Polish office and industrial markets attract the strongest investor interest, says Cresa

Commercial real estate investment volume in Poland surpassed EUR2.85 billion in the first six months of the year, the second best result ever, accord ing to a new report by real estate advisory firm Cresa.

The key growth drivers were the office and industrial markets which together generated just more than 84 per centof the investment volume. The industrial market attracted nearly EUR1.08 billion worth of investments, which represented an all-time high, while the office market saw nearly EUR1.33 billion worth of deals, the second best result of the segment in the history.

“Before the outbreak of the Covid-19 pandemic, we expected the investment market to set another record this year. Despite the historically strong performance in the first half of the year, investment activity is likely to slow down in Poland in the second half and to bounce back quickly in the next 12 months,” says Paweł Nowakowski, Head of Capital Markets at Cresa Poland.

The H1 investment volume was nearly 7per cent up on the same period last year. The first half of 2020 saw 52 transactions totalling more than EUR2.85 billion. The office and industrial markets led the way in the first half with a total of EUR2.41 billion worth of deals. Retail investment volume amounted to EUR0.45 billion (nearly 16 per cent of the total volume). Due to the exceptionally difficult situation on the hospitality market, which was under lockdown for a considerable part of the first half of the year, no transaction was closed on this market.

“Investors’ appetite for the industrial sector remained strong, with the investment volume exceeding EUR1 billion, a record-breaking result for this sector in the first half of a year. Prime industrial assets offer long-term leases, and the rapid expansion of e-commerce is another driving force behind the growing demand for this asset class coming from tenants and investors alike,” adds Paweł Nowakowski.

A significant amount of investment activity was generated by Savills Investment Management, which acquired industrial properties for a total value of more than EUR290 million across three transactions. Among other leading investors of the first half of 2020 was CPI Property Group, which bought five office buildings in Warsaw for close to EUR230 million. Another notable transaction was the sale of a 61.49 per cent stake in GTC’s office and retail portfolio to the Hungarian-based investor Optima Investment for approx. EUR550 million.

Regarding transaction sizes, deals ranging between EUR50-100 million that usually dominated on the market in previous years also had the largest share of the investment volume in H1 2020 – it stood at 34 per cent. Transactions ranging between EUR100-200 million accounted for 28 per cent of the total investment volume.

“In mid-2020, yields for prime office buildings in Warsaw’s CBD with strong covenants and long-term leases stood at 4.5 per cent. The most attractive industrial yields were 5.5 per cent for BTS schemes let to a single tenant under a ten-year or longer lease. Retail yields averaged 5.0 per cent, largely for dominant large-city shopping centres that are successfully adapting to ongoing demographic changes and evolving consumer habits,” comments Nowakowski.