2018 was a record-breaking year for the Polish commercial property investment market. The total volume of transactions completed in the office, retail, warehouse and logistics as well as hotel sectors came to nearly €7.3 billion, which represents a y-o-y growth of approx. 41%. This is a result not previously recorded on the Polish market, according to a report by BNP Paribas Real Estate Poland.
More than 100 transactions were completed through the year with respect to both individual properties and entire portfolios, where the transactions completed in the warehouse and logistics sector contributed to the high result achieved to the most extent.
The highest investment volume for 2018 was achieved by the office sector. 45 office buildings changed owners for the total price of more than 2.75 billion euro, which accounted for 38% of the total investment volume recorded for the year. In contrast to 2017, 2018 was dominated by transactions completed on the Warsaw market accounting for nearly 63% of the office investment volume. Investors showed interest in a number of different types of assets, i.e. prime properties and those with a weaker position on the market but with growth potential, older schemes and those only recently completed and delivered to the market, large office buildings and the smaller ones of a more boutique nature. Properties with new owners include Proximo II, Spark C, Cedet (with its retail component), Małachowski Square, the Atrium Centrum complex – Plaza and Tower, Warsaw Spire C, Warta Tower, Skylight and Lumen, Marynarska Point II, UBC I and II, Pałac Jabłonowskich as well as Warsaw Spire A in which 50% of shares changed hands. Last year investors additionally directed their attention to the regional markets. And thus Wrocław saw transactions being completed with respect to e.g. Green2Day, West Link and Sagittarius Business House, in Kraków it was e.g. High5ive, Moonoffice and 2 buildings in Quattro Business Park, along with Silesia Business Park C and D in Katowice and Nowa Fabryczna in Łódź. Furthermore, the purchase of the Hungarian TriGranit by Revetas and Goldman Sachs Asset Management from TPG Real Estate was also an important transaction. The TriGranit portfolio includes existing office properties and schemes currently under construction located in Poland and Hungary.
The total volume of transactions completed last year in the retail sector was 30% higher than that recorded in 2017 and came to 2.5 billion euro, which accounted for 34% of the total investment volume recorded for the year. The purchase by the Chariot Top group (established by Redefine, PIMCO and Oaktree) from Apollo Rida / Axa / Ares of the portfolio of 28 retail properties located across Poland (M1 and Power Centre shopping centres and stand-alone Auchan, Bi1 and Praktiker stores) was a transaction of the highest value, i.e. for the not previously recorded on the Polish market price of approx. 1 billion euro. In turn, the acquisition by the Malaysian Employees Provident Fund from Meyer Bergman of Galeria Katowicka in Katowice for approx. 300 million euro was the largest transaction completed with respect to an individual property. Additionally, the purchase of Warsaw’s Wars, Sawa and Junior buildings, i.e. the old department stores situated in a prime location in the heart of Warsaw city centre, by Atrium European Real Estate from CBRE GI for more than 301 million euro was also an important market event. In addition to the flagship stores of several of the most popular brands such as Zara, Reserved, H&M, C&A, TK Maxx, CCC and Douglas, the complex also accommodates office space. Buyers in the retail sector display a particular interest in small shopping centres and retail parks of the “neighbourhood shopping centre” type located in towns with a population of fewer than 100 000 residents.
The hotel sector attracted less interest from investors and generated approx. 119 million euro in 2018, which accounted for less than 2% of the total volume of investment transactions concluded last year.
“The investment market will be driven by the positive results achieved by Poland’s economy and the continuously attractive prices prevailing on the Polish property market as compared to those to be found on Western European markets. We estimate that the interest in office, logistics and industrial properties will remain the same in each of the sectors. On the other hand, we expect the volume of transactions in the hotel sector to increase. In turn, most retail operators will be facing the challenge brought about by the reduced – and to be further reduced – number of trading days and consequently lower turnovers set against the rents in effect. Consolidation of retail chains represents another important issue. Moreover, due to the fact that more than 90% of the Polish investment market is dependent on foreign investors, the way Poland is perceived internationally is also of considerable significance,” commented Mateusz Skubiszewski, Director, Capital Markets at BNP Paribas Real Estate Poland.
The significant interest in properties from the warehouse and logistics sector, already noticed in 2017, increased even more in 2018. The value of transactions completed in this sector last year amounted to 1.9 billion euro, which accounts for 26% of the total investment volume. The warehouse and logistics sector was dominated by purchase transactions completed with respect to entire property portfolios.
„There were a few significant portfolio transactions completed, where two largest ones were carried out by a new player on the Polish investment market. The Singaporean Mapletree fund purchased warehouse property portfolios from Hillwood and Prologis for the total price of approx. 581 million euro. However, we should also remember about one of the most important transactions completed with respect to an individual asset, i.e. the purchase by the South Korean Vestas fund of the second largest and the most technologically advanced e-commerce logistics centre in Europe. It is operated by Amazon, one of the e-commerce market leaders, that uses the distribution centre located near Szczecin to run its German market operations. Additionally, the transaction was finalized at a rate of return not previously recorded in the sector,” added Piotr Goździewicz, Director, Capital Markets at BNP Paribas Real Estate Poland.
The Polish properties compare highly attractive against the mature markets of Western Europe. This results from higher yields along with the availability of top quality schemes and stable demand from tenants and has led to an increased flow of capital from many different corners of the world. Similarly as in the previous years, players from the USA, the UK and Germany counted amongst the most active investors on Poland’s market last year. The level of activity of investors from South Africa decreased marginally, while there is continuously growing interest from Asian capital (South Korea, Singapore, Malaysia) attracted by Poland’s stable economy, positive forecasts and the relatively high level of liquidity of assets.
The strong demand from investors clearly translated into compressed yields. The Warsaw office and retail market recorded a significant drop in yields for prime assets, which now stand at approx. 4.25% in the retail sector and approx. 4.75% in the office sector. As regards top quality industrial and logistics assets, the value oscillates around 6.25 – 6.50%, where it has to be stressed that investors offer approx. 5.25% for unique warehouse assets with long term leases in place signed by e-commerce operators.
