The Polish real estate market is seeing its first major investment deals, and later this year it will become clear whether further possible interest rate cuts in the euro zone and a return to cheaper financing will bring about a much-needed recovery.
So far, investment decisions have been primarily restrained by high inflation and interest rates, which have resulted in higher capital costs. The ECB's announcement of an interest rate cut alone has already heralded an increase in deal activity in Poland. The value of real estate investments in the second quarter was higher than in the first three months of the year, and new players are entering the Polish market.
The Polish market has recorded its first significant transactions after a slow start to the year, including several deals involving portfolio acquisitions in the retail sector and purchases of office buildings. Office buildings are changing hands not only in Warsaw but also in major regional cities. The acquired assets include both modern core properties and older buildings in attractive locations, often purchased with plans for redevelopment. The market has responded favorably to the first interest rate cut in the eurozone in several years, and investors are hoping for further cuts.
Nearly half of the total value of commercial real estate transactions in Poland will occur in the logistics and industrial sector in 2023, taking the lead from the office sector. Acquisitions announced in recent weeks suggest that the scale of investment in the office sector this year could be significantly larger.
Higher value transactions
This year, the retail sector has emerged as a leader in the deal market, mainly due to a portfolio deal in which Polish newcomer Star Capital Finance purchased six retail parks from Cromwell (CH Janki in Warsaw, Kometa in Toruń, Korona in Wrocław, Tulipan in Łódź, Ster in Szczecin and Rondo in Bydgoszcz) for a total of 219,000 sqm, valued at €285 million.
Earlier this year the retail market, like other sectors, was dominated by small transactions, the largest of which was the sale of Aniołów Park in Częstochowa for €25 million. Recently recorded portfolio transactions could see the retail sector surpass last year's total transaction volume.
Warehouses rank second in terms of market share this year in terms of number of transactions, partly due to the completion of a €92.5 million acquisition in May. The two-hall Panattoni Park Poznan XI complex in Zelniki near Poznan changed hands during the period. Panattoni, which accounts for more than 50% of transaction volumes on the Polish industrial real estate market in 2023, also sold Panattoni Park Wrocław West Gate in March.
The largest warehouse deal in the first quarter of this year was Hillwood's purchase of two Westparks from DWS for €55 million. Transactions in the sector remain hampered by a continuing gap between buyer and seller expectations, which is particularly evident in the warehouse sector.
The office building changes ownership
Investors interested in offices are now targeting not only the Warsaw market, but also regional assets. In the first quarter of this year, the market recorded no high-value office acquisitions. In Warsaw, buildings such as the Concept Tower and two offices in the Lipowy Office Park complex changed hands. In Wrocław, the Krakowska 98 building found a new owner.
But Skanska recently sold the Studio B building in Warsaw to Stena Real Estate, a subsidiary of Sweden's Stena Group, for €86 million, and also announced the sale of Nowy Rynek E, an office building near Poznan Central Station, to Sweden's EastNine AB for €79 million.
CPI Property Group has signed a €250 million agreement with UK company Sona Asset Management for the acquisition of a minority stake in a CPIPG subsidiary which owns 11 office properties in Warsaw and two retail properties in Elblag and Lublin, Poland.
Meanwhile, Immofinanz has completed the sale of three office buildings totalling 43,000 square metres in Warsaw's Empark complex “Majhiwe Mokotów”. Archicom acquired the properties for €28.5 million with plans for demolition and residential development.
Belgian developer Arides and AYA Properties fund Arides Polska have announced the purchase of the Warsaw office building Metron from a company owned by Patrizia Frankfurt Kapitalverwaltungs GMBH.
Greenstone Fund has acquired about 80% of the shares in the company that owns the Format office building in Gdańsk from Taurus. In addition, an office building on Barska Street in Warsaw is being sold by real estate developer SGI.
The hotel sector has also been attracting attention, with several transactions registered this year, including two properties along the Baltic Sea changing hands and most recently TMS Inwestycje acquiring the 148-room Holiday Inn Resort Warsaw Jozefów from Aquila Group.
Improved investment mood
The market is adapting to a new economic environment where interest rates are permanently higher compared to pre-pandemic times. The first interest rate cut in the Eurozone has clearly boosted investor confidence. Further interest rate cuts could bring funding costs back to optimal levels and boost investment activity in the Polish market.
Investment in Poland is supported by optimistic GDP forecasts and stable rental conditions across the real estate sector. Above all, competitive investment returns are a major attraction. Poland ranks among the top European countries where investors can achieve the highest real estate returns. Income indicators are supported by energy and labor costs which remain low in Poland compared to Western European countries.
