Such a good first half of the year was not achieved even in record 2019. July also had a strong beginning, although investors' sentiment in the following quarters is still uncertain.
In the first half of 2020, the value of investment transactions concluded in the commercial real estate market in Poland was 5% higher than in the corresponding period of the record-breaking previous year and exceeded EUR 2.9 billion, according to the At a Glance Investment Market in Poland H1 2020 report, published by the BNP Paribas Real Estate Poland.
Under normal circumstances, such a good result would be an excellent forecast for entire 2020, but the current global crisis may be impact the results for the second half of the year. The expected yearly volume will probably be lower than a year before and will probably come close to the amount of transactions concluded 3 years earlier.
Under normal circumstances, such a good result would be an excellent forecast for entire 2020, but the current global crisis may be impact the results for the second half of the year. The expected yearly volume will probably be lower than a year before and will probably come close to the amount of transactions concluded 3 years earlier.
We are cautious about the forecasts for the next two quarters and the closing of 2020. Despite the good results in H1 2020, which were significantly influenced by transactions concluded in the first months of the year, we expect a slowdown in the investment market. Investors certainly need some time to analyse and assess the current economic and financial situation. Many of the transactions planned for this year will be postponed
Mateusz Skubiszewski, Head of Capital Markets, BNP Paribas Real Estate Poland
Almost half of the investment volume generated in January-June this year was in the office sector (EUR 1.33 billion). By comparison, in H1 2019, it was about a quarter higher, largely due to more assets subject to investment transactions in regional office markets, where 28 office buildings were sold. This year, 21 assets have changed ownership in regional markets, including 11 buildings from GTC's portfolio (61.49% shares in GTC was sold by Lone Star to the Hungarian state fund Optimum Ventures). The most significant transaction of the first half of the year was the acquisition of another phase of the High 5ive complex in Kraków by Credit Suisse. In Warsaw, on the other hand, the highest amount for a single office building was paid by Hines which took over Wola Center for about EUR 102 million.
In Q2 alone, office properties located in regional markets were slightly more popular among buyers than those in Warsaw. In Kraków, for instance, office buildings in the Equal Business Park complex purchased by a consortium managed by Apollo - Rida have changed their owner, while the Philippine based ISOC Holding has expanded its Polish portfolio by two office buildings in Silesia Business Park in Katowice. In the same period, the largest value transactions finalised in Warsaw included the sale of Nowogrodzka Square (Yareal to Amundi) and of DSV's headquarters (DSV Group to Corum)
dr Piotr Goździewicz MRICS, Director Capital Markets BNP Paribas Real Estate Poland
For the past three years, there has been a clear growth in the investor interest in investing capital in warehouse, industrial and logistics properties. In H1 2020, this sector accounted for almost 40% of the investment volume. The result of nearly EUR 1.15 billion is only about 20% lower than the yearly value invested in the broadly defined warehousing segment last year. More than EUR 1 billion was generated by portfolio transactions, including the acquisition of the portfolio of five Panattoni properties for EUR 188 million by Savills IM for an Asian fund, the sale of CGL (Chinese capital) of six logistics and industrial parks by Hines for EUR 140 million, and the acquisition by GIC (Singapore) of the portfolio of six logistics facilities from a fund managed by Apollo Global Management.
Although in Q2 2020, the warehouse sector lost its leading position in favour of the office segment, July started with the acquisition of Goodman's portfolio of several properties by GLP Group (this transaction is not included in the calculations for H1). Experts from BNP Paribas Real Estate Poland forecast that the coronavirus crisis may further strengthen buyer sentiment towards warehouse, industrial and logistics assets. The expected increase in the importance of the e-commerce sector in Poland translates into an even higher interest in this product class. In turn, the collapse of supply and production chains in Asian countries may partly result in a change of strategy for many European companies, which will seek to shorten their supply chains and move some of their production closer to their home countries. Poland is a very attractive location for the so-called reshoring of production, offering modern stock of warehousing, industrial and logistic space, still good availability of land for new projects, constantly improving transport infrastructure, financially attractive human resources and quite a large sales market. The interest of foreign investors in the product from this sector seems to be a natural consequence.
In the retail real estate sector, H1 2020 saw transactions worth EUR 446 million, the vast majority of which is attributable to the aforementioned acquisition of Lone Star's share in GTC by the Hungarian state-owned fund Optimum Ventures. The transaction also involved shares in GTC's retail portfolio, comprising two shopping centres - Galeria Północna in Warsaw and Galeria Jurajska in Częstochowa. Investors are interested in free-standing specialised retail facilities, small retail parks and local convenience retail centres. The acquisition of 301 Tesco supermarkets by the Sailing Group, the owner of the Danish grocery store Netto, received a lot of attention in June. The transaction is awaiting the UOKiK’s (Office of Competition and Consumer Protection) approval, which is to take place in autumn this year and can then be finalized.
The global crisis following the Covid-19 pandemic has resulted in adjustments of yields, to varying degrees depending on the asset sector. According to BNP Paribas Real Estate Poland experts, in the office sector, prime assets may currently expect yields around 4.60%, while at the beginning of the year, even before the pandemic, negotiations between buyers and sellers were underway on the expected yield of around 4.25% - 4.35%. The situation in the coming quarters may be influenced by a number of factors, of which the key ones will be the development of the epidemiological situation and the development of office space under the sanitary regime, the scale of remote working and completely new approaches to the flexibility of lease agreements.
In the retail sector, yields from prime assets increased by around 25-50 base points, depending on the retail format. The highest decompression affected shopping centres, which are among the most affected by the pandemic and the ensuing restrictions on business and consumer behaviour.
Warehouse properties seem to be going through the current market turmoil without much harm. Yields for prime multi-tenant logistics and warehouse facilities are stable and, as in the previous quarter, range between 5.75% and 6.50%, depending on the location. Definitely lower yields can be seen in the case of distribution centres taken by e-commerce giants, secured by long-term leases. There, yields can be around 4.25%. Strong investor demand for this asset class will probably uphold this trend.
The good result of the first half of 2020 allows for a moderate optimism about the coming months, although the global crisis resulting from the pandemic and the expected recession of the Polish economy are causing anxiety and will affect the results of following quarters. A considerable part of the ongoing transactions was delayed or halted due to severe restrictions and border closures introduced since mid-March, which made it impossible to continue the transaction processes. The parties are slowly returning to the negotiation tables, although in the current reality, changed trading conditions are often discussed, taking into account the events of the first half of the year.
