Poland is one of the few countries in Europe where investment activity in the commercial real estate segment is growing. The good economic situation of our country, including indicators regarding leasing of commercial space, create favorable conditions for investing. Walter Herz specialists calculate that the value of investments in retail real estate in Poland in 2018 exceeded EUR 6 billion. Among the concluded contracts dominated the ones concerning purchase/sale of commercial real estate which covered about 42 per cent of the overall volume of investments. A little less, over 40 per cent of the value of all investments was associated with changes in ownership of real estate from the office segment. Investments in warehouse facilities accounted for around 16 per cent, and in hotels 1.5 per cent.
Investors from Asia, Africa and North America
For three years, Poland has been the leading investment market in the region. Companies investing in our country can still count on a higher level of return on investment, compared to the largest European markets. Foreign capital flows into our country mainly from South Africa, South Korea, Singapore and the USA.
One of the main players in our investment market for a long time have been German and Austrian funds, just like in the Central and Eastern Europe region. In recent years, they have built large real estate portfolios in Poland and are still active on our market, especially when it comes to the top office properties, but their share in the volume of transactions has recently dropped.
- The interest of German investors in the Polish real estate market, primarily from the office and logistics segment, remains high, which was visible last year. Nonetheless, investors from Asia, South Africa and North America are a strong competition to the German funds - says Bartłomiej Zagrodnik, Managing Partner and the CEO of Walter Herz.
Retail or office segment
Retail real estate sector saw the highest share in 2018’s transaction volume. The largest transaction in this segment was the sale of a portfolio of 28 retail properties by ARES/AXA/ Apollo Rida for the total amount of approximately EUR 1 billion to Chariot Top Group. The EPP fund has finalized the first stage of the purchase of M1 shopping centers, taking over for EUR 360 million centers in Czeladz, Cracow, Zabrze and Łódź. Moreover, the Malaysian EPF fund bought Galeria Katowicka mall for EUR 300 million.
However, the demand for retail facilities is beginning to decline. According to Bartłomiej Zagrodnik, in the near future, investors will prefer office and logistics properties. - The biggest problem for investors is the deficit of investment products. A minor new supply in the office segment, which should be expected this and the next year, in view of the continuing high demand for office properties, will bring an increase in competitiveness in this segment of the market. The expert explains that especially Warsaw office facilities are becoming more and more attractive on the market due to rents for leasing space going up and low vacancy rates in the agglomeration.
According to Walter Herz data, the volume of investment transactions on the office market in Warsaw in 2018 exceeded EUR 1.5 billion euro. It was twice as high as in 2017, when the value of sales amounted to EUR 600 million. The analysts predict that despite the observed compression of capitalization rates in the entire EMEA region, office real estate remains the most popular asset among the investors.
New transactions are coming
Last year, there was a growing number of transactions in the office real estate segment. In the third quarter of the year, the largest transaction on the office market in Warsaw was the sale of two buildings of Gdański Business Center complex for EUR 200 million. Also Spektrum Tower office building changed its owner and was acquired by Globalworth for EUR 101 million. Globalworth Poland Real Estate also concluded a contract with Unibail-Rodamco-Westfield for the purchase of two Warsaw Lumen and Skylight office buildings for EUR 190 million, with a total area of 45 thousand sq m., which are part of the multifunctional Złote Tarasy complex located in the vicinity of the Central Railway Station.
At that time, Skanska sold the first office building in the Warsaw-based Generation Park investment for EUR 83 million. The developer has also recently concluded a sales transaction for buildings C and D of the Silesia Business Park office complex in Katowice, which was acquired by ISOC Group investment group based in Manila, Philippines for EUR 59 million.
In addition, among the transactions carried out, there is Biura przy Bramie office building, part of Browary Warszawskie project by Echo Investment, which after obtaining an operating permit, will be purchased by a fund managed by GLL Real Estate Partners for EUR 76.5 million.
White Stone Development plans to purchase two office buildings located in Warsaw at 7 and 7a Cybernetyki street, offering a total of about 15 thousand sq m. of lease area. The Singaporean Cromwell European REIT fund is planning, in turn, to take over Warsaw’s Riverside Park and Grójecka 5 office buildings and Arkońska Business Park in Gdansk from Artemis Acquisition Poland company, for over EUR 72 million.