Investors are unanimous that Poland will see more investor interest than last year
by Beata Socha
Poland will be a highly attractive market for real estate investors in 2014, according to a study by advisory firm EY.
As many as 33 percent of the 500 investors polled by EY said Poland is a “very attractive” market, while 67 percent called it attractive. More importantly, Poland was the only European market that not a single investor surveyed considered unattractive.
As many as 67 percent of investors expect this year’s transaction volume to surpass last year’s figure of over €3 billion. The improving macroeconomic situation in Europe and increasingly positive investor sentiment will likely lead to more activity in the real estate market, the report said.
Most respondents also expect property prices, including those of residential real estate, to remain stable over 2014.
EY’s survey, carried out in the fall of 2013, involved 500 investors active in 15 countries: Austria, Belgium, France, Germany, Italy, Luxembourg, the Netherlands, Poland, Russia, Spain, Sweden, Switzerland, Turkey, the UK and Ukraine.
The Polish market lures investors not only with its stability and low risk but also with strong yields. Prime office yields are estimated at 6.25 percent, while retail yields for the best-in-class products bring 5.75 percent, according to data by Jones Lang LaSalle. Meanwhile, warehouses bring even more money, with yields at 7.75 percent for the best logistics properties.
“Prime retail yields should remain stable but prime office and warehouse yields might see some compression during 2014,” the report states. The yield spread between prime and secondary product is currently at 100 to 250 base points, and is expected to widen.
Real estate investors active in the Polish market have easier access to capital than a year ago, according to a recent report by Cushman & Wakefield. The maximum loan-to-value ratio for senior debt invested in real estate in Poland currently stands at some 65-70 percent, a marked increase from the 50-60 percent recorded in Q1 2013. Its current level puts Poland on a par with core Western European countries.
“Appetite for the dominant CEE markets increased by 17 percent,” the report said. Poland, and the entire CEE region, are not only increasingly attractive to investors but also to lenders.
Poland’s margins on prime loans have also decreased over the past 12 months, from 2.50-3.50 percent in Q1 2013 to 1.75-3.00 percent in Q1 2014, the survey showed. Meanwhile, the country’s rating remains at 3 (on a 1-5 scale), which is on a par with Switzerland and Norway, but below most other Western European markets. Polish real estate investors also have good access to mezzanine capital.