Boom in the construction market in Poland

Construction companies provide very positive assessments of the current market climate – more optimistic than at any other time in the past several years. Almost 80% of the managers at the largest Polish construction firms positively view the present situation in the industry. Yet, notwithstanding the upside, the sector must address looming problems, including shortages of labour force, soaring costs and difficulties with securing supplies of construction materials, which hamper strong growth in the industry.

Construction companies provide very positive assessments of the current market climate – more optimistic than at any other time in the past several years. Almost 80% of the managers at the largest Polish construction firms positively view the present situation in the industry. Yet, notwithstanding the upside, the sector must address looming problems, including shortages of labour force, soaring costs and difficulties with securing supplies of construction materials, which hamper strong growth in the industry.

Construction sector expresses optimism

The research conducted by PMR, a research and consulting firm, for the purposes of the report “The construction sector in Poland – H1 2007. Development forecasts for 2006-2009” confirms that the construction market is still going strong. A vast majority of the largest construction companies operating in Poland (nearly 80%) are positive about the situation in the construction sector. Compared with previous research conducted by PMR in March 2006, the market sentiment has improved significantly – at that time only 41% of the respondents assessed the market climate as good or very good. The outlook for the future remains optimistic as well since over half of the respondents expect the market situation to improve in the coming 12 months, while only 6% anticipate a downturn.

• construction and assembly output

• cement production

• number of issued construction permits

• prices of building materials

• workforce at construction companies

• wages at construction companies.

According to the surveyed companies, all six indicators are set to rise. A whopping 99% forecasted growth in the prices of building materials, while one in every nine respondents was convinced of the upcoming growth in wages of construction workers, cement production and construction and assembly output. Workforce growth was forecast by two-thirds of the surveyed companies, while one in every seven respondents was of the opinion that the number of issued construction permits would rise

Construction companies in gradually better financial standing

Polish construction companies were also very positive about their order portfolios – a robust 83% of respondents provided positive assessments of the current number of orders. Nearly one in every eight respondents expects the order portfolios to grow further in the upcoming 12 months.

Labour shortages, labour costs and limited supply of building materials as the key barriers to construction market growth

When asked about key barriers to doing business in the Polish construction market, two-thirds of respondents pointed towards labour shortages (in March 2006 a third of respondents indicated that problem). The shortage of workforce is rapidly becoming a more acute problem for the entire Polish construction sector. High labour costs incurred by construction companies are the second major obstacle cited by respondents. Compared with the previous surveys of the construction market climate conducted by PMR, the industry now faces a new challenge: a limited supply of building materials. Construction companies are more and more often faced with building material shortages and never-seen-before increases in prices. Owing to delays in the execution of orders for building materials, contractors can fail to meet contractual deadlines, which can lead to serious financial problems (i.e. contractual penalties). “Should this phenomenon become widespread, it could pose a serious risk to construction companies,” stated Szymon Jungiewicz, analyst at PMR. Nevertheless, Mr Jungiewicz estimates that despite the above threats, the Polish construction industry is poised for rapid growth. PMR forecasts that construction and assembly output will rise by 27% in 2007.