According to Savills, investment into the Polish commercial property market reached €5.29bn during 2020 with the industrial sector accounting for half of the total. During this time period, industrial assets became more sought-after than offices or retail properties for the first time in the historical series.
Data from the international real estate advisor showed that it was the first quarter of 2020 that saw the highest volumes of investment at approximately EUR 1.7 billion. The fourth quarter saw just EUR 1.26 billion of capital invested, which was two-and-a-half times lower than the volume recorded in the fourth quarter of 2019, which was a peak year for the Polish commercial property market. Overall, total investment activity in 2020 fell by 32% year-on-year.
“Pandemic-related restrictions have clearly taken their toll on the real estate market. Due to a high level of uncertainty and the wait-and-see strategy adopted by most investors, weaker transaction volumes were inevitable. Unlike in the previous financial crisis in the aftermath of the collapse of Lehman Brothers, Poland entered the pandemic period as a much more mature market. The Polish market saw a record-breaking real estate investment volume in the year preceding the GFC, just as it did in 2019, before the pandemic struck.” says Tomasz Buras, CEO, Savills Poland.
Nevertheless, investment activity in the industrial sector reached an all-time high in 2020 with EUR 2.61 billion transacted, accounting for 49.4% of the annual total and representing a 65% increase year-on-year. The largest contributors were portfolio deals, including the acquisition of Goodman’s assets by GLP, and the sale of Panattoni Europe’s five warehouse facilities (280,000 sq m) to an Asian investor who was represented during the transaction by Savills Investment Management. Demand for warehouses was driven by the accelerated growth of e-commerce and the relative resilience of logistics facilities to the economic downturn caused by the pandemic.
“Benefiting from its strategic location on the New Silk Road, Poland is also becoming the first point of entry into the German or UK real estate markets for Chinese investors. With such intense demand for this asset class, prime office and industrial yields are likely to converge this year. Healthy supply will, in turn, lead to pressure on land prices that may reach unprecedented levels, while strong demand on the industrial occupier market is likely to result in rental growth in the medium to long term,” says Tomasz Buras.
2020 also saw notable growth in investment activity across the Private Rented Sector (PRS). While this sector is still in its infancy in Poland, the living sector in Germany and the Nordics, for instance, is ranked high in terms of investment volumes, frequently ahead of offices and warehouses. The lack of investment product has had a knock-on effect on the structure of transactions which tend to be concluded upon securing financing for development projects or starting construction works. An example of such cooperation is the contract between Eiffage Immobilier Polska and Heimstaden Bostad, on which Savills advised. It will see construction of 640 build-to-rent apartments across two projects in Warsaw.
“The market continues to be awash with capital to be allocated to real estate. With overseas investors accounting for more than 90% of the investment activity on the Polish commercial property market, the travel restrictions in place will also hinder the return to normality. The first tangible signs of a stronger recovery are expected in the second half of the year, with real estate retaining its status of one of the most sought-after investment assets in the long term.” concludes Tomasz Buras, Savills.