The value of investment transactions concluded on the commercial real estate market in Poland since the beginning of 2020 amounts to approx. 4 billion euros. Nearly half of the volume generated was yielded by the industrial and logistics sector attracting the most investor interest in the current market climate. In the first three quarters of this year, the sector all but achieved the value reached in the entire of 2018 – a record-breaking year, as far as industrial and logistics properties are concerned. According to the authors of the “At A Glance, Investment, Q3 2020” report published by BNP Paribas Real Estate Poland, the figures are set to go up even further before the year is out.
Total investment volume recorded at the end of the last three quarters of this year showed a decrease by approx. 11% from the corresponding period in the previous year. After a successful start early in 2020, the results achieved in the subsequent quarters reflect the impact of the global pandemic and worldwide crisis on the investment sector. However, given the investor activity freeze during the spring lockdown and the global decline in sentiment, the figures can be regarded as solid. Furthermore, they bring a positive forecast for the final quarter of the year which usually sees the most activity on the investment market.
In the third quarter of the year, investment volume exceeded the 1 billion euro threshold, with the industrial and logistics sector accounting for more than 70% of the figure. More than half of the total value of transactions completed between July and September came from the acquisition of Goodman's industrial and logistics portfolio by GLP Group as part of a larger transaction covering properties in Central and Eastern Europe (it additionally involved industrial and logistics facilities in the Czech Republic, Romania and Hungary). By the end of September of this year, the value of investment transactions focused on industrial and logistics product stood at more than 1.9 billion euros.
Investors have shown interest in large portfolios and entire property platforms, as well as individual industrial and logistics facilities of different sizes, including properties from the so-called urban logistics sector that is now emerging in Poland. The effects of the global pandemic, such as the collapse of the manufacturing sector across Asian markets, the supply chain disruption and the change in the rules of the retail game to the benefit of the e-commerce sector, will in the coming quarters further stimulate investor appetite for industrial and logistics properties located in countries seen as attractive in terms of location of manufacturing plants and distribution centres, as well as availability of labour
The office sector, with a transaction volume of approx. 210 million euros achieved in Q3, and a total of approx. 1.5 billion euros reached since the beginning of the year, takes second place and accounts for approx. 40% of the investment volume generated between January and September of this year. For the sake of comparison, the result achieved by the sector in the corresponding period in 2019 was higher by approx. 80%. The largest of the transactions completed in the third quarter was the acquisition by DEKA of the Generation Park Z office tower in Warsaw for approx. 98 million euros. Unlike in the previous quarter, office properties on regional markets attracted only modest investor interest.
The current business climate in the office sector is clearly affected by the ongoing pandemic which will inevitably bring certain long-term consequences for the future of office buildings. Despite the current circumstances, we see that while today's investor appetite for office properties is temporarily curbed, it will be upheld in the long term
Piotr Goździewicz, Director in the Capital Markets department at BNP Paribas Real Estate Poland
The last quarter has confirmed a sustained shift in investor sentiment towards retail properties. The turmoil in the industry caused by the ongoing pandemic and the resulting restrictions imposed on traditional shops and services are reflected in investor interest in properties from the sector. The last three quarters of this year saw the completion of transactions worth approx. 542 million euros, the vast majority of which came in Q2 when Lone Star's shares in GTC were acquired by the Hungarian state fund Optimum Ventures. The acquired portfolio additionally covered GTC’s shopping centres (Galeria Północna in Warsaw and Galeria Jurajska in Częstochowa). Given the ongoing fundamental changes in customers' buying habits and their direct impact on the state of retail properties, investor interest is now focused on the so-called proximity centres, small retail parks, discount supermarkets and free-standing specialty stores.
Following an adjustment of prices and yield in the office and retail sectors in the second quarter of this year, they remained stable during the July-September period. According to experts at BNP Paribas Real Estate Poland, prime office assets in Warsaw can currently bring a return of approx. 4.50%-4.60%. In the retail sector, following prime yields decompression for prime assets by approx. 25-50 basis points in Q2, they remained stable in the July-September period. The situation in the coming months will be affected by a number of factors, key being what direction the pandemic takes and the restrictions introduced under the new health regulations. These may bring consequences for retail, service and particularly for food and drink, and entertainment operators.
In the third quarter of this year, prime yield for prime multi-tenant industrial and logistics facilities remained stable between 5.75% and 6.50%, depending on location.
The current crisis caused by the global pandemic has strengthened the positive investor sentiment towards warehouse, industrial and logistics assets. The continued investor demand for assets of this type and sellers' expectations as to their property values will bring about a widely expected prime yield compression. In the coming weeks, we expect to see yields for prime industrial and logistics assets of 5.25%-6.25%
Mateusz Skubiszewski, Head of Capital Markets at BNP Paribas Real Estate Poland
As far as distribution centres occupied by e-commerce giants and secured by long-term leases are concerned, significantly lower returns apply. For transactions involving assets of this class, the prime yield may oscillate around 4.25%.
