Constructionshows
After several years of annual growth rates in the range of 20-30%, the public building construction market slowed in 2011-2012. The market is expected to grow by some 3% to a record-high level of PLN 7.5bn (€1.8bn) in 2012. However, the public building construction market will see a correction in the wake of the end-phase of the EU funds and the rising debt levels of local governments. The sector is not likely to recover until 2015.
The public building construction market is poised to hit a record-high market value of PLN 7.5bn (€1.8bn) in 2012, showing year-on-year growth of 3% in real terms, according to “Public buildings construction in Poland 2012 – Development forecasts for 2012-2015”, a report recently released by the market research company PMR. However, the segment is going to face a big challenge in the years ahead due to a wide range of factors including EU co-funded projects reaching completion, the looming fiscal tightening and high levels of debt of local governments. One indicator of the coming slowdown that is already visible is the deteriorating data on H1 2012 building permits, which reveals declining investment activity of public entities.
However, despite a lower number of planned investment projects, the segment will continue to provide contractors with numerous opportunities for high-value contracts, all the more valuable in the face of a shrinking number of infrastructural projects. Several dozen major contracts are currently in the tender or planning phase. Most of them are located in the 10 largest cities of Poland. Marked improvement in the segment can be expected in 2015 when projects co-financed from the EU budget for 2014-2020 are launched.
The public use building sector is a particularly important market for the highly fragmented designing industry. The market’s fragmentation is evidenced by the fact that less than 30% (of more than 300) of the largest projects designed in the last five years were authored by top ten design studios specialising in public building projects. The remaining several dozen companies were responsible for the balance of nearly three-quarters of the market.
The segment of contractors appears to be much more consolidated. The top four companies account for nearly half of the market. Budimex, owned by Ferrovial, was responsible for the largest portion of major contracts completed in 2008-2012, while the value of contracts obtained by Mostostal Warszawa (owned by Acciona) was only slightly lower. Skanska and Warbud (Vinci Group) were ranked third and fourth, respectively. In total, the top ten contractors control nearly two-thirds of the market of significant contracts concerning the construction of public buildings.
A disconcerting trend in the market is cancellation of contracts between investors and contractors justified by the former on the grounds of delays in construction progress. Companies which had their contracts cancelled in the past weeks include Mostostal Warszawa (€72m construction of the National Forum for Music in Wroclaw and €43m construction of the Lublin Oncology Centre), Polimex-Mostostal (€60m construction of the International Congress Centre in Katowice) and Pol-Aqua (€16m construction of Shakespeare Theatre in Gdansk). “However, the good news is that these projects will return to the market as new tenders to continue the work need to be announced. It is possible that investors will have to be prepared to consider higher bids from contractors”, said Bartlomiej Sosna, Head Construction Analyst at PMR and the report’s author.
This press release is based on information contained in the latest PMR report entitled “Public buildings construction in Poland 2012 – Development forecasts for 2012-2015”.
