The Real Estate Investment Market in Poland
11 August, 2020
By Marcin Malmon, Polish Properties (Poland)
The coronavirus pandemic has not dampened the appetite for real estate investments in Poland.
Over the last decade the total value of real estate investment transactions has increased from € 737 million in 2009 to € 7.5 billion in 2019. In the 1st half of 2020 it reached €2.9 billion, 11% more than in 1st H 2019.
“Immediately prior to the pandemic the real estate market in Poland had strong fundamentals: robust occupier demand, a large market, high liquidity and historically low yields” – explained Dorota Lachowska Head of Market Research at Polish Properties and member of PRAXI Valuations, Independent Global Advisers. As a result, most of the purchase/sale negotiations which had had begun before the pandemic have been finalised despite the uncertainty on the global market.
Office properties were the subject of the largest percentage (46%) in the total investment volume in the first half of 2020 followed by warehouses (38%). Not surprisingly the share of transactions with respect to retail properties dropped in the first half of 2020 to 15% (from 34% in 2018).
We do not expect the growth in real estate investment to continue in the second half of the year as the number of newly started sales negotiations has fallen. However, the expected total investment volume for 2020 is to be only around 1/3 lower than in the record year of 2019. This will be the first time that real estate investment volume will have decreased in Poland since the global financial crisis of 2007-2009.
“Before the pandemic a hot topic was the question of how low investments yields in Poland could drop. At the end of 2019, prime office yields in Warsaw were as low as 4.5% (a drop from 7.25% in 2009). Yields with respect to warehouses stood at 6.25%, and in the case of “Built to Suit” properties with long-term lease agreements at even less than 5%. Yields with respect to prime retail properties had been stable for over 3 years at around 5%” – said Marcin Malmon Director, Valuation Services at Polish Properties.
“The question now is by how much will yields rise. As for now we believe that yields are at 0.25 percentage points more, a lower increase than during the previous cycle when they had grown by almost 2 percentage points” – Marcin added.
The coronavirus crisis could also be an accelerator for the warehouse and logistics sector in Poland. With its transit route location, the country has been experiencing intensive development in this sector, becoming one of the leading European hubs. Such development has been the result of positive macroeconomic indicators (one of the highest growths in GDP in the UE), a large market (38 million inhabitants), a growing internal demand and the systematic improvement of the country’s infrastructure. As elsewhere, the growing importance of the sector was also the result of the of e-commerce revolution. Now, in light of the pandemic, global companies have been reviewing their supply chains and looking to shifting work from Asia to Europe (nearshoring), thus providing an additional opportunity for Poland.
In the first half of 2020 the total investment volume in warehouse properties exceeded € 1.1 billion, some three times more than in the first half of 2019. The largest transactions were portfolio deals with an international reach, such as the acquisition of Goodman by GLP, covering warehouses in Poland, the Czech Republic, Slovakia and Hungary, the sale of the Ares Management warehouse portfolio in Poland, Germany, the Netherlands, Spain and Italy to Investec, and the sale of 28 logistics parks in Europe (including 6 in Poland) by Apollo Global Management to Singapore’s sovereign wealth fund GIC.
The largest national warehouse transactions included the sale of the Panattoni portfolio of 5 logistics parks with a total area of 280 000 m2 to Savills Investment Management or the sale by Hines of a portfolio of 6 Distribution Parks with a total area of 170 000 m2 to the Chinese CGL Investment Holdings.
Poland has become a major destination for real estate investors worldwide including property funds from Asia which have joined those from the USA, United Kingdom and Germany which have already been present in the market for many years. Despite the coronavirus pandemic, the inflow of new market players has not stopped with half of this year’s total investment volume having been concluded by parties investing in Poland for the first time.
“Considering the large scale of investment demand, we believe that the prospects for the Polish real estate market, despite the negative effects of the pandemic, remain positive” – summarised Marcin Malmon.