The highest transaction volume in years was recorded in the commercial property investment market in Poland in 2017. Experts are saying that this year’s result is likely to be even better BY ADAM ZDRODOWSKI In spite of a slower first half in which Poland temporarily lost its leading position in Central and Eastern Europe to the Czech Republic, 2017 ultimately proved to be very good for the commercial real estate investment market in the country. The transaction volume achieved in the entire year was one of the highest in history and restored Poland’s role of the regional champion. Judging by the number of deals now in the pipeline, the prospects for this year are very promising. REGIONAL LEADER According to JLL data, the combined value of investment transactions closed in the commercial property market in Poland last year stood at €5.03 billion, a figure that is only slightly lower than the record volume of €5.05 billion which was seen in 2006. The country was the regional leader – it accounted for as much as 39 percent of the total 2017 transaction volume recorded in the entire CEE/SEE region, which reached €12.56 billion. The runner-up – the Czech Republic – gained a 27-percent share of the market (see graph). The retail sector put up the strongest performance with a combined transaction volume estimated at €2.07 billion. The office, warehouse and hotel sectors accounted for transactions valued at €1.58 billion, €940 million and €342 million respectively. Interestingly, in the office sector the volume of transactions closed in regional cities – which reached a record level of €950 million – was higher than the volume of transactions closed in Warsaw, noted Tomasz Trzósło, the managing director of JLL Poland. As for retail property, investor attention was focused on dominant malls in prime locations, but those are now in short supply. In the largest cities, only one such transaction – Union Investment’s €380-million acquisition of Magnolia Park in Wrocław – took place in 2017. As a result, buyers turned to older centers with extension and re-commercialization potential. The logistics volume was dominated by one huge portfolio deal – the purchase by China’s CIC of Blackstone’s Logicor platform that included €750 million worth of assets in Poland. PORTFOLIO DEALS The year 2017 was another year of large portfolio transactions in the retail, office and warehouse sectors, which accounted for almost half of the total investment volume, pointed out Marek Paczuski, deputy head of investment department at Savills. He added that last year also witnessed the further diversification of foreign capital flowing into Poland. This also pertained to Asian capital, which came to the country both in the form of direct investments and through platforms that manage investment capital. Trzósło said that the preferences of investors vary depending on their profile. Some investors continue to be interested only in core assets, which include well-located and fully leased out office buildings as well as shopping malls that achieve excellent footfall and turnover results. Others, by contrast, are looking for properties with value-add potential. Last but not least, there are also opportunistic investors who expect high yields on investments which involve relatively high risk. The high level of investment activity has translated into compressed yields. According to Savills data, the yields for prime office buildings in downtown Warsaw and leading shopping centers in Warsaw and regional cities now amount to 5-5.25 percent. The yields for the best office buildings in Kraków and Wrocław amount to 6-6.25 percent, while in the other leading regional office markets they stand at 6.5-7 percent. When it comes to warehouse properties, the figure usually ranges between 6.5 and 7.25 percent.

POSITIVE PROSPECTS Will investors remain active in 2018? JLL expects the very good performance of the investment market that was seen in 2017 to continue this year. “In the office sector, the volumes should be similar to or even higher than those recorded in 2017,” Trzósło argued. He explained that a number of large transactions are in the offing and are expected to be closed in 2018. In the retail sector, too, the prospects look very positive, with a major deal having already been completed in the first quarter of this year.