Portfolio transactions driving investment

“The past year can be seen as an exceptionally surprising period in the history of the investment market in Poland. The volume of commercial property acquisitions exceeded EUR 7.2 bln, which means a rise of EUR 2.3 bln (47 pct) compared to 2017. Such a high figure is attributable mainly to the rapid growth of the commercial market, the emergence of new investment vehicles, and the rise of the Polish economy in international rankings. In addition, investment is being spurred by low interest rates, strong consumer sentiment and high demand for commercial space.

The record year of 2018 ended with an investment volume totalling EUR 7.2 bln, the highest in the history of the Polish market (the previous record, reported in 2006, stood at EUR 5.1 bln). As the most attractive market in Central and Eastern Europe, Poland is an excellent alternative to the Western European markets. With an extensive array of assets from each category on offer, the country has attracted the attention year on year of an increasingly larger group of investors. Last year funds from countries such as the Phillipines and Singapore made their debut in Poland. Moreover, Poland advanced in the FTSE Russel ranking, to become the first country of the region to be classified as a developed country, which will translate in the long term into higher investment volumes, not only in the commercial property sector, and will improve how are our economy is perceived by international players.

2018 abounded with portfolio transactions, especially in the warehouse market, where the total volume of invested capital in the sector came to EUR 1.8 bln almost doubling the figure from 2017. Over EUR 1.3 bln of the warehouse acquisitions were made up of portfolio transactions. Such high interest in the logistics sector is a result of the market’s stable growth and development due, among other things, to a significant improvement in the country’s roads and motorways, the relatively low costs of business, as well as the rapid development of e-commerce. The largest warehouse portfolio transactions in 2018 included the purchase of Hines-owned properties by Blackstone, the sale of the Prologis portfolio to Mapletree, and the partial takeover of the Panattoni portfolio by European Logistic Investment BV.

Despite the dynamism of the warehouse sector, the assets in highest demand last year were office assets, located mainly in the Warsaw market. As much as 38 pct of the total acquisition volume, i.e. EUR 2.7 bln, was invested in offices, of which an impressive EUR 1.7 bln were made up of transactions made in Warsaw.

Investors are increasingly often looking on Warsaw as a stable market that promises long-term returns because of its very good condition with a high supply of modern assets already leased out at the construction stage. In terms of volume, the largest finalised office transactions included the Gdański Business Center (C&D) takever by Savills IM, the purchase of the Skylight and Lumen office buildings by Globalworth, the acquisition of Warsaw Spire A (50 pct) by Madison and the sale of the Cedet office building to GLL.

The retail sector also continues to attract investors’ attention, with a total of EUR 2.5 bln invested in 2018, representing a 41 pct increase in volume on the previous year. However, this high volume was predominated by the sale of 28 shopping centres to Griffin Real Estate for nearly EUR 1 bln, which was the largest transaction in the history of the Polish investment market. Also, properties such as Wars Sawa Junior, Galeria Katowicka and Galeria Malta changed owners.

2018 was also marked by yield compression for the best assets with yields reaching historically low levels. In the office segment, the 5 pct level was also crossed, for products in the core region of Warsaw’s city centre. Prime yields for retail properties also dropped, which were valued slightly above 4 pct last year, whereas the best warehouse products, secured by long-term lease agreements, came to nearly 5.25 pct. In the near future, prime yields should remain stable.”