The Polish property market has long been the region’s frontrunner and it seems like that nothing can slow it down. In spite of all the fears of last year related to political instability and the Warsaw office market getting potentially overheated, investment volumes are up significantly and development activity is stronger than ever. Piotr Mirowski, Director of CEE Investment Services at Colliers International Poland talked to us about the country’s investment market.
So far over €2 billion has been invested in Poland this year, indicating that 2016 could be a record year for the country in terms of investment volumes. What are the most sought after asset classes?
It seems that 2016 could indeed be another record year, taking into consideration the volume of transactions, which are currently in due diligence and/or contract negotiations. Historically office and retail asset classes have accounted for in excess of 85% of the overall volume and I expect this trend to be continued into to the foreseeable future. However I note that other alternatives such as student / retirement housing are generating more interest, although there is limited availability of product that can be directed to institutional investors. Platform / corporate deals have also been in high demand.
Are there any segments of the market where investors have to face a scarcity of quality product?
In general, all the prime assets, which are placed on the market receive appropriate traction and subsequently trade, therefore given the current depth of the market in terms of availability of product for sale, investors would welcome more opportunities in each asset class, particularly for core properties given the demand.
Last year many have feared that the Warsaw office market is getting overheated. With annual supply expected to reach a record high level this year, do you expect a consolidation on the market in terms of developments?
The office development pipeline contains numerous projects that are under construction. Given the strong reputation of the developers behind the projects, there are to be delivered in line with the schedule. Naturally, the extension of the Warsaw CBD to the west is expected to witness more office development in the near term as all the largest players are already present in the area, therefore pricing and liquidity of CBD office properties is predominantly driven by the length of the residual cash flow.
Over 60% of investment transactions have been closed in regional cities. What are the most popular markets? Is there a strong competition between cities?
Back in 2011, 85% of the capital invested in Poland was allocated to Warsaw and the remaining 15% to regional cities. We have witnessed an exact reversal of the above trend in the course of the last two years (ca. 85% of the volume allocated to regional cities), which highlights the fact that Poland as a whole has been underwritten by the international investment community. Investors are more willingly looking into secondary and tertiary markets in search of quality assets. In terms of office projects, Wrocław and Kraków have been the frontrunners, but we see increased interest in the Tricity, Katowice and Łódź. Cities compete for new occupiers and it also creates critical masses for investors in terms of the size of the market, one of the criteria which is important when considering potential of a given city.
There is also a race between CEE countries to attract investors. In your experience what are the most important factors that are driving investors’ decisions when it comes to choosing countries?
Performance of the economy, further growth prospects, level of FDIs and EU structural funding (ca. €105.8 billion allocated to Poland until 2020), depth of the qualified labour pool, quality of the legal framework, political stability, scale and depth of the domestic market and relative liquidity in the real estate market. Poland has emerged as an undisputed regional leader over the last decade. It is the EU’s sixth largest economy, CEE’s largest consumer market and the investment gateway for the entire region. Currently Polish real estate investment volumes account for ca. 40% of the overall transaction activity in the region.
Where are investors coming from? Have there been new entrants to the Polish market?
The geographical composition of the investor pool continues to expand. Historically, German investors have been the market-makers, particularly for core product. Currently the landscape is more diversified, with the most notable group of new investors originating out of South Africa, South Korea and Singapore, both directly as well as through money managers. Successful deals involving investors such as Redefine and Rockcastle have generated more liquidity in addition to increasing the transaction volume and increasing Poland’s status as an established investment destination. In fact, the transaction involving Redefine at ca. €900 million was the largest deal in Europe in Q1 2016. I expect that Polish capital will ultimately become a larger contributor to the market, following establishment of REIT structures, which are currently in the pre-planning stage and as a result create additional liquidity for the market, which will facilitate its further growth.
What are your expectations for the next 12 months in terms of investment volumes?
Subject to the availability for sale of real estate product of appropriate quality, the investment volumes are expected to remain strong.
How have yields changed since the beginning of the year? What are your expectations for the next 12 months?
Yields have contracted meaningfully in selected markets over the last 12-18 months, and I do not expect similar dynamics going forward, rather the market to stabilize. However a further slight adjustment cannot be excluded.
The Hungarian branch of Tech Mahindra has prolonged its lease in the CityZen office building in Budapest. OTIS Group has also signed an extension of its lease on the same property.
Poland's only concept store of the fashion brand PRM can now be visited at Fabryka Norblin, a complex in the Capital Park Group's portfolio in Warsaw. The PRM store occupies an area of nearly 600 sqm.
Douglas is opening its 150th perfumery in Poland, in Galeria Starówka in Leszno (western Poland). The new perfumery occupies an area of 196 sqm and is the second perfumery in the city.
New appointments
Piotr Herian has taken up the position of ISS CFO for Poland and the Baltics. ISS is a leading company in the creation of friendly workplaces and comprehensive facilities management.
Paulina Strutyńska has been promoted to the position of Leasing & Asset Director at Skanska’s commercial development business unit. She is now responsible for leasing processes in the Warsaw market as well as Key Customer Management. Agnieszka Krawczyk-Rogowska is responsible for project commercialization and client liaison in Gdańsk, Kraków, and Bucharest, while Marek Stasieńko is responsible for the Wrocław, Poznań, and Łódź markets.
The Supervisory Board of Globe Trade Centre S.A. has appointed Balázs Gosztonyi as a member of the Management Board of GTC S.A. Balázs Gosztonyi has held the position of Chief Financial Officer at GTC Hungary since January 2024. He joined GTC Group in September 2023 as Group Controlling Director.
In 2024, the total investment volume in Poland amounted to €364 million, marking the weakest result for the first quarter in recent years. Interestingly, 25% of the invested capital comes from Polish investors. The warehouse sector remains the leader, accounting for 38% of the total investment volume. Unchanged, the vast majority of office transactions took place in Warsaw, while commercial investments were dominated by retail parks. Additionally, the market also saw two transactions in the residential sector in Warsaw, and two hotels were sold in seaside tourist cities, says Paulina Brzeszkiewicz-Kuczyńska, Research and Data Manager at Avison Young.
The 4-day workweek is becoming an increasingly hot topic. Although in Poland it still appears to be a thing of the future, recent years have shown how quickly labour market trends are changing. AI is also broadly expected to have a significant effect on the workplace. BNP Paribas Real Estate experts are wondering, how will all of this impact the commercial real estate market.
The vacancy rate at the end of Q1 2024 reached 8.9% in Greater Budapest, representing a 0.3 percentage points increase quarter-on-quarter, while an increase of 3 percentage points was registered year-on-year, the Budapest Research Forum reports.
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