Shifting perspective

Poland’s investment volume reached €3.13 billion in 2014, more or less on par with the 2013 score, with a large chunk of all deals made in Q4 (€1.26 billion), according to Cushman & Wakefield. Poland is no longer the sole green island in Central and Eastern Europe. While the investment volume in Poland remained largely unchanged last year, the total deal volume in the region increased by 41 percent to reach €7.3 billion for the five core CE markets (Poland, Czech Republic, Romania, Slovakia and Hungary), according to CBRE. The entire CEE region excluding Russia saw €7.7 billion worth of real estate transactions, 28 percent more than in 2013. Poland accounted for 40 percent of that volume (last year it was 54 percent). The reason why Poland’s share in the total CEE market is decreasing is that the Czech Republic experienced a 96 percent increase on 2013 volumes with €1.99 billion transacted in 2014. Romania saw the highest annual increase (141 percent) and achieved €1.07 billion in 2014. The investment volume in Hungary was at €616 million in 2014 (73 percent increase on the year). Slovakia recorded an 116 percent y/y surge and reached €504 million in 2014, Cushman & Wakefield reported. “Central Europe has become an established part of any pan-European investment strategy. Warsaw has been the gateway for this but activity is clearly growing rapidly in secondary cities and across all CE countries,” said James Chapman, partner and head of CE Capital Markets at Cushman & Wakefield. Segment breakdown The reason why investment volume in Poland is not growing as quickly as in the other CE markets is largely due to the limited supply of assets for sale, particularly retail properties. Last year, the sales volume of retail properties stood at €1.32 billion. This year it was at less than half of that sum – €570 million. “The largest retail schemes changed hands over the past few years. They will return to the market once their owners reach the expected return on investment,” said Kamila Wykrota, head of Consultancy and Market Research at DTZ. Meanwhile, the office and the industrial/logistics segments more than made up for the loss, with €1.65 billion in office deals and €710 million in logistics transactions, according to CBRE data. “The office sector recorded the highest investment activity in Poland since 2006, while the industrial sector turned over the highest-ever transaction volume on the Polish industrial investment market,” Cushman & Wakefield wrote. Regional paradise One of the reasons why the office segment dominated the investment market last year is the growing prominence of regional office markets in Poland. It is no longer only Warsaw that’s of interest to international money managers. They are more and more inclined to consider secondary locations. That is why last year’s office investment deals in regional cities increased by over 100 percent compared to 2013 and amounted to €370 million, according to Cushman & Wakefield. This is also why over 400,000 sqm of brand new office stock is scheduled for delivery this year. Developers are more than eager to capitalize on improving investor sentiment towards regional markets. Skanska, for instance managed to sell three projects in the last two months of 2014: Dominikański in Wrocław to German-based Union Investment (the developer’s fourth office sale in the city), Green Horizon in Łódź to a fund managed by Griffin Real Estate and Kapelanka 42 in Kraków to Polish REINO Dywidenda FIZ for €29 million. It has also launched two new projects: Axis (20,000 sqm) in Kraków and Maraton (25,000 sqm) in Poznań, both set for completion (and likely for sale) in 2016. Who’s buying? Polish investors are increasingly active on the investment market. The share of Polish capital in the total transaction volume has increased from 6 percent in 2013 to 10 percent in 2014. “In 2015, new Polish funds will be created which will invest Polish capital, either directly or indirectly, in commercial real estate,” said DTZ’s Wykrota. More importantly perhaps, they were not afraid to take on some major deals last year. “The single largest logistics deal was made by Polish insurer PZU, which purchased a portfolio of five Panattoni warehouses for around €140 million,” said Łukasz Lorencki, senior surveyor at the Capital Markets Department at Cushman & Wakefield. Besides the growing participation of Polish capital, the past year has also seen more interest from oversees. “In previous years, investment activity was fueled invariably by German investment funds, but in 2014, US entities were the most active investors in Poland for the first time since 2011, accounting for nearly 40 percent of deal volume,” Lorencki said. “This was largely due to the strong activity of a new entrant to the Polish market, Starwood, which acquired Łopuszańska Business Park, T-Mobile Office Park and Katowice Business Point from Ghelamco and Quattro Business Park in Kraków from the Buma Group.” Two other US investment funds, Blackstone and Prologis, focused largely on the warehouse sector with five transactions totaling around €310 million.