As of the end of Q3 2020, €3.9 billion have been transacted on Poland’s property market since the beginning of the year. The result is slightly lower than in the years 2018 and 2019, however, it is worth noting that despite the investors’ “wait and see” strategy at the beginning of COVID-19 pandemic, the outcome is still impressive. As many investors are returning to transactions which were put aside, multiple deals should be closed within the last quarter of the year which has always been a period of intense activity on the market, according to a report by Avison Young.
Convenience retail proves its resilience
The third quarter saw the continuation of investors’ activity in the retail sector with a strong focus on convenience schemes. The volume of retail transactions increased three times in comparison to the second quarter (excluding the acquisition of a majority stake in GTC in Q2 2020, which also included two shopping centres).
5 out of 8 retail transactions concluded in Q3 2020 involved convenience retail. The largest transaction since the start of the pandemic was the sale of 5 assets (Tyrion Portfolio) by Atrium European Real Estate to Metropol Group. In the disposal, the seller was represented by Avison Young. There were also several retail parks transacted as well as standalone retail schemes and retail properties with redevelopment potential. With many preliminary agreements signed for the acquisition of such assets, we expect this sector to remain strong during the coming months.
Industrial keeps the momentum
Once again it was the industrial sector which attracted investors’ interest the most. The volume of €1.9 billion realized in three quarters of this year already outperformed total industrial volume from the year 2019 (€1.5 billion). The disposal of Goodman portfolio to GLP was finalized in the third quarter, which confirms a significant interest of investors in takeovers of whole companies and platform acquisitions, already observed in previous quarters.
What has been noticed in the last few months was the acceleration of e-commerce development caused by COVID-19 pandemic. This trend is also reflected in the increase of investments in the city logistics schemes. LaSalle IM purchase of two such schemes, developed by Panattoni in Warsaw, is one of the examples of the recently closed transactions of this type.
Office market: slight slowdown but to rebound
The volume of €230 million in the third quarter of 2020 was lower than in the previous quarters of this year, and the total volume in this sector after 9 months amounted to €1.6 billion. There are still a few large transactions ongoing and some of them will be probably successfully closed still in 2020. Part of them might be postponed to the next year. As a result, it will be difficult to reach office investment volume comparable to last year’s.
Four out of five transactions were done in Warsaw, which confirms investors’ interest in stable, core markets. The disposal of Chmielna 89 to Madison or Generation Park Z purchase by DEKA prove continued investors’ activity in the western part of Warsaw City Center and is an indicator for further transactions in this district.
What’s next?
Although investment volume in the last three quarters is slightly lower than in the same period last year, it has to be noted that investors’ approach has changed in some way during this time. Despite lower volume, the Polish market remains flexible which is shown by the second-highest number of transactions after three quarters.
Industrial volume already outperformed 2019 outcome, which confirms increased demand for warehouses observed for some time already, additionally accelerated by current COVID-19 circumstances.
The retail investment volume is much lower than during past years, which is a result of investors’ turnaround to small, convenience schemes from large shopping centres, which were pushing retail transaction volumes high during the recent years. Due to this fact, although investment volume has decreased, the amount of retail transactions closed in Q1-Q3 2020 was higher than during the same period in 2019.
The significant decrease of the office investment volume is mainly caused by the last years’ disposals of office skyscrapers, such as Warsaw Spire, Warsaw Financial Centre or Warsaw Trade Tower, which pushed the 2019 volume high. During the first nine months of 2020, investors’ appetite was focused rather on smaller, core+ assets.
Taking all of the above into account, it will be difficult to repeat this year the record volume from 2019. On the other hand, we can notice that multiple investors remain active and are accommodating to the new market situation, actively looking for new acquisitions after a few months of retaining “wait and see” strategy. Currently ca. €2.5 billion are in advanced negotiations with forecasted closings until the end of the year, which is an evidence of the investors’ significant activity. This proves that they still perceive Poland as an attractive place for allocating funds.
