Raport AAG Investment Q1 2018

First quarter whets the appetite for another record breaking year on the transaction market

29 May 2018

The first three months of the year were marked by a record breaking volume of transactions amounting to more than 2.1 billion euro. This really positive result achieved in Q1 means that there is undiminished interest from investors in commercial properties in Poland, which is a good sign for the entire 2018 that now looks to have the potential to beat last year’s record.

Over the past 12 months, i.e. from the beginning of April 2017 to the end of March 2018, the commercial property market in Poland saw investors complete transactions worth a total of nearly 7 billion euro. More than half of the amount came from portfolio transactions. Q1 of this year was unquestionably dominated by the retail sector with a completion of sale and purchase transactions for the total amount of 1.78 billion euro. It should be stressed here that this year’s result achieved in Q1 through completion of retail transactions represents as much as 93% of the total transaction volume recorded in this segment for the entire last year. The purchase by the Chariot Top group, as established by the Redefine, PIMCO and Oaktree consortium, of 28 retail properties located across Poland (M1 and Power Centre shopping centres and free standing Auchan, Bi1 and Praktiker schemes) from Apollo Rida / Axa / Ares, was completed soon after the champagne corks had popped on New Year’s Day. The transaction worth approx. 1 billion euro, an amount not recorded in Poland before with regard to one single transaction, will be written into the history books of the domestic investment market. The first tranche of resale of part of the portfolio, comprising four M1 shopping centres, to the EPP group took place not long afterwards. Another milestone for Q1 was the change of ownership of Galeria Katowicka for approx. 300 million euro. One of the most popular retail complexes in Upper Silesia is now in the hands of the Malaysian Employees’ Provident Fund.

Data shows that investors continue to see the commercial property sector in an extremely positive light, and the transaction meter is running continually. The market is currently benefiting from the favourable economic conditions, while a solid foundation here is the fact that Poland is seen as a regional leader enjoying a stable economic situation. It should be pointed out here that attractive market niches are gaining in significance now, particularly that on the one hand, there is a considerable amount of capital present on the market, while on the other hand, the number of traditional properties that give investors the guarantee of predictable and attractive returns is limited

Mateusz Skubiszewski, Director, Capital Markets, CEE, BNP Paribas Real Estate Poland

Undiminished interest in logistics

The boom in the warehouse and logistics sector continues. Following last year’s purchase of Logicor’s European portfolio, the first three months of this year saw completion of another considerable portfolio transaction. Ares Management was the buyer of Prologis properties located in several countries on the Old Continent. Authors of the report at BNP Paribas Real Estate Poland stress that the result achieved by the sector in Q1 reached 135 million euro, which means that it was only slightly lower than the usually superior result achieved by office transactions.

The warehouse market is growing, and not only in terms of the key areas. The extremely good results achieved by the sector in Poland are continuously stimulated by the favourable conditions prevailing in the domestic economy, rapid e-commerce growth and the processes relating to the advancing globalization of the manufacture and retail industries. Furthermore, the developing road and transport infrastructure, e.g. completion of the New Silk Road and the deepwater container terminal in Gdańsk servicing the huge Asian cargo ships, are not without importance here. All of the above means that warehouse and logistics schemes are now attracting considerable interest. We are expecting to see stable demand for schemes generating regular and predictable returns over the next quarters

John Palmer, Director, Industrial Investments & Valuation, CEE, BNP Paribas Real Estate Poland

Offices – Warsaw, as well as the regions

In Q1 of this year, investors in the office sector spent approximately 142 million euro, half of which was spent on regional markets. In March, Globalworth Poland became the owner of Warsaw’s Warta Tower office building. Globalworth Poland paid the previous owner, Kulczyk Real Estate Holding, approx. 55 million euro for the distinctive complex with its glass façade. A similar amount, i.e. approx. 54 million euro, was the cost at which the Pegaz office building in Wrocław changed its owner and went into the hands of the German Warburg – HIH fund. In the period between the beginning of January and end of March, investors also showed interest in smaller schemes with subsequent transactions taking place in respect thereof.

The potential of the sector is still large. Numerous office schemes of high standard of quality have been delivered to the market over the past 24 months, and the market is seeing an increasing number of schemes where the office function is mixed with retail, hotel and residential functions. This hypothesis is corroborated by the growing demand for office schemes, and also hotel schemes, from Asian and Middle Eastern capital complementing the active capital from Europe and the USA

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

Analysts at BNP Paribas Real Estate Poland stress that the undiminished interest from investors has to a great extent been shown in the regional markets, the result of which in the short term will be completion of further transactions.

Different types of schemes wanted

In the last quarter investors showed interest in schemes representing all sectors of the commercial property market. The targeted properties included the newest and most modern schemes with a leading market position, as well as the older ones in outstanding locations and with a significant potential for repositioning, active management and generation of new value. This type of a portfolio comprising three older-generation shopping centres (Czyżyny in Kraków, Bielawy in Toruń and Guliwer in Łódź) was purchased from Aerium by Newbridge for approx. 110 million euro. As regards the office sector, large potential for conversion of an existing building to an entirely new function will be offered to the new owner by a Wrocław townhouse located at Plac Solny which up until recently housed one of the banks.

Origin of the capital

A considerable amount of capital from South Africa found its way to the market thanks to the transactions completed by the Top Chariot Group and EPP. In turn, we are now witnessing increased activity of German investors in the hotel sector. One of them, Union Investment, became the owner of two Polish hotels from the Holiday Inn chain.

Polski rynek staje się coraz bardziej atrakcyjny dla graczy z Dalekiego Wschodu, czego dowodem jest zakup przez malezyjski fundusz emerytalny jednego z najważniejszych kompleksów handlowo-rozrywkowych na Górnym Śląsku. Warto również podkreślić obserwowany od kilkunastu miesięcy dość istotny udział w wolumenie inwestycyjnym wypracowywany przez inwestorów z regionu Europy Środkowo-Wschodniej, dla których lokowanie kapitału nad Wisłą jest elementem strategii dywersyfikacji portfela.

Mateusz Skubiszewski, Dyrektor, Rynki Kapitałowe CEE, BNP Paribas Real Estate Poland

Justyna Magrzyk-Flemming

Head of Marketing & PR CEE at BNP Paribas Real Estate Poland