by Property Forum | Report

After a year from the beginning of the pandemic, investors are continuing their strategies adjusted to the new market conditions. Most of them are focusing mainly on safe, predictable investments. This year Avison Young has observed the third-best opening ever with almost €1.3 billion transacted in 31 deals during the first quarter of 2021.

“As we have predicted previously, Western European capital was unleashed at the beginning of the year, taking up the majority of the volume invested in the property market. Despite the fact that Asian investors’ activity slowed down, we forecast that their investment pace will go back to the previous level in the next quarters", comments Radosław Pietrzak, Research & Data Manager, Avison Young.

Safe office market

After strong domination of the industrial sector in the investment market in 2020, the office market had the biggest share in the investment market in Q1 2021, taking up almost 50% of total volume. Office investors, adapting to the COVID-19 circumstances, continue their strategies of purchasing properties of a low level of risk. Next disposals took place in the Warsaw City Centre West – Spark B and Villa Offices in Browary Warszawskie. Increased activity in Mokotow was still observed, as Yareal sold Neopark to Amundi Real Estate.

Also, a few prime properties were sold in regional cities – Neon (Alchemia IV) in Gdansk and Brama Portowa in Szczecin, where Avison Young provided technical advisory services. 1/3 of total office volume was taken up by the acquisition of Buma office portfolio by Partners Group / Reino, consisting of 11 (incl. 2 in development stage) properties in Wroclaw and Krakow.

“Worth noticing is the fact that almost all properties were bought by European investors, whose share in the total office volume amounted to 97%", points out Radosław Pietrzak, Avison Young.

Primary industrial market

With over 1/3 of total investment volume, the industrial market holds a strong position this quarter. What is interesting, 85% of industrial investment volume in Q1 2021 regarded modern properties sold for the first time by the developers. Only one huge property changed an owner for the second time – Castorama BTS in Stryków from Tritax Euro Box to Savills IM – another prime property reaching yield below 5%. “Current market situation proves investors’ desire for a long term, secured income”, observes Radosław Pietrzak, Avison Young.

Opportunistic retail

The first quarter of 2021 in the retail market was marked by opportunistic purchases. The majority of transactions fell on acquisitions of Tesco supermarkets, leaving the Polish market. Also, Galeria Pestka in Poznan sold by Blackstone to Henley Investments represented the type of properties with significant value-add potential. The biggest deal was the disposal of the third Chariot tranche to EPP, scheduled already in 2018, consisted of four Power Parks, located in Kielce, Olsztyn, Opole and Tychy.

PRS even stronger

We have observed a strong opening of the PRS market in 2021, which followed investors’ expansion in the sector last year. As the market is evolving and there is still a limited supply of existing product, forward purchases dominated among transactions¹. We observed further expansion of Heimstaden Bostad, purchasing development projects in Warsaw from Marvipol. Moreover, Milestone - one of the leaders in premium student housing - enters the Polish market. The company will manage the portfolio bought by the joint venture of Value One and Nuveen Real Estate. Investors, looking for new opportunities, decided also to buy whole platforms – Echo Investment is in the final stage of acquiring Archicom and Cornerstone Partners / Crestyl Group is about to purchase Budimex Nieruchomości.

What’s next?

The current situation indicates further positive changes in the market. Speeding up the vaccination process might enable lifting restrictions (particularly affecting the retail sector) as well as might encourage people to come back to the office. This can influence the investment attractiveness of these sectors. Moreover, the current supply increase of over 10% per year in the most sought-after sectors – industrial and retail parks – will probably drive the investment growth. What is more, as the development of the next prime office properties in Warsaw City Centre have just been completed or are at the final stage of the construction, it can bring next significant transactions in this sector. Currently, there are over €1 billion of transactions in the final stage.  We forecast that the investment volume in the next quarter can even exceed the value of this quarter.