or services abroad? (July 2004-September 2011)      68
55. Countries where Polish construction companies most often conduct business activity      68
56. Does the company plan to launch business activity outside of Poland?      69
57. Contribution of civil engineering construction to total construction and assembly output in Poland (%), 2003-H1 2011      71
58. Structure of civil engineering construction and assembly output in Poland, by type of buildings, 2010      72
59. Structure of civil engineering construction and assembly output in Poland, by type of buildings, H1 2011      73
60. Civil engineering construction and assembly output in Poland (PLN bn), 2000-H1 2011      73
61. Construction and assembly output comprising distribution pipelines and cables in Poland (PLN bn), 2000-H1 2011      74
62. Construction and assembly output comprising roads and motorways in Poland (PLN bn), 2000-H1 2011      77
63. Construction and assembly output comprising bridges, viaducts, flyovers, tunnels, subways and pedestrian bridges in Poland (PLN m), 2000-H1 2011      77
64. Motorways and expressways under construction in Poland (km), as at year-end, 2000-2011      78
65. Motorways and expressways in use in Poland (km), 2000-2014      79
66. Existing and proposed motorways and expressways in Poland, 2011-2013      80
67. Construction and assembly output comprising railways in Poland (PLN m), 2000-H1 2011      82
68. Modernisation of railway lines in Poland until 2015      83
69. Civil engineering construction and assembly output in Poland, 2007-2014      91
70. Non-residential construction and assembly output in Poland (PLN bn), 2000-H1 2011      93
71. Non-residential construction and assembly output in Poland, by type of buildings, 2010 and H1 2011      94
72. Building permits and projects completed in Poland – non-residential construction, the number of buildings, 2004-H1 2011      94
73. Building permits and projects completed in Poland – non-residential construction, the floor area of buildings, 2004-H1 2011      95
74. Construction and assembly output comprising industrial and warehouse buildings in Poland (PLN bn), 2000-H1 2011      96
75. Building permits and projects completed in Poland – industrial and warehouse construction, the number of buildings, 2004-H1 2011      96
76. Construction and assembly output comprising retail and service buildings in Poland (PLN bn), 2000-H1 2011      99
77. Building permits and projects completed in Poland – retail and service buildings, the number of buildings, 2004-H1 2011      99
78. Building permits and projects completed in Poland – retail and service buildings, the floor area of buildings, 2005-H1 2011      100
79. The supply of modern retail space in Poland (m2), 2005-2011      101
80. Change in the number of hypermarkets in Poland, 2001-2011      102
81. Construction and assembly output comprising office buildings in Poland (PLN bn), 2000-H1 2011      104
82. Building permits and projects completed in Poland – office buildings, the number of buildings, 2004-H1 2011      104
83. Building permits and projects completed in Poland – office buildings, the floor area of buildings, 2004-H1 2011      105
84. Stock and future supply of office space projects in regional cities in Poland (m2), September 2011      105
85. Construction and assembly output comprising hotels and tourist accommodation buildings in Poland (PLN m), 2000-H1 2011      107
86. Building permits and projects completed in Poland – hotels and tourist accommodation buildings, the number of buildings, 2004-H1 2011      107
87. Building permits and projects completed in Poland – hotels and tourist accommodation buildings, the floor area of buildings (‘000 m2), 2004-H1 2011      108
88. Polish hotel stock, H1 2011      108
89. Construction and assembly output comprising cultural, educational, sports, healthcare buildings and hospitals in Poland (PLN bn), 2000-H1 2011      110
90. Building permits and projects completed in Poland – cultural, educational, sports, healthcare buildings and hospitals, the number of buildings, 2004-H1 2011      110
91. Building permits and projects completed in Poland – cultural, educational, sports, healthcare buildings and hospitals, the floor area of buildings (‘000 m2), 2004-H1 2011      111
92. Non-residential construction and assembly output in Poland (PLN bn), 2007-2014      113
93. Contribution of residential construction to total construction and assembly output in Poland (%), 2003-H1 2011      115
94. Residential construction and assembly output in Poland (PLN bn), 2000-H1 2010      116
95. Residential construction and assembly output in Poland, by type of buildings, 2010-H1 2011      117
96. Housing starts and homes for which building permits were issued in individual construction in Poland (‘000), 2002-2012      119
97. Prices of materials used in the construction of a typical single-family house in Poland, May 2004-Aug 2011      120
98. Housing starts and homes for which building permits were issued in the developer sector in Poland (‘000), 2002-2012      121
99. Developer-built homes marketed, sold and offered in Poland, Q1 2007-Q2 2011      122
100. Housing starts and homes for which building permits were issued in Poland (‘000), 2002-2012      125
101. Number and value of new mortgage loans in Poland, 2004-2012      128
102. Residential construction and assembly output in Poland, 2007-2014      129
103. Housing completions in Poland, 2004-2014      130
104. Homes completed in Poland, by type of construction (‘000), 2004-2014      131
105. GDP per capita in Poland, by voivodship (the average for Poland=100%), 2010      134
106. Annual nominal changes in construction and assembly output in Poland, 2002 – Jan-Aug 2011      138
107. Sales of construction and assembly output per capita in Poland (PLN), 2010      139
108. Sales of construction and assembly output per construction employee in Poland, (PLN ‘000), 2010      140
109. Construction and assembly output in Poland – civil engineering and road construction projects, by voivodship (PLN m), 2010      142
110. Length and density of hard-surfaced public roads in Poland by voivodship, 2010      142
111. Number of road structures for which permits were issued in Poland, by voivodship, 2010      143
112. Permits for the construction of road structures in Poland, by voivodship, 2010      144
113. Public tenders for road construction in Poland, by voivodship, 2010      145
114. Length and density of rail network in Poland, by voivodship, 2010      146
115. Non-residential construction and assembly output in Poland, by voivodship (PLN m), 2009-2010      148
116. Number of non-residential buildings for which construction permits were issued in Poland, by voivodship, 2009-2010      148
117. Home completions per 1,000 population in Poland, 2010      163
118. Number of new dwellings for which construction permits were issued in Poland, by voivodship, 2010-H1 2011      164
119. Dwellings for which permits were issued and house starts (‘000), H1 2011      165

List of tables

1. Construction and assembly output in Poland (PLN bn), 2010-H1 2011      18
2. Projections for the main economic indicators in Poland for 2011-2014      28
3. Main indicators illustrating the condition of the Polish construction industry, 2007-2011      30
4. Construction and assembly output in Poland, by type of building, 2008-H1 2011      32
5. The number of construction firms in Poland, June 2002-June 2011      33
6. Financial results of the largest construction groups operating in Poland, 2010-H1 2011      34
7. Financial results of construction companies operating in Poland (PLN m), 2007-H1 2011      34
8. Major environmental protection projects in Poland, 2011-2015      76
9. Major road construction projects in Poland, 2011-2020      81
10. Major railway construction projects in Poland, 2011-2020      84
11. Major airport projects in Poland, 2011-2020      86
12. Major power projects in Poland, 2011-2020      87
13. Major industrial and warehouse space projects in Poland, 2011-2015      98
14. Number of hypermarkets in Poland, 2009-2011      101
15. Foreign supermarket chains in Poland, 2009-2011      102
16. Discount store chains in Poland, 2009-2011      102
17. Major retail and service projects in Poland, 2011-2014      103
18. Major office development projects in Poland, 2011-2020      106
19. Major hotel projects in Poland, 2011-2014      109
20. Major public utility projects in Poland, 2011-2020      112
21. Housing stock in Poland, H1 2011      117
22. The average floor area of homes completed in Poland (m2), 2005-H1 2011      118
23. Housing completions in Poland, by type, 2005-H1 2011      118
24. Major housing projects in Poland, 2011-2015      123
25. Change in housing completions in Poland (%, y-o-y), 2005-H1 2011      124
26. Homes for which building permits were issued in Poland, 2009-H1 2011      125
27. Housing starts in Poland, 2009-H1 2011      125
28. Voivodships’ shares in Polish GDP (%), 1998-2014      134
29. Capital expenditure in Poland, by voivodship, 2010-2011      135
30. Forecast for capital expenditure growth in Poland (PLN m), 2009-2014      135
31. Area and population of Poland, by voivodship, 2010      136
32. Population forecast for Poland, by voivodship (‘000), 2010-2035 (as at 31 December)      137
33. Forecast for construction and assembly output in Poland (%, nominal change), 2011-2014      140
34. Construction and assembly output in Poland, by voivodship (PLN m), 2010-2014      141
35. Construction and assembly output – civil engineering construction in Poland, by voivodship (PLN m), 2010-2014      147
36. Forecast for construction and assembly output – non-residential construction in Poland, by voivodship (PLN m), 2010-2014      149
37. Building permits issued in Poland, by voivodship: hotels and tourist accommodation establishments (number of buildings and floor area in m2), 2005-H1 2011      150
38. Projects completed in Poland, by voivodship: hotels and tourist accommodation establishments (number of buildings and floor area in m2), 2005-2010      151
39. Building permits issued in Poland, by voivodship: office buildings (number of buildings and floor area in m2), 2005-H1 2011      152
40. Projects completed in Poland, by voivodship: office buildings (number of buildings and floor area in m2), 2005-2010      153
41. Building permits issued in Poland, by voivodship: commercial and services buildings (number of buildings and floor area in m2), 2005-H1 2011      154
42. Projects completed in Poland, by voivodship: commercial and services buildings (number of buildings and floor area in m2), 2005-2010      155
43. Building permits issued in Poland, by voivodship: transport and communication buildings (number of buildings and floor area in m2), 2005-H1 2011      156
44. Projects completed in Poland, by voivodship: transport and communication buildings (number of buildings and floor area in m2), 2005-2010      157
45. Building permits issued in Poland, by voivodship: industrial buildings and warehouse facilities (number of buildings and floor area in m2), 2005-H1 2011      158
46. Projects completed in Poland, by voivodship: industrial buildings and warehouse facilities (number of buildings and floor area in m2), 2005-2010      159
47. Building permits issued in Poland, by voivodship: cultural, educational, sports and healthcare buildings, hospitals (number of buildings and floor area in m2), 2005-H1 2011      160
48. Projects completed in Poland, by voivodship: cultural, educational, sports and healthcare buildings, hospitals (number of buildings and floor area in m2), 2005-2010      161
49. Number of homes completed in Poland, 2010-2014      164
50. Construction and assembly output, residential construction in Poland, by voivodship (PLN m), 2010-2014      166
51. Population of Poland by voivodship, 2007-2010      167
52. Number of construction firms in Poland, by voivodship, June-end 2011      168
53. Sales of construction and assembly output in Poland, by voivodship, 2008-H1 2011      168
54. Construction and assembly output in Poland, by voivodship, 2008-H1 2011      169
55. Construction and assembly output in Poland, capex projects, by voivodship, 2008-2010      169
56. Construction and assembly output in Poland, renovation work, by voivodship, 2008-2010      170
57. Number of residential buildings for which construction permits were issued in Poland, by voivodship, 2007-H1 2011      170
58. Number of non-residential buildings for which construction permits were issued in Poland, by voivodship, 2007-H1 2011      171
59. Voivodships in figures      172-172
60. Key financial data of the Budimex Group, 2005-H1 2011      173
61. Key financial data of the Polimex-Mostostal Group, 2005-H1 2011      175
62. Key financial data of Strabag, 2005-H1 2011      177
63. Key financial data of the Skanska Group, 2005-H1 2011      178
64. Key financial data of the PBG Group, 2005-H1 2011      180
65. Key financial data of the Mostostal Warszawa Group, 2005-H1 2011      182
66. Key financial data of the Warbud Group, 2005-H1 2011      185
67. Key financial data of P.R.I. Pol-Aqua Group, 2005-H1 2011      187
68. Key financial data of the Mostostal Zabrze Group, 2005-H1 2011      188
69. Key financial data of the Trakcja Tiltra Group, 2005-H1 2011      190