Despite the ascent in capitalization rates and prevailing global uncertainties, investors have executed agreements exceeding 741 million euros—a figure surpassing fourfold that of the preceding quarter in 2023. The propelling force in the market remains industrial and logistics real estate. However, the initiation of concrete purchase decisions and fresh transactions may necessitate patience until the commencement of the forthcoming year.
Investment activity increasing despite challenges
As outlined in the latest report from BNP Paribas Real Estate Poland, titled "At A Glance Q3 2023," the Polish commercial real estate market, analogous to the majority of European economies, remains subject to the influences of global monetary policy. Elevated interest rates, global inflationary trends, and the depreciation of U.S. bond prices defer the realization of global stability, posing challenges in reconciling the expectations of both buyers and sellers.
Notwithstanding, the last quarter has, in terms of transaction values within the country, outperformed its predecessor, with investors sealing agreements totaling over 741 million euros—nearly four times the amount of the last quarter. Although the transaction volume remains significantly lower compared to the corresponding period last year, investors express a continued interest in the Polish market.
- While the prospects for the future are promising, decisions on concrete purchases and new transactions will likely be deferred until at least the beginning of the next year. Warehouse properties persist as focal points for investors, although retail park formats are also garnering attention, primarily due to their attractive price levels and high market liquidity – evaluates Mateusz Skubiszewski, Head of Capital Markets Department, BNP Paribas Real Estate Poland.
Capitalization rates for premier commercial real estate assets in Poland have remained consistent every quarter, with expectations of stability or marginal increases in the ensuing quarters. Nonetheless, analysts at BNP Paribas Real Estate Poland highlight that elevated financing costs continue to serve as a deterrent for global investors.
- The majority anticipates no swift reductions in interest rates in Europe, which are likely to remain stable or experience slight increases in the upcoming quarter. The recent interest rate cut in Poland, contrary to the European Central Bank, is unlikely to alleviate the situation, given that the majority of investment loans are denominated in euros. Simultaneously, amid economic turbulence on the continent, the European Central Bank intensifies scrutiny over such loans. Consequently, one can anticipate that banks will adopt a more stringent approach to risk assessment and project profitability. Nevertheless, the long-term fundamentals of the national economy remain robust, with the public debt-to-GDP ratio standing at 49%, well below the eurozone average of 91%. Furthermore, last year, Poland ranked among the top in Europe in terms of the number of foreign greenfield investment projects, securing the 5th position, largely attributed to the implementation of international companies' 'nearshoring' policy, positively impacting the local market – comments Marta Gorońska - Wiercioch, Associate Director, Capital Markets DepartmentBNP Paribas Real Estate Poland.
Selected transactions
From January to September 2023, transactions with a cumulative value exceeding 1.54 billion euros were concluded, with the third quarter accounting for an impressive 48%. Driven by attractive pricing and substantial market liquidity, industrial and production assets (55% share) continue to dominate the national investment landscape, followed by commercial assets with a share of nearly 25%. Owing to fluctuating financial conditions, agreements for the acquisition of office properties were fewer than in previous years.
Industry and Logistics
Industrial and logistics real estate persist as the market's driving force, maintaining its dominance in terms of investment transaction volume. Agreements with a total value surpassing 842 million euros have been concluded since January, with the third quarter contributing 48%. Panattoni emerged as the most active seller in terms of transaction volume, followed by 7R. The largest transaction during this period was the acquisition by the NREP fund of controlling interest in the real estate portfolio of the Polish developer 7R, achieved through the purchase of an 80% stake in the company for approximately 200 million euros.
Retail
From January to September, the investment transaction volume in Polish retail commercial real estate amounted to almost 380 million euros, with the average size of the sold property standing at around 18.6 thousand sqm. Nearly 74% of transactions involved assets valued below 20 million euros, predominantly located in smaller city retail parks. The largest transaction during this period was the acquisition of the Matarnia Retail Park in Gdańsk for almost 103 million euros. The buyer was the French fund, Frey, with the Czech Ingka Centers as the seller.
Office
Of all asset classes, offices proved to be the least resilient to the rapid increase in capitalization rates. Since the beginning of the year, only 10 buildings changed or partially changed ownership. The total value of transactions exceeded 267 million euros, constituting just over 14% of the volume recorded in the same period last year. The largest transaction in the third quarter was the acquisition of the Warta Tower building by Cornerstone Investment Management for over 63 million euros. The previous owner of the property was the Globalworth fund.