Poland attracts majority of H1 CEE commercial real estate investment
Most of the capital invested in commercial real estate in Central and Eastern Europe (CEE) in the first half of this year went to Poland and forecasts for the domestic investment market are very optimistic, says Walter Hertz, a Poland-based commercial property specialist.
In the first half of this year, investors' activity resulted in a large number of acquisitions on the commercial real estate market in Poland. However, the acquisitions concerned mainly facilities of lower value than in the previous year. Hence, the transaction volume was several per cent lower than a year ago. Nevertheless, most of the capital invested in commercial real estate in our region of Europe in the first six months of the year flowed to Poland.
"In the first half of 2021, the greatest investment activity on our market could be observed in the warehouse and office sectors. The transactions concluded at that time, were basically divided between these two segments. The retail sector, in which mainly retail parks and smaller convenience facilities were purchased, had a dozen or so percent share in the transaction volume. The PRS market, where further transactions have been recorded, continues to become stronger," says Bartłomiej Zagrodnik, Managing Partner/CEO of Walter Herz.
Warehouses remain in trend, which in 2020 brought the sector the best result in the history of the investment market in Poland. Supply in the warehouse segment is growing rapidly. In the first half of the year, over 1.1 million sq m. of new space was delivered. According to Walter Herz's calculations, there is still a record amount of new space under construction - 3.4 million sq m. of warehouses. This year, the logistics sector still remains the leader in terms of the value of the investment volume, although the result recorded in the first six months of this year differs from the record result achieved in the previous year.
"Our market is no exception, investors all over Europe focus mainly on warehouse and logistics real estate. However, it should be noted that the current talks may also result in prime transactions in the office segment in Poland in the upcoming months. This is due to the fact that these assets can now achieve a yield higher than at the beginning of last year. I think that offices will continue to be the fundamental value of investment portfolios and a significant part of the surplus of global capital will be invested in this class of real estate," says Bartłomiej Zagrodnik.
Among the transactions carried out from January to June 2021 on the domestic warehouse space market, one can mention the purchase of BTS Castorama in Stryków by Savills Investment Management, the acquisition of 7R’s Duo Portfolio projects in Siemianowice and Sosnowiec by M7 RE, the purchase of TDP Park Piaseczno by Hines, as well as 7R City Flex in Rzeszow by PAREF.
In recent weeks, however, there have been other acquisitions on the warehouse market. Marvipol Logistics and PG Dutch Holding I BV on behalf of PDC Industrial Center 108, concluded an agreement with BGO Warsaw I Propco for the sale of shares in Panattoni Park Konotopa IIa warehouse park in Ozarow Mazowiecki. M7 Real Estate, on behalf of M7 CEREF II fund, which is planning on investing over EUR 100 million, took over the warehouses at 50 Mogileńska Street in Poznan. Palmira Capital Partners is finalising the purchase of Brukowa Business Park warehouse park in Lodz.
Among the largest transactions on the office market in the first half of this year, one can mention the purchase of the portfolio of BUMA group buildings in Wroclaw and Cracow by Partners Capital/REINO Capital for approximately EUR 200 million, and in the regions, the purchase of Gdansk’s Alchemia Neon office building by the German DWS fund.
Moreover, German KGAL bought Villa Offices building in Browary Warszawskie from Echo Investment for approximately EUR86.7 million. Indotek company, which being launched in Poland, purchased four office buildings with a total area of over 45 thousand sq m. in Warsaw from Immofinanz, a company listed in Poland and Austria, for EUR 72.5 million.
Neopark complex in Warsaw, built by Yareal Polska also went under the hammer. What is more, Wołoska 24 office building with an 23.5 thousand sq m, located in Warsaw's Mokotow district, was purchased from Ghelamco for over EUR 60 million by the Czech fund ZFP Investments, belonging to the Slovak IAD Investments fund.
Generali Real Estate has finalised the acquisition of Le Palais office building in Warsaw from PATRIZIA AG on behalf of Generali Europe Income Holding (GEIH) fund managed by Generali Real Estate.
In addition, in Warsaw, Biura przy Willi in Browary Warszawskie, Spark B, Cybernetyki Office Center and Bokserska Office Center have changed their owners. Recently, they have been joined by Biura przy Warzelni, the largest office building of Browary Warszawskie complex and the historic Warzelnia building, which were purchased from Echo Investment by Deka Immobilien for approximately EUR152.3 million.
On the retail market, the most sought after are parks and facilities with low rental volumes. Most of the transactions related to the sale of convenience properties in the first half of this year, concerned projects located in cities with less than 50 thousand residents.
The largest share in the structure of transactions recorded in the retail segment at that time was attributable to the portfolio purchase of M1 shopping centers by EPP, a company listed on the Johannesburg Stock Exchange, for over EUR 100 million. In the first half of this year, properties owned by Tesco, which is leaving the Polish market, were also sold.
Among the recently registered contracts in the commercial sector, one can mention, among others, sale of Pasaż Wiślany in Grudziadz by Rank Progress, which is to be acquired by MSRETAILV for a net price of EUR 5.13 million.
The pandemic has turned away the attention of investors from hotel properties. In the first half of this year, only one transaction worth EUR 29 million was recorded in the sector, and it concerned the acquisition of Warsaw’s Regent by PHN and PHH.
"Investors are now cautious about investing capital in hotels. The vast majority of investment funds have suspended hotel acquisitions. However, it should be noted that apart from the specialised entities, hotels have never been priority assets for them, and in the pandemic investors have further lost interest in them. Especially that there are still no long-awaited deals on the market. At least when it comes to attractively located hotels offering a minimum of 100 rooms. The owners of such facilities do not lower the prices. Perhaps more investment opportunities are yet to come. Much will depend on the further impact of the pandemic on the business," says informs Katarzyna Tencza Associate Director Investment & Hospitality at Walter Herz.
Tencza admits that for several months there has been a visible decrease in the demand for plots for hotel facilities in large cities.
"The plots of land, which were to be used for hotel investments and secured in previous years, are now waiting for better times or alternative forms of development are sought for them. A large part of planned projects is suspended or postponed, and some have already been reclassified as residential investments. On the other hand, plots for resort hotels are still very popular, especially in attractive seaside and mountain locations."
Development of the pandemic is still unpredictable, making it impossible to estimate future demand. This, in turn, causes banks to distance themselves from financing hotel investments.
The domestic PRS market is also consistently building its position, attracting more and more investors' attention. This year, we could observe further investments in this market segment. According to Walter Herz, the value of the transaction in the first half of the year was EUR 0.56 billion. Heimstaden Bostad fund has committed to purchasing the projects after their completion and financing the construction of real estate for rent. The company concluded an agreement with Spravia (former Budimex Nieruchomości) for the purchase of 2,500 apartments for over EUR 300 million.
YIT real estate company has contracted over 1 thousand apartments in Warsaw by concluding an agreement with the Scandinavian fund NREP, which recently entered the market in Poland and also finalised the purchase of a logistics portfolio with an area of 130 thousand sq m.