POLAND Polish 2020 investment unlikely to fall by more than a fifth – Savills

This is the second highest volume on record and comes in spite of the Covid-19 pandemic. Savills expects the pandemic to have a noticeable impact in H2 2020 but that the investment volume is still unlikely to fall by more than 20 pct from last year’s all-time high of EUR 7.8 bln.

The office market attracted the most investor capital in H1 2020 (EUR 1.33 bln, down by 20 pct y-o-y), followed by the warehouse and industrial sector (EUR 1.15 bln, almost 155 pct up y-o-y), emphasising the strength of the positive shift in investor sentiment towards this asset class over the last few years. According to Savills, nearshoring opportunities in Poland, as well as the expansion in e-commerce accelerated by the pandemic, are responsible for this. In Q1 2020 alone, warehouse buildings accounted for more than half of the total investment volume, including transactions completed by Savills Investment Management (six facilities with a total area of more than 400,000 sqm) and advised on by Savills.

The economic slowdown due to the pandemic has pushed office yields up, from 4.25 pct in central Warsaw pre-Covid-19, to 4.5 pct now. Similar corrections have been taking place in Polish regional cities. Savills forecasts that prime office yields in the Polish capital will range between 4.5 pct and 4.75 pct until the economy recovers and the extent of the changes in working styles can be properly assessed. The consultancy puts the smaller number of transactions for office properties in city centre locations down to the current significant mismatch between buyers’ and sellers’ price expectations.

Prime industrial and shopping centre yields have converged for the first time in history, at around 5 pct.

The industrial sector appears to be getting through the pandemic largely unscathed. Its growth outlook remains very positive. The accelerated growth of e-commerce will certainly boost investor demand. There are more unknowns as regards the pandemic’s impact on the office sector. This may lead to market polarisation and the concentration of investment capital in prime office buildings, which will most likely demonstrate long-term resilience. The difficult period for the retail sector could attract investors who understand the changes taking place in this segment and are able to build value in such a market environment. PRS investors, however, have received a fresh impetus. Working from home has sparked a discussion about the new dimension to the residential function combined with some aspects of commercial space. Resimercial will be the next buzzword. And finally, the pandemic has demonstrated that there are real estate asset classes whose performance does not depend on footfall levels or employee presence. These include data centres and solar farms. In time, they will join the alternative investment pool.
Tomasz Buras, the CEO and head of investment of Savills Poland