Investors’ interest in polish market continues

22 listopada 2019

In the course of Q3 2019 the investment volume transacted in Poland reached nearly €1.8 billion, pushing the total volume traded since the beginning of 2019 to above €4.5 billion, a report prepared by BNP Paribas Real Estate Poland shows. According to experts, Poland is still an attractive market to invest in. Not only Warsaw but also regional markets draw the attention of investors, who increasingly often reach for value-add products.

The total value of transactions carried out in the first three quarters of 2019 in the commercial real estate market was significantly lower than in the corresponding period of the previous year, which was largely due to the fragmented volume of investments in the period from January to March this year. However, taking a closer look at the second to third quarter of 2019, the result is 25% better than last year. According to experts from BNP Paribas Real Estate Poland, the amount of all finalised agreements this year may come close to the last year's result, thus confirming the unwavering interest of foreign investors in the Polish market for a long time. Funds from Western Europe and South Africa are looking for investment opportunities in Poland. Asian investors have greatly increased their footprint in Poland. In the first half of 2019 purchasers from Singapore, South Korea, Japan and the Philippines were involved in approx. 20% of investment spend in Asian investors are also looking more and more often towards our country.

Offices on top of the list, not only in Warsaw

In the three first quarters of 2019, the most traded products were office assets which have brought €2.75 billion (over 60% of total turnover). Almost 50 single and portfolio deals involving approx. 75 office buildings with a total space of over 1 mln sqm were finalised.

Warsaw remains in the investors’ centre of attention, having raised around 60% of the office investment volume to date, worth over €1.6 billion.

Those investing in Warsaw were interested in a wide range of assets, from top class properties located in the City Centre to secondary class older buildings with substantial upside potential, located in more distant, non-central clusters. In Q3 major transactions included the acquisition of the prime 220-metre office tower Warsaw Spire A by Immofinaz for €386 million and the purchase of Ethos and Astoria by Credit Suisse

Piotr Krawczyński, Head of Capital Markets CEE, BNP Paribas Real Estate Poland

Regional markets on the march

Despite the great interest in Warsaw, the importance of regional markets, which offer higher yields and a wider range of available investment products, is growing. The value of transactions in these markets in the first three quarters of the year exceeded €1 billion, comprising significant deals on leading (Kraków, Wrocław, Tricity) as well as secondary (Poznań, Łódź, Katowice) markets. In Q3 the largest transaction was acquisition of two more buildings in the Business Garden complex in Poznań by Crowmell European REIT. The same investor has bought a portfolio comprising four buildings (Avatar, Green Park A, B and C) in Kraków, while another big player in the office segment – Globalworth – purchased a two-building Silesia Star complex in Katowice and Retro Office House in Wrocław for an aggregated price of approx. €113 million.

Retail segment on the slide

Despite the good condition of the retail segment, it is slowly disappearing from investor’s radar. Many of them are concerned about the future of traditional retail facilities in the context of the dynamic development of the e-commerce market. The retail transaction volume in Q1-Q3 reached nearly €900 million, strongly pushed by two portfolio deals, i.e. acquisition by ECE European Prime Shopping Centre Fund II of two large shopping & leisure centres located in regional markets (Atrium Felicity in Lublin and Atrium Koszalin in Koszalin) for €298 million, and conclusion of a deal arranged in 2018 - the re-sale of four M1 shopping centres by Chariot Top Group to EPP for €222 million. A number of transactions involved smaller assets, mostly convenience centres and retail parks, located in small regional cities.

Strong investor appetite in the industrial & logistics sector, recovery in the hotel market

By the end of September 2019, the aggregate value of all 15 deals concluded in Poland in this sector, including single buildings and logistics parks, amounted to €620 million, which represents approx. 14% of the overall investment volume. The largest transactions included the acquisition of Logistics Park Gdańsk in Pruszcz Gdański by Hines Global Income Trust and Panattoni Park Warsaw West VI (situated in Grodzisk Mazowiecki – Warsaw II) by La Salle IM/Encore+.

BNP Paribas Real Estate Poland's experts point to recovery in the hotel sector following a period of temporary stagnation. Q3 2019 has brought around €50 million, thanks to e.g. the purchase of Holiday Inn in Gdańsk by Union Investment.

Possible further compression of yields for selected assets

In Q3 2019 yields across all sectors have remained relatively unchanged

In the case of prime office assets in Warsaw, yields oscillated around 4.50%, while in the major regional markets they were around 5.50%–6.00%. For best-in-class dominant retail assets, prime yields varied from 4.25% in Warsaw to approx. 5.00% in other major markets. In the industrial sector, prime multi-tenant schemes reached 5.50%–6.50%, depending on the region, while yields for outstanding prime and best performing long-leased assets with secured e-commerce operators have oscillated around 5.00%,

Piotr Krawczyński, Head of Capital Markets CEE, BNP Paribas Real Estate Poland

The authors of the report expect to see further soft yield compression for prime office assets, while the upcoming months may bring a major compression in the industrial & logistics segments, in particular in the case of assets occupied by e-commerce giants.