In 2024, Central and Eastern European countries experienced a resurgence in investment activity, with most markets showing significant increases in volume compared to 2023. Poland and the Czech Republic saw renewed investor engagement and increased capital allocation, while Hungary, despite having its lowest annual volume since 2015, showed signs of recovery in Q4. Romania and Slovakia also demonstrated strong growth, with Romania's investment volume up 47% year-over-year and Slovakia's nearly tripling in the second half of 2024. Across the region, there was a mix of domestic and international investor participation, with sectors like retail and industrial performing particularly well. JLL experts, in cooperation with iO Partners, present an analysis of the trends observed in the investment market in Poland in comparison to the countries of the CEE region.
In 2024 investment market in the EMEA region reached a transaction volume of nearly €185 billion. This represented a 17% increase compared to 2023 and simultaneously confirmed improving sentiments among institutional investors. Simultaneously, the market in the CEE region recorded an increase of over 60% compared to the previous year, in which investment activity was subdued. The total volume reached €8.3 billion. There is increasing evidence of higher liquidity and improving market sentiment. Forecasted rate cuts by both FED and ECB are anticipated to stimulate more transactional activity throughout 2025 and onwards.
"The CEE investment market seems to be entering a new cycle, one defined by strategic capital deployment, evolving investor priorities, and a recalibrated approach to risk. Capital is coming back, but selectively, with investors remaining focused on assets that offer solid fundamentals and realistic pricing. Markets like Poland, Czechia and Romania are already seeing meaningful traction, while others are still in transition. The shift in sentiment is clear and we expect 2025 will likely bring more capital back into play, especially as financing conditions ease. We are already witnessing a very strong start to the year, despite some uncertainties in the macro-economic and political climate", says Andrei Vacaru, Head of Capital Markets CEE, iO Partners.
In 2024, the economy of Poland experienced moderate growth, with GDP expanding by 2.3% y-o-y, supported by relatively stable domestic demand and exports. These economic improvements, coupled with more favourable financing conditions, contributed to a resurgence in real estate investment activity, particularly in the commercial and logistics sectors. Peering into the horizon, economic forecasts for 2025 anticipate a marked acceleration, with real estate investors exhibiting heightened optimism and appetite for Polish assets.
"The second half of 2024 showed a remarkable comeback in the investment market. We observed a substantial increase in capital deployment and keen competition for prime opportunities. Globally, the fear of missing out outweighed the fear of making mistakes, a trend clearly evident in the Polish investment landscape as well. Transaction volumes of €2.3 billion in Poland in Q4 alone were comparable to the full-year investments of 2023 and brought 2024’s total to €4.8 billion. Improved market sentiment was evident in large-scale transactions, especially in the office and retail sectors. The value of transactions in each of these segments totalled €1.6 billion, which in both cases represents an almost fourfold increase compared to the challenging year of 2023. The industrial sector, with turnover exceeding €1.3 billion, has also improved its performance, and the transactions currently underway indicate that this year may be led by acquisitions of warehouses", says Dmytro Havrylenko, Head of Capital Markets Poland.
Forecasts for 2025 indicate a further increase in the attractiveness of Poland’s market, especially in the context of expected further reductions in interest rates in the eurozone. The easing of financing conditions is expected to boost investor activity. At the same time, the market will face challenges, such as the limited supply of new projects in some segments, increasing ESG requirements and competition from Western Europe. The market's ability to attract capital by offering attractive yields and delivering ESG-compliant projects will be crucial. Nevertheless, the outlook remains very optimistic, and we anticipate seeing a number of very interesting deals in the coming year.
Prime transactions drive turnover in the Polish office sector
The office sector returned as a key driver of Poland’s investment market. The current investor activity is incomparably higher compared to the previous year. Office investments exceeded €600 million during the final quarter of 2024 bringing the total for the year to €1.6 billion, almost four times more than in 2023. What is even more optimistic, apart from the large entity deal on the CPI Portfolio, the market was also driven by core transactions both in Warsaw and regional cities. On the other hand, Core+ and Value-add Warsaw transactions remained popular, offering very attractive pricing.
The growing number of active bidders, observed in 2024 brought stabilisation in the current prime cap rates level for most markets. As of the end of December, the yield for prime Warsaw assets, with lease agreements exceeding five years, was expected at approx. 6.00%. The prime cap rates in Kraków, which remains the core regional city, are currently estimated at approx. 7.00%.
The dominance of shopping centres in the transaction volume of the retail sector
The 2024 retail investment volume of approx. €1.6 billion was almost four times larger compared to 2023’s result and translates into the best year since 2019. The lion’s share of the turnover was generated by three large-scale shopping centre acquisitions: the purchase of Silesia City Center in Katowice by NEPI Rockastle for €405 million, the purchase of Magnolia shopping centre in Wrocław also by NEPI Rockastle for €373 million and the sale of six retail assets across Poland from Cromwell Polish Retail Fund to Star Capital Finance, new Czech investor, for the total of €285 million.
Despite the dominance of shopping centres in the retail investment volume (79% of total retail volume transacted), investor activity continued to focus on retail parks and convenience retail, which is proved by the fact that most retail transactions (18 out of 31) concentrated in these two segments. The largest transaction involving Retail Park was a sale of Silwana in Gorzów Wielkopolski from Equilis and Acteeum to BIG Polska, valued at €40 million.
Although there is still no recent transactional evidence in Warsaw, based on the overall market sentiment JLL estimates the Q4 2024 prime shopping centre yields at 6.50%. The prime cap rates for the best retail parks are currently estimated at 7.25%.
Strong Q4 and promising outlook for 2025 in terms of industrial and logistics
As was expected, the industrial sector recorded a very strong Q4 and currently pending transactions foreshadow a promising start of 2025. The lack of warehouse deals in the list of the largest transactions of 2024 means that extensive portfolios (in excess of €200 million) were less liquid in the passing year. However, the increased activity in the last quarter may be taken as an early signal for a change, with the recently announced acquisition of five warehouse parks from 7R by Investika, which, excluding share acquisitions, was the largest warehouse transaction on the Polish market in more than two years. We are also seeing very strong investor interest translating into increased competitiveness of bids in the pending processes, which results in the fact that the industrial sector will be the first to witness yield compression with financing costs still being elevated. Overall, industrial volumes in 2024 were up 27% year-on-year, reaching €1.3 billion in 29 transactions, with the aforementioned acquisition of 7R portfolio having significantly boosted this result.
As a result of lower interest rate volatility, the growth in yields for prime properties stopped in 2024, and Q4 transactions indicated even a yield compression. At the end of December 2024, prime warehouse yield for multi-tenant schemes with five-year lease agreements was estimated to be at the level of approx. 6.50%-6.75%. Warsaw prime projects were priced at around 6.25% - 6.50%.
Investors focused on JV and M&A transactions in the living sector
Throughout 2024, the Polish living sector experienced a gradual improvement in investor sentiment, despite challenging financing and geopolitical conditions. While market fundamentals remain compelling, single-asset forward transactions continue to face obstacles such as expensive financing and high Built-to-Sell (BTS) market prices. However, after years of growth, the BTS market is now seeing price stabilization due to a significant decrease in sales, potentially facilitating institutional transactions.
Positive developments emerged in early 2024, with the Dutch family office Van der Vorm Group expanding its Polish PRS portfolio by acquiring 119 fully furnished residential units in Warsaw. In March, UK-based Signal Capital Partners announced plans to establish a new PBSA platform with local partners, aiming to develop an operational portfolio of 5,000 beds across key Polish academic cities within three to five years. Additionally, Lithuanian asset manager 1 AM, backed by Hanner, formed a joint venture with Polish developer Develia to construct a 300-room PBSA project in Wrocław and acquired 21,000 sqm of office space in Warsaw for conversion into over 650 rental living units. June saw Xior's acquisition of the LivinnX student residence in Kraków, comprising 290 self-contained units with 673 beds, marking the second transaction of a standing asset in the Polish living sector in 2024.
The latter half of the year witnessed the return of forward deals, with AFI, NREP, and the Ares-backed Life Spot platform acquiring projects in Warsaw and Wrocław. Consequently, the total living volume exceeded €150 million in 2024, a notable increase from less than €60 million in 2023. This rebound in investment activity is anticipated to accelerate further in 2025, with multiple portfolios likely to be offered for sale. Based on investor sentiment, prime yields for operating multifamily assets remain at 5.25% in Warsaw and 5.50% in regional cities. For student housing, prime yields are estimated at 5.75% in Warsaw and 6.00% in regional cities.
