Market outlook has improved since the start of the year
The commercial property market in Poland experienced a significant uptick in investment activity since the beginning of 2024, with a transaction volume surpassing EUR 1.7bn This represents an almost twofold increase on the transaction value posted in the same period last year. The office sector was the top performer with a 46% share in the total investment volume, followed by retail with more than 29%.
“After three stormy years, we are entering a period of milder weather conditions for the Polish economy. The commercial property market in Poland - as in most of Europe - is still, however, being held hostage to high interest rates and geopolitical factors. The investment volume for the second quarter of 2024 reached EUR 1.34bn, the highest quarterly figure since the beginning of 2023, but it is skewed by the acquisition of CPI shares by Sona Asset Management, which accounted for 40% of the total. If this transaction is removed, the result is still good but does not signify any marked change in investor sentiment that would lead to significantly higher trading volumes,” comments Mateusz Skubiszewski, Senior Director, Head of Capital Markets, BNP Paribas Real Estate Poland.
As regards only typical asset trading in the first half of the year, the retail sector took first spot with EUR 449m, ahead of the industrial segment with EUR 307m. Continued strong investor demand for retail assets is attributed to growing consumption and improving retail sales compared to last year.
Yields are still high
According to report authors, the ECB’s decision to cut interest rates by 0.25 pp in June has had little impact on investor sentiment. And with inflation in Europe forecast to remain high, any further cuts in borrowing costs in the near future are highly unlikely.
“Prime commercial property yields in Poland appear to be still too high to attract global investors. The Polish investment market is dominated by more demanding and opportunistic capital from Central and Eastern Europe and the Baltic states. In addition, due to high borrowing costs and thereby more muted development activity, the supply of new and fully let assets, particularly on the office and industrial markets, is expected to remain limited in the coming quarters,” says Marta Gorońska-Wiercioch, Director, Capital Markets, BNP Paribas Real Estate Poland.
The situation is further complicated by conflicting market signals: although the ECB began easing its monetary policy by cutting its refinancing rate to 4.25%, German 10-year bond yields rose again to 2.4%. Apparently, market players need more time to adapt to new conditions. Consequently, commercial property yields in Poland remain flat and are expected to continue at stable levels in the future.
“We expect that 2025 will, however, be a breakthrough year,” adds Marta Gorońska-Wiercioch. The Polish economy and market are likely to benefit strongly from the disbursement of nearly EUR 60bn of EU funds as part of national recovery and resilience plans.
How is each real estate sector performing?
In the six months to June 2024, the office investment volume in Poland totalled more than EUR 788m, marking an almost fourfold increase from the same time last year. However, excluding the acquisition of a 49% stake in CPI by Sona Asset Management (the deal was for a total of more than 370,000 sqm), the increase in investment volumes was only 46%. The first half of 2024 saw 21 transactions, the largest being Eastnine’s acquisition of Nowy Rynek E - Tower from Skanska for more than EUR 79m.
Investors continue to target core+ and value-add offices, while trading in the prime segment is unlikely to pick up until late 2024.
Retail transaction volume in Poland for January-June 2024 was close to EUR 497m, with the average scheme size of approximately 16,500 sqm. Nearly 77% of all transactions were for assets under EUR 20m, mostly retail parks located in smaller towns. The biggest retail deal in the year to date was the acquisition by Czech investment fund Star Capital Finance of a property portfolio comprising 219,000 sqm of retail space for EUR 285m from Cromwell, which was represented by BNP Paribas Real Estate Poland. It was also the largest asset transaction of the second quarter of the year.
Interestingly, industrial and logistics assets which had been the top-performing sector for many years recorded much lower investment activity in the first half of 2024, with more than EUR 307m of deals in the year to date, of which 51% was in the second quarter. The largest transaction of the surveyed period was EQT Exeter’s acquisition of Panattoni Park Poznań 11 with an area of 130,000 sqm for EUR 90m. With three transactions finalized, Panattoni was the market leader on the sell side in the first half of 2024.
