The red-and-white investment magnet

‘Eurobuild Central & Eastern Europe’: Which players, this year, were the most active in terms of investment on the Polish industrial and logistics market?. Where has the capital been flowing in from – and what is the totalvalue of the warehousing that has changed owners since the beginning of the year? How do investment values and yields in Poland compare to other countries in the region?

Soren Rodian Olsen, partner, capital markets group, Cushman & Wakefield: This year has been quiet in terms of industrial investment transactions, all the way up to CIC’s acquisition from Blackstone of the Logicor platform, which includes 28 assets in Poland. This transaction has yet to be closed; however, it will define the year’s industrial investment transactions in Poland, accounting for app. EUR 600 mln, and in spite of being a pan-European platform deal, it is also the largest ever real estate transaction in Poland by a Chinese investor. For the remainder of the year, we still expect a number of significant transactions to take place, including a large logistics portfolio and potentially three warehouses with single tenants and long term incomes. Any other deals are set to be dwarfed by the five transactions I’ve mentioned and so our 2017 forecast for the industrial sector is app. EUR 1 bln, which will be the highest ever volume for Polish industrial and logistics investment. As for 2018, our outlook is more in line with previous years, as we expect EUR 500–700 mln to be transacted. Poland continues to attract new capital and investors for the industrial and logistics sector, and our main challenge remains to find the right products for investors. Poland is often viewed as an extension of Germany in terms of logistics; however, since prime yields in Germany are at 4.95 pct and substantially lower than Poland at 6.75 pct (multi-let assets), while in the Czech Republic they are at the level of 6 pct, Poland continues to be a very attractive market. The prime yields in Hungary and Romania are at 8 pct and 8.75 pct respectively, but both countries feature very different logistics market dynamics compared to Poland, being smaller markets with lower levels of stock.

Are there any warehouse locations that have a special attractiveness for investors? If so, which ones and what are the reasons behind this?

The key factor that determines which are the most core locations in Poland has always been the local road infrastructure as well as proximity to the major cities: Warsaw, Wrocław, Łódź and Poznań. Warsaw, being the largest city and logistics sub-market in Poland, remains a core location for distribution, while the excellent express and motorway junctions located in and around Łódź, Wrocław, Poznań and the region of Upper Silesia have established these sub-markets as core logistics hubs. But it doesn’t end there. Due to the increasing demand from large distributors and corporate occupiers, we recommend to our clients that they keep several emerging sub-markets on their radars, including the TriCity, Szczecin, Bydgoszcz/Toruń as well as Rzeszów.

The market is increasingly focused on portfolio transactions. Is this the direction it will continue to go in? And why are such portfolio transactions so popular right now?

For many institutional investors, achieving a ‘critical mass footprint’ in the Polish market is vital. Being the owner of one or two small assets provides little synergy and negotiating power when it comes to tenants, whereas a larger critical mass offers more flexibility and asset management options. Another reason has been the availability of portfolios in Poland that have over the last few years been built up by Panattoni in partnership with different types of JV investment partners. We do expect that the Polish industrial and logistics investment market will continue to be dominated by portfolio transactions and the sale – and sale-and-lease backs– of large, stand-alone, single-tenant assets that offer long term income.