We are approaching the halfway point of 2024. Before the semi-annual investment market reports are released, Avison Young is sharing the current insights on the Polish investment market.
In April & May 2024 alone, the transactions announced on the Polish investment market achieved a volume exceeding €500 million. The total volume is at the moment at the level of ca. €885 million, approaching last year's performance. Due to the fact that the result after Q1 2024 (€364 million) was the worst Q1 for a long time, the current volume seems quite promising.
Retail sector dominating
The retail sector accounted for 42% of the five-month transaction volume, largely due to the significant sale of the Cromwell 6 shopping centres portfolio, which was acquired for €285 million. This deal marks the largest investment transaction across all sectors since Q3 2022. Notably, the retail sector has once again drawn new investors to the Polish market, namely Star Capital Finance from Chechia as the buyer. This transaction further underscores the robust activity of CEE investors in our country.
In addition to this transaction, volume in the sector was mainly based on the sale of convenience assets, among which Avison Young's investment team is responsible for around half of the realised volume.
Industrial sector
The industrial sector, with a total volume estimated at €230 million, currently holds the second position with 26% of the investment market share.
In the warehouse sector, the disparity between the price expectations of sellers and buyers is particularly visible. While transactions are occurring, their scale is somewhat limited due to this misalignment. Investors seem to be taking longer to reconcile their price expectations, and there is a notable absence of major players capable of executing large-scale deals exceeding €100 million.
However, in the last two months, an impressive transaction volume was recorded, amounting to over €90 million. The warehouse complex in Żerniki, next to Poznań, was sold by Panattoni to a specialist real estate investor. The complex of over 100,000 sqm is fully let to international supply chain management companies.
Office sector – finally, prime transaction!
Investors still focus on office assets in the capital city. In the 5-month period only 1 office transaction was recorded in the regional cities – the acquisition of Krakowska 98 in Wrocław, brokered by Avison Young.
Most deals occurring are still due to value-added and opportunistic assets, indicating a strong domination of investors who are prudent in their approach and seek out opportunities without overpaying for assets. But, like we recently predicted, the market also saw – finally! - a prime office purchase in the city centre office area. The transaction in question was the sale of Studio B by Skanska for €86 million. Having in mind that the ECB has cut interest rates, for the first time in 5 years, it constitutes a promising forecast for core capital which should activate and increase the activity.
Despite the domination of the Warsaw office market, Avison Young also observes growing investor interest in regional cities, evidenced by ongoing discussions between sellers and buyers. AY is aware of at least a few deals which are now in the last stage of the transaction process.
Hotels are back to the game?
The market recorded already 3 hotel transactions this year. The most recent one was a 148-room Hotel Inn Resort Warszawa Józefów. Avison Young believes that there is a new trend, which started in H2 2023, of growing appetite amongst investors to buy hotels. There are a number of hotel assets which are on the market and we expect to see more deals in the sector by the end of the year.
Expecting more affordable financing
The market finally noticed a decline in interest rates, which may anticipate a further decrease. This is a signal for the return of more affordable financing, which is likely to stimulate investor activity.
As the interest rates begin to decline, the market can expect to operate at its full capacity in the next 12 months. Therefore, those who are well-prepared, having thoroughly analysed the market and identified promising assets, will be poised to capitalize on this opportunity. Being better prepared than the competition to swiftly make offers and finalize deals will be crucial in emerging as winners in this scenario.
What awaits us in the second half of the year?
Poland still remains an economically stable and strong market, providing good conditions for real estate investment. This is well seen by European market players and so we have already welcomed newcomers to Poland.
Based on their own projects and discussions with other market participants, Avison Young observes that numerous properties across various sectors are currently in the bidding, due diligence, or even finalization phase. These are mostly not large-scale or spectacular projects, but in the industrial and retail sectors, we have already seen big transactions which might be a signal that there will be some more.
AY remains optimistic about the number of transactions and hopes that the investment volume in 2024 will surpass that of 2023, signalling growth in the subsequent years.
