Construction industry to deliver results below expectations in 2016

More information on this topic is presented in the PMR report:

The construction industry expanded at a year-on-year real growth rate of approximately 4% in 2015, according to PMR, as against the preliminary GUS estimate of 2.8%. Stronger-than-official growth of the market in 2015 is also suggested by an increase of over 10% in the aggregated revenue generated by 30 construction contractors whose shares are listed on the WSE.

 

Despite the weak initial months of the year, 2016 still has a substantial growth potential, mostly on the back of the continued upturn in the segments of industrial and warehouse construction and residential construction (not only developers but also individual investors), the execution of large-scale power projects and the impressive length of fast-road projects awarded, according to the findings of PMR’s latest report “Construction sector in Poland, H1 2016 - Market analysis and development forecasts for 2016-2021.

However, the industry will not be able to fully make up for the poor start to the year in the forthcoming months, hence PMRs’ downward revision of forecasts, which, still, however, predict that the market will grow in 2016. Given a slower growth rate projected for 2016, the record level of construction output delivered in 2011 is unlikely to be surpassed this year as yet. That is more likely to occur only in 2017.

In terms of construction output generated by companies employing more than nine people, civil engineering construction was the largest segment as it again contributed over 55% of the value of construction works completed in 2015. With regard to the value of construction output generated by all companies, non-residential construction was the largest segment, representing over 40% of the market. Residential construction represents the smallest market segment in both rankings.

 

 

While in terms of building permits for non-residential projects, the year 2015 saw growth of an impressive 17% in the area of buildings planned, the increase was driven by a relatively poor 2014, which was the worst year in terms of building permits in over a decade. The expansion of the non-residential construction segment in the coming quarters will be mostly driven by the construction of industrial and warehouse buildings and agricultural buildings.

Regarding civil engineering construction, a positive fact is that during the current financial perspective, the peak in construction activity in the road construction and railway construction segments will not come at the same time (a similar situation happened in the previous financial perspective). While contracts for a considerable number of road projects have already been awarded, most of the major projects in the railway sector are in the initial tender stage or even in the conceptual phase, and they are unlikely to translate into tangible growth in construction activity anytime soon.

The road construction sector will, traditionally, report the highest average-annual output in 2016-2021. In terms of output growth, railway construction and industrial construction are poised to see the fastest increases in 2010-2015, supported mostly by the power sector.

Importantly, construction companies operating in Poland intend to step up their foreign operations so as to secure their interests in the years following 2020. The companies focus on different markets of the neighbouring countries, starting from the Baltic States through to Belarus, Ukraine, Slovakia, the Czech Republic, Germany and Scandinavia. It is much less often the case that Polish construction firms plan to expand to far-off corners of Europe, and if they do, they tend to do so as subcontractors.

 


More information on this topic is presented in the PMR report:
Construction sector in Poland H1 2016. Market analysis and development forecasts for 2016-2021