A time for those in the know

Around 170 people were in attendance at the Radisson Hotel in Warsaw on a sunny April 20th to find out all they could about the current state of the real estate market in our part of the world. The 9th Invested Interest Investment Market Conference got underway with a short presentation on the situation for investment in Europe and in particular in the CEE region, which was provided by Mateusz Skubiszewski, the head of capital markets at BNP Paribas Real Estate Poland. “The situation is not so bad because, despite everything, we saw investment volumes of more than EUR 10 bln in the CEE region last year. Moreover, countries like Romania and Slovakia actually broke their investment records, which is a good sign for the region as it shows that money is still pouring in,” pointed out Mateusz Skubiszewski.

The discussion that followed featured investors, a lawyer and a banking representative. “Poland is in a similar situation to Western European countries. There’s a lot of uncertainty on the market, but its fundamentals are healthy, particularly in the office, logistics and PRS segments,” insisted Piotr Trzciński, the head of Poland at Savills Investment Management. Tomasz Niewola, the head of structured finance and co-head of investment banking at MBank, on the other hand, expressed the view that although the market is currently in a bad moment and the banks have become more selective when providing loans, they are still likely to keep financing decent projects.

The second panel discussion provided a deeper insight into the office market and again it featured a range of opinions, from the cautiously optimistic to what could be termed ‘harsh realism’. “Significant yield decompression was already taking place last year. This was mostly related to the industrial sector, which has maybe slightly overheated over the last few years, but it is also affecting all of the other asset classes. Unfortunately, this trend is set to continue, although at a much slower pace over the next two quarters,” predicted Piotr Piasecki, the director of capital markets corporate finance at JLL.

Much of the retail discussion was focused on retail parks, which have for a couple of years been one of the stars of the real estate market. “I think we now need to watch our step in order not to fall into a similar situation as with other formats. We are now getting so many offers for plots to build retail parks that we really have to think twice about what park to invest in to avoid market cannibalisation,” warned Tomasz Szewczyk, the managing partner of Acteeum. Marek Noetzel, the COO of Nepi Rockcastle, added that Poland is already a mature market, which is why the firm is eager to invest in acquisitions of existing Polish shopping centres while at the same time developing new ones in less mature markets. “For the last five years there haven’t been so many parties interested in talking about selling their projects. That’s not the result of them itching to exit their investments and leave the market, but the result of their problems with refinancing their projects,” he commented.

After the coffee break there was a lively interview with Robert Dobrzycki, the CEO and co-owner of Panattoni Europe, UK and India. Under his leadership, the company has grown to become the largest warehouse developer in Europe. It is now active in 14 countries and has opened a new outpost in India. What then followed was a panel discussion on the PRS market. “Projects are being leased and there is no vacancy,” emphasised Marcin Jański, the head of alternative investments at CBRE, who moderated that panel discussion. However, rents have recently stopped rising. “From mid-2021 we saw rents on the rise again, but after such a long time it’s natural that they are now stabilising,” explained Rafał Ryba, the CFO of Resi4Rent. The panellists, however, also voiced a few concerns about the future. One issue is the expected reform of the zoning and planning system, a bill that is soon likely to be debated by the Polish parliament. “I think that this will see the biggest upheaval of the market yet and it could have a serious impact on the availability of land for investment, not just for the living segment, but for all the other real estate sectors. The supply of housing stock will shrink and as a result prices will go up,” forecasted Karol Dzięcioł, the business development advisor of Develia.

The closing panel discussion focused on the warehouse sector, which found itself a little out of breath last year after doing extraordinarily well previously. Michał Grabara, the director of capital markets at Knight Frank and the moderator of the panel, underlined bank financing as one of the major stumbling blocks for the warehouse sector right now, as it restricts buyers in acquiring projects. Another issue is the rise in cap rates, resulting in much lower returns for investors, along with the uncertainty over when they will stop rising. “It is obvious that warehouse values have fallen. The market has evidently cooled down. This trend becomes obvious from looking at the figures for the first quarter, when we had just ten transactions,” argued Michał Grabara. He added, however, that yields were holding at 5–6 pct, so we haven’t seen any big discounts yet. “When those investors specialising in big volumes floated away, mainly due to the political risks, it was also a time when there was growing interest from CEE investors as well as those active in other asset classes who had never previously been interested in logistics. New activity can also be seen from boutique investors and new investment clubs. Although the scale of their investment is obviously much smaller, these new investors are now aware that they can buy a healthy, new product, with good tenants, that’s sustainability certified, and that was previously not even available to them,” pointed out Renata Osiecka, the managing partner of Axi Immo Group. She also stressed that a window of opportunity had opened for investors who understand the market’s momentum and want to enter it. Joanna Plaisant, the strategic partnership and sustainability associate director and ESG lead at Arcadis, was in full agreement, adding that since the beginning of this year there has been greater activity from opportunistic funds. “We often hear from funds that where there is uncertainty there are also new opportunities,” she remarked. Developers seem to have attained a similar understanding of the situation. “It feels like the investment market hasn’t yet regained its balance. Efforts are being made to find prices on which both sides can agree – and I have the impression that it’s easier to do this now than a year ago,” commented Magdalena Uler-Kłeczek, a senior capital markets director at 7R. With that, the audience headed for lunch and more informal discussions.