Retail portfolio deals continue to grow

Two of last year’s three largest commercial real estate transactions were retail portfolio deals: the EUR 600 mln acquisition of Cromwell Polish Retail Fund’s shopping centre portfolio by Cromwell Property Group and the sale of Atrium Koszalin and Atrium Felicity in Lublin to ECE Group for EUR 298 mln.

A total of EUR 7.57 bln was transacted on the Polish commercial investment market volume reached in 2019. The volume in retail sector turned over EUR 1.92 bln, accounting for more than 25 pct of the investment total, some way behind offices, which made up 50 pct of the volume.

While single asset transactions continue to dominate the retail investment market, the share of portfolio deals has been gradually rising. The annual growth in portfolio transactions averaged 20.9 pct in 2010–2019. This significant increase is due to the low base effect – with two retail portfolio deals in 2010 compared to eleven last year. In 2019, as in the previous year, deals of between EUR 500 mln and EUR 1 bln had made up a considerable share of the retail investment volume.

Retail yields last year were steady at around 5 pct, while those for convenience assets, including retail parks, hardened from just under 8 pct in 2018 to 7.4 pct.

“Investor interest in retail assets remains strong. Recent years have shown that the retail market’s growth will be driven mainly by large portfolio deals. Looking ahead, investors will target dominant retail schemes in Poland’s key cities and those that are successfully adapting to the changing demographics and shopping habits of consumers who expect an increasingly enjoyable shopping experience,” explains Paweł Nowakowski, the head of capital markets at Cresa Poland.

Last year, investment activity was as usual driven by investors from the US, Western Europe (mainly the UK, Germany, Austria, and the Netherlands), Israel and South Africa. CEE capital made its presence felt in the form of Polish investors, which closed several deals involving small-scale shopping centres and retail parks, as well as Hungarian-based Wing, which acquired Echo Investment last year.

Prices per square metre ranged between app. EUR 1,000 per sqm in retail parks in small regional cities and towns and app. EUR 6,100 in shopping centres in Warsaw. For centres in regional cities (such as Galeria Libero in Katowice, Atrium Koszalin and Atrium Felicity in Lublin) the average acquisition price per sqm ranged between EUR 2,600–2,825.