A strong end of the year expected on the investment market

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A strong end of the year expected on the investment market

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The total value of transactions on the domestic investment market at the end of 2017, taking into account the acquisitions completed in the first nine months and the estimated value of transactions in progress, may be about 15% higher from the record EUR 4.5 billion last year. The EUR 2.3 billion generated during the first three quarters of 2017 was lower than the value of the transactions completed in the corresponding period of the previous year, however the authors of the report believe this was caused e.g. by new regulations concerning the tax classification of agreements that prolong the decision-making process and the time needed to prepare and complete a transaction.

Recognized popularity of offices and regions

Q3 2017 saw a change of ownership of properties valued at EUR 810 million, of which more than half (52%) was represented by office projects. The commercial sector recorded worse performance than in Q2, in which large portfolio transactions played a major role. As far as warehouse and logistic space is concerned, two schemes changed hands, with a total of EUR 92 million paid by the new owners.
The authors of the report emphasize that in the past three quarters there has been a growing interest of investors in office projects on regional markets which offer attractive investment products with significant potential. Directing attention to regional offices translated directly into the volume of transactions in the office sector - half of them were conducted on these markets.

The position of regional office markets is constantly improving due to strong demand from modern business service centres which create high demand for modern office space. Looking at the supply of new space and the level of space leased, the supply-demand situation in the regions is seen as stable, which is advantageous to developers active there. Hence a good selection of products that meet the investors’ criteria

Patrycja Dzikowska, Head of Research and Consultancy, CEE, BNP Paribas Real Estate Poland

The investors’ increased interest in top-quality office products in the regions entails reduction in the capitalization rate for prime real estate on Warsaw’s market and the individual regional markets

Piotr Goździewicz, Director, Capital Markets, CEE, BNP Paribas Real Estate Poland

In search of logistics opportunities

Summing up the three quarters of 2017, more than half of the market transactions were generated by the commercial sector, where transactions on the office market accounted for 29% of the total number. The value of purchase agreements concluded in respect of warehouse schemes amounted to less than EUR 119 million. However, the recorded low volume of logistics and warehouse transactions does not mean that the sector is less attractive and investors are less eager to purchase.

We are observing the continued interest of investors in purchasing warehouse properties, however the fact is that the supply of ready-to-sell facilities is very limited. Hence, many transactions in the warehouse segment are of the forward-funding and forward-buy type, which is not always reflected in the volume of transactions completed in this segment

John Palmer, Director, Capital Markets, CEE, BNP Paribas Real Estate Poland

The future of REITs

The end of the summer holidays brought alarming news as to the prospect of introducing the long-awaited legal regulations enabling the creation of REIT companies in Poland. The legislation will not become effective in January 2018, as initially planned; the reason given is the need to analyse the numerous critical comments from various institutions and circles on the draft legislation drawn up by the Ministry of Finance. Moreover, the draft regulations have been significantly amended in comparison with the first version and in their present shape they limit the possibility of forming REITs for the residential property sector. The exclusion of commercial properties from the act introducing REITs in Poland means the loss of alternative sources of capital for market growth in this sector.

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In Q3 the modern retail market in Poland grew by nearly 140,000 sqm of GLA. This is a significant increase as compared to the first half of the year when only a mere 26,000 sqm of GLA within 5 schemes were completed. Notably, the first IKEA store was delivered in Lublin with the residents of Poland’s eastern regions in mind. Furthermore, the authors of the report draw our attention to the bustling end of the year which is set to bring more than 200,000 of GLA sqm in new retail projects.