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credit: AXI IMMO
credit: AXI IMMO

Polish Retail sector dominated by portfolio deals

Investors feel safe again in Poland. The total volume of investment transactions in H1 2022 amounted to almost 2.9 billion Euro, which was more than 40% more than in the same period last year. 28% of all investments were made in the shopping center sector.

The high value of investments demonstrates investors’ continued strong interest in Polish investment products in all major categories, despite the new geopolitical situation and the war in Ukraine. AXI IMMO experts analyze the situation of individual sectors in the investment market in the first half of 2022 in Poland. The first six months of this year started very well in Poland’s commercial real estate market. At the end of June 2022, a high volume of transactions was registered in the investment market, resulting from several significant acquisitions launched in 2021. The result obtained was 40% higher than last year and thus similar to 2020. By sector, investments split up in offices (44%), followed by shopping centers (28%) and warehouses (24%).

“The biggest unknown in Q2 2022, which influenced the attitude of a large part of investors, was the situation in Ukraine. We see that sentiment towards our region is now returning. Still, some investors from Asia and the US are assessing the proximity of the conflict as a greater risk and are adopting a wait-and-see basis for the time being. On the other hand, those from Europe and the CEE region are already back in the market,” comments Grzegorz Chmielak, Head of Valuation and Capital Markets, AXI IMMO.

Polish Retail sector dominated by portfolio deals

The high performance of the retail sector was mainly due to two transactions finalized by EPP worth 653 million Euro, which involved approximately 50% stakes in two retail property portfolios: PIMCO and I Group – as a consequence of EPP’s delisting from the Johannesburg and Luxembourg stock exchanges. The remaining sales were primarily from retail parks and free-standing grocery stores. It’s the favorite product category of choice for funds, which have invested heavily in smaller formats in Poland for several years. This product category has not lost its popularity even during the Covid-19 pandemic.

Other Sectors

Offices: The office sector accounted for 44%, or 1.3 billion Euro, of the total transaction volume in the market. Offices defended their position during the Covid-19 pandemic. Now employees have returned to offices, demand in the market is returning to normal, which translates into an upward trend in lease rates and the increased popularity of this asset class among investors. An important signal for the sector was Google’s purchase of buildings B and C of The Warsaw HUB complex from Ghelamco for €583 million. It was a record transaction on the office market. At the same time, it is not only Warsaw that is on the radar of investors, regional cities are also gaining in popularity. Quite large transactions took place in Wroclaw, with the largest one in Poznan, where Estnine bought building D in the Nowy Rynek complex from Skanska for about 121 million euros.

Industrial: The warehouse sector performed 25% lower than last year. Transaction volume closed at 0.7 billion Euro, which is a temporary effect. Logistics and industrial assets continue to attract investors. Demand in the rental market remains high, driven by e-commerce. In the coming quarters, there will be an increasing share of production related to changes in supply chains and the relocation of companies from war-stricken Ukraine. Rental rates have been upward for at least the past two quarters, especially for new projects, which must consider higher construction costs. Financing costs are also rising, and as a result, yields have stopped falling. Capitalization rates for the best warehouse products ranged between 4.7% and 5%.