Time For Rental Growth

Yield compression has been dramatic over the last 24 months within the Polish industrial market whilst the added attraction of ‘rental growth’ has often been overlooked. Dry income producing investments of significant volume with long-15 year plus leases to popular name tenants are compressing to ca. 5 pct. More asset management angled investments, such as multi-tenant parks, are hotly pursued by funds with a view that yields will come in to something like 6.25 pct from 6.75 pct. However focus now turns to the question of rental growth. In the current landlord market developers are selective in undertaking new projects unless it makes business sense at a required return and to do this rents have to match their costs plus a profit margin. Developers cannot build at replacement costs. The factors that are causing an upward push in rents include: 1. The dramatic increase in material construction costs, labour and associated soft costs over the last two years. Price trackin