Poland Investment Insights Q3 2022

OFFICE

The office market recorded substantial volumes in Q3 (€502 million); however, only four transactions were completed. The sale of the Gen Y tower in Warsaw to Hansainvest accounted for close to 57% of total investments. The price discovery process is visible across all asset classes, with yields’ decompression driven mainly by increasing interest rates. As most typical core German investors remain cautious, there is limited activity in the prime submarket. On the other hand, Core+ assets (offering 6%+ cap rates) are being sought after, with several transactions in Warsaw and key regional markets pending. CEE investors remain the most active group of buyers attracted to Poland by the availability of fair-valued and high-quality assets.

LOGISTICS

The logistics market continues to be a leading and most sought-after sector, with a 60% share in Q3 2022 volumes. CBRE IM’s acquisition of the cross-border Hillwood portfolio is the largest transaction in CEE this year, showing a solid commitment from global equity sources for further acquisitions in Poland. Similarly to other sectors and markets, price adjustment takes place in logistics, with prime yields leaving the 4% territory.

RETAIL

2022 has been the most active in terms of retail investment activity for the last few years, with the anticipated year-end volumes significantly exceeding the previous year’s results. Both shopping centers and retail parks are seen as exciting investment products by CEE and international equity sources; however, higher financing costs impact the prices of retail assets similarly to other sectors, which may cool down the market activity in the coming months.

FINANCING

In recent months, the debt market has faced challenges in the residential and commercial sectors. Due to high inflation in Eurozone and much higher in Poland, EURIBOR and WIBOR rates have reached the highest levels in the last 12 and 20 years, respectively. 5Y interest rate swaps for EUR exceeded 3% p.a. and are over 9.5% p.a. for PLN, impacting DSCR and LTV levels. The predicted stagnation and the decrease in developers’ activity led to a more conservative approach of banks in all real estate sectors. Banks are more selective in granting debt to developers and investors. Investors' experience and capability of active asset management are even more important than location, property quality, and tenants’ covenants.

PRS/PBSA

High inflation, huge credit interests, and increasing construction costs have caused a significant slowdown in the sale of apartments on the primary market to individual clients. As a result of this situation and the inflow of several thousand refugees from Ukraine, the demand for apartments for rent has grown tremendously. It has opened a massive opportunity for institutional investors searching for either income-producing assets or developments. Over the last few months, one significant transaction in the living sector was the acquisition of Basecamp and its existing and planned portfolio by Xior Student Housing, totaling almost 1 billion EUR (incl. 3 assets in Poland). We have seen lower investor activity during recent months, mainly due to high credit and development costs, as well as the exchange rate risk.