Reports | Investment

475 million euro spent on commercial property in Poland in the first quarter

05 maja 2017

The first quarter of 2017 closed with a mere €475 million of transaction volume, which is slightly lower than in the corresponding period of last year. Still, on a 12-month rolling basis, the market recorded a lift by 12.5%, reaching €4.58bn. With a solid pipeline of deals pending and a number of investors interested in various types of assets, 2017 is likely to show strong performance in terms of weight of capital and property values.

Hotels ride the wave

The hotel sector is thriving at the moment, which results from the increasingly attractive tourist offer, which in turn translates directly into a larger number of foreign and domestic visitors, investments in hotels and growing importance of business and recreational tourism. Similarly as last year, the best facilities record record-breaking occupancy levels, which attracts interest from investors.

In the first three months of the year hospitality sector attracted an unprecedented volume of investment reaching €240m and accounted for 48% of the overall market share. Considering the strong interest, this trend is likely to continue in the mid-term horizon.

Warsaw remains the top target

Six investment transactions sealed in Q1 2017 accounted for 47% of the overall volume of investment. With a slight compression in the prime yield curve, in spite of worrying signals on the occupier market with vacancy on the rise, investors are confident about the prospects in the capital.

Investment products in the capital and within the Warsaw agglomeration invariably attract the greatest interest from investors. In spite of the fact that in many cases regional cities offer more attractive cap rates, Warsaw remains the location of first-choice. Regional markets attract both opportunistic investors as well as those less likely to take risks and it is products that present opportunities for creating added value through proactive management, revitalization and repositioning that are highly popular there.

Plethora of investors’ nationalities

When analyzing the source of funds invested in Poland, it is difficult to point out the dominant player. In Q1 2017 capital flowed from Australia, the USA, the UK, the Czech Republic, Qatar and Poland. Over the next quarters we also expect activity from investors from Germany, South Africa and Thailand.

REITs are getting real

The government is working on new REIT legislation, allowing for direct investment of Poles, which is planned to be adopted in 2017 and implemented in 2018.

With the successful IPO of Griffin Premium RE on the Warsaw Stock Exchange, the chances to activate Polish capital to invest on the real estate market have significantly increased. The total value of the IPO amounted to approx. €118 million, bringing market capitalization to around €206 million. Shareholders include institutional and retail investors from Poland as well as international institutional investors such as EBRD.

As regards REITs, the domestic investment market is eagerly awaiting the development and adoption of unambiguous and sustainable legal provisions. REITs constitute an extremely effective instrument that has for many years successfully functioned in the West. Their simplicity and high profitability would generate stronger interest in the capital market from investors and even attract new ones. We know today that two, and maybe even three, debuts of new REIT companies will be taking place on the Warsaw stock exchange by the end of this year

Anna Staniszewska, Head of Research & Consultancy, CEE