Investment market in Poland 2020 - Savills
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Poland Commercial – January 2020
S P OT L I G H T
Investment market
Savills Research
in Poland 2020
Another record year Prime yields still sharpening New capital What’s next?
Investment market in Poland 2020 Investment market in Poland 2020
Once again, Poland attracted a record volume of
investment capital, thus strengthening its position
as a major destination in Central Europe for 49% 25%
2019 investment volume by sector,
20% respectively: office, retail, industrial,
investment from around the world. 6% hotel & residential.
Investor activity in 2019
exceeded all expectations.
The record volume
Investment volume in Poland by sector
office retail industrial hotel student housing residential
Prime yields still sharpening In brief
1 2019 was the third
consecutive record
confirmed that Poland 8000
New records on the horizon year, in the Polish
investment market, with
remains an attractive haven
High investment demand, fuelled with aggressive capital for high quality assets offering secure, long-term income and an impressive investment
for investment capital, even 7000 from Asia and a resurgent investment appetite from German more opportunistic approach to second-tier assets. volume of nearly
in the face of a global
Annual volume (€ million)
buyers, has led to further compression of prime yields, €7.8 billion.
slowdown. The strength and 6000 especially in the office and industrial sectors. Tightening Prime retail yields
stability of the Polish
economy, which saved the
country a decade ago, is
5000
of prime yields has led to yield compression for secondary
assets, albeit, with the exception of the retail sector, where the
market has become more polarised.
There is limited fresh deal evidence for prime shopping
centres, due to shortage of such products offered for sale in
2019. However, we estimate that the prime retail yields for
2 Offices were a
dominant asset
class comprising
still a major driver of high 4000 the most successful schemes in Warsaw are now at ca. 4.25%, approximately 49% of
occupier activity, which in Prime office yields while in major regional cities they are around 5.00%. the total investment
turn drives the construction 3000 In 2019 prime office yields in Warsaw went down to 4.50%, volume, followed by the
market, providing good reflecting continued yield compression for the best assets in Prime warehouse yields retail sector with 25%,
quality products for global 2000 Warsaw City Centre. Bearing in mind, there are some ongoing In 2019 prime yields in the industrial sector were in the industrial with 20% and
investment capital. transactions, we anticipate that prime achievable office yields range of 5.00-5.25% for single-let assets with long-term hotels plus residential
1000 are now at 4.25%, with potential to decrease further to ca. leases and strong covenant tenant. However, already at the with 6%.
2019 was also a year of 4.00%. This still remains attractive compared to core markets turn of 2019/2020, the first transaction took place where this
further yield compression
and this will continue in
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
in Western Europe, especially when taking into account the
rental growth prospects. Office yields are also sharpening in
Warsaw non-central locations and regional cities, although
psychological barrier was significantly broken and the yield
of 4.25% was achieved. In the case of multi-let big-boxes
prime yields are estimated at approximately 6.00% with the
3 Investment activity
in the office sector
increased in Poland by
2020, at least in the office
Source Savills Research these markets remain more polarised, with strong demand potential to compress further to ca. 5.75%. approximately 37%.
and industrial sectors.
Prime yields by sector
It was also a year of growth
for alternative asset classes, The third record year in a row office retail industrial 4 Retail sector is
clearly affected
by the slowdown and
student housing and 9.00% became even more
apartments for rent in 2019 was the third consecutive record year in the real estate polarised. Investment
particular. The first investment market in Poland. The transaction volume last year 8.50% in the retail sector is
significant transactions in
these sectors were totalled almost €7.8bn, representing an increase of 8% y-o-y. 8.00%
limited by negligible
supply of prime product.
definitely a foretaste of In 2019 offices were still the demand for industrial assets in still some room for those investors
7.50%
5
what we will observe in number one choice for property Poland and dynamic growth in who feel confident at throwing Prime logistics assets
Prime yield (%)
2020 and in the following investors with over €3.8bn apartment investment (although new life into those assets whose offering secure
7.00%
years. invested in the sector across this one is still an emerging sector glow has slightly dimmed. long-term income are
Poland, reflecting a 37% growth growing from a relatively low Following a record 2018 for 6.50% definitely top priority for
Given the particularly year-on-year. This superior base), the office market is also the industrial market in Poland, many investors. Tough
strong prospects for the growth, in fact, represented the fuelled by massive development, the investment volume in the 6.00% competition among
first quarter of the year, I opposite direction compared responding to continued strong industrial sector fell by ca. 13% in buyers is reflected
expect 2020 to be the third to what we observe globally. occupier demand, which creates 2019. Despite a slight decrease in 5.50% by continued yield
consecutive year to close While offices, in aggregate some rental growth opportunities. transaction volume, it was still compression.
with a EUR 7.0-8.0bn remain the number one sector Investor volume in the retail historically the second highest 5.00%
investment volume.
2020 looks like an exciting
in terms of investment volume
worldwide, the increased interest
in the apartment sector and the
sector in 2019 amounted to
€1.95bn reflecting a 23% fall year-
on-year. The decrease in activity
volume and the reasons for the
decline should be traced to the
supply side. Investment demand
4.50% 6 Prime yields have
been sharpening
further across all
year under the banner of 4.00%
office towers, logistics and industrial market, which have both is no surprise, as the overall remains high which is reflected commercial sectors
grown in response to structural retail investment market has in numerous forward funding or 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (with the exception of
further growth of activity in
changes in how people shop and seen a slowdown due to growing forward purchase agreements. retail).
alternative asset segments.
live, is gradually acquiring part e-commerce and overall structural Bearing in mind, there are Source Savills Research
of office (and naturally retail)
investment. At the same time the
world’s office market suffers from
changes in shopping habits.
Additionally, the sector is suffering
from a negligible supply of prime
some portfolio transactions on
the horizon, 2020 is going to
be another record year for the
Prime yields in 2020 7 Investment sentiment
remains positive and
2020 will be another
a shortage of suitable stock, which product, which is still relatively industrial sector. good year for the
contributes to the decline in deal liquid. On the other hand, change investment market
volumes. While there is strong creates opportunity and there is in Poland with a new
benchmark for prime
Tomasz Buras yields in the office and
CEO Poland, Investments in the office sector in Poland industrial sectors and
Head of Investment recorded a growth of 37% y-o-y. 4.25-4.50% 4.25-5.00% 4.25-5.00% the investment volume
Prime office yields Prime retail yields Prime industrial yields of ca. €7.0-8.0 billion.
savills.pl 2 3Investment market in Poland 2020 Investment market in Poland 2020
Capital flows 2019 INVESTMENT
ACTVITY GROWTH
by origin of capital
Fierce competition
Centrally located, grade-A office assets have been attracting
lot of interest from buyers from around the globe. With
Selected top transactions in the office sector in 2019
Property Location Buyer Price
German and Austrian buyers increasing their activity after
In line with the significant growth in the number of transactions some slower years, stronger than ever activity from the Warsaw Spire A Warsaw Immofinanz EUR 386m
(over 40% in 2019 compared to 2018), the spectrum of buyers is CEE-based investors and the growing spectrum of buyers
from outside of Europe, the race for the best assets is more Warsaw Financial Center Warsaw CPI Property Group EUR 275m
also widening with a particular growth in inflow of capital from -25% challenging than ever before.
APAC and Middle East regions. Domestic Eurocentrum Office Complex Warsaw CPI Property Group EUR 255m
West Station I & II Warsaw Mapletree Investments EUR 190m
Investment in Poland by origin of capital
2017-2019 comparison
2017 2018 2019 +34%
European cross-border
4500
Continued transformation Selected top transactions in the retail sector in 2019
The ongoing transformation of the retail sector, resulting
4000 from structural changes in demography and urbanization Property Location Buyer Price
trends, as well as dynamic growth of e-commerce are
affecting the shape of the investment market within the Cromwell Portfolio Portfolio Cromwell Property Group EUR 600m
3500 sector. There is still strong demand for core, dominant
assets, however, there is shortage of these assets available for Atrium Koszalin & Atrium Portfolio ECE European Prime Shopping EUR 298m
acquisition. There is, however, some room for experienced
Investment volume (EUR million)
3000 Felicity Centre Fund II
-75% asset managers such as EPP, ECE or Cromwell, who see
opportunities in the changing market and benefit on scale. Chariot Top Portfolio (II Portfolio EPP EUR 222m
US
2500 tranche)
Makro Portfolio Portfolio FLE GmbH EUR 127m
2000
1500
-50%
South Africa In pursuit of safe haven Selected top transactions in the industrial sector in 2019
1000 Most investors are currently looking towards the industrial
sector, even those who have traditionally specialized in other
Property Location Buyer Price
market segments. The development of e-commerce and the
500
growth in supply chain is providing an extremely strong Barn Portfolio Portfolio GLL EUR 175m
foundation for the industrial property sector, which attracts
0 capital seeking a safe haven in the face of the economic Amazon Lodz & Boleslawiec Portfolio CGL Investment Holdings undisclosed
slowdown.
Domestic European Cross- US APAC Middle East Africa Corporation
Border
Blackstone Portfolio Portfolio Mirae Asset Management EUR 129m
DC Zalando Olsztynek IGIS Asset Management EUR 85m
Source Savills Research +127%
Domestic investment in Poland remains low, Asian buyers spent over EUR 1.73 billion
Asia / Pacific
as the number of buyers able to compete with (approximately 23.5% of the total volume) which
foreign capital is limited. In 2019 acquisitions by was the highest level ever. This group of investors
domestic buyers accounted for only 3% of the total is almost fully focused on office and industrial
investment volume. sectors, although there was also a large portfolio
European cross-border investment increased transaction in the retail sector.
significantly in 2019 and accounted for 53% of the South African and Middle Eastern buyers
investment volume in Poland. European buyers were responsible for nearly 7.4% and 2.4% of the
were focused on office assets (58%) followed by transaction volume respectively. South African
retail (21%) and industrial (13%). Interestingly, capital is now less active in the retail sector, With several European economies having slowed down in 2018,
for the first time ever, a single Czech buyer (CPI searching for opportunities mainly in the office Poland is still on the growth path, thus attracting new sources
Property Group) outperformed German buyers. sector. Middle Eastern investment recorded the
Although this is only one investor, the activity of highest growth last year, although from a relatively +246% of both continental and outbound investment capital.
CEE investors in Poland is gradually growing. low base. Middle East
savills.pl 4 5Investment market in Poland 2020 Investment market in Poland 2020
With the global trend in interest rates remaining
lower for longer there is nothing to suggest that
the cycle will end this year.
Outlook
What’s next? EUROPEAN PERSPECTIVE
Low interest rates and low cost of
Strong activity, new benchmarks for prime yields
Consumption to remain a main pillar of the GDP growth.
1 4 7
debt are injecting investment
The outlook for the Poland will continue Retail sector
capital towards real estate, despite
the fact that prime yields are at a
real estate market for to be a destination will remain in
record low, in some core European 2020 is once again very of choice, bearing in the shadows of
markets even below 3.00%. positive. From today’s mind the resilience of the spectacular
perspective, there is the Polish economy transactions in the
Forecast for Poland Slower economic growth and nothing to suggest that in the face of the office and industrial
softening occupier demand for the cycle will end this slowdown and strong sectors, however,
2018 2019 2020 2021 2022 5-year offices around Europe are pushing year. In fact, with the occupier demand there is still room for
investors to concentrate on assets global trend in interest driving rental growth, as investments in both
that can provide a stable income
rates remaining ‘lower well as pretty attractive prime and opportunistic
GDP 18.0% over a longer period of time.
for longer’, at least for pricing levels. segments of the market.
+5.1% +4.2% +3.1% +2.5% +2.0% the foreseeable future,
Warsaw is among the office markets
Domestic demand 18.8%
that might still experience yield
compression, especially due to
relatively attractive capital values
the current cycle could
continue for a few more
years.
5 Continued growth
of both Warsaw and
regional office markets
8 Bearing in mind
current activity in
the industrial sector,
+5.3% +4.0% +3.3% +2.8% +2.2% compared to other core markets, will uphold offices in the 2020 may be another
2
strong occupier demand and rental Despite uncertainty position of dominant record year for the
growth prospects. and disruptions, asset class. Activity in sector with the volume
Industrial production 16.8%
which have been major regional markets of transactions set to
+5.8% +4.3% +1.4% +1.7% +2.6% In spite of the slowing European
buzz words globally will grow further, exceed EUR 2.0 billion
economy, consumer confidence has
remained on a broadly flat
in recent years, there attracted by a yield for the first time, fuelled
Exports 21.4% trajectory. Whilst the retail market can be no doubt that premium and attractive by larger portfolio sales.
is adapting and reshaping itself to investors will turn to pricing levels.
+7.0% +4.5% +2.7% +2.8% +2.8%
meet new consumers’ demand,
investors are still restraining their
exposure to the sector.
real estate, looking
for both security and
opportunity. 6 Warsaw will
continue to be a
9 In conclusion, we
expect 2020 to be
the third consecutive
Imports 23.5%
major arena for large- year with high investor
+7.6% +4.3% +3.3% +3.3% 3.1%
3
Whilst the overall European retail The decline in global scale investments with activity. End-year
investment activity is slowing down,
demand dynamics several landmark office investment volumes are
the number of retail sale and
Trade balance -4.9% and the low level of assets to be transacted anticipated to be in the
leaseback (SLB) transactions is
growing, mainly driven by economic growth will and bringing yields to range of EUR 7.0 - 8.0
-5.6% +1.3% +1.4% -0.2% -1.3% encourage the search even sharper levels. billion.
supermarket retailers. In the face of
the rising tide of e-commerce, sale for stable income
Consumer prices 12.9% and leaseback is seen as a financial from long-term lease
strategy to take capital out of real agreements.
1.8% 2.2% 3.2% 2.6% 2.5% estate assets and put it back into
the core retail business. From an
investor’s perspective, it is an
Short-term interest rates alternative opportunity to source
1.51% 1.52% 1.52% 1.52% 1.82% property and to invest large
amounts of capital, which in return,
Source Oxford Economics/ Statistics Poland will provide long income streams.
Solid household consumption and higher which should extend the consumption boom, contribution to annual GDP growth in 2019 While overall repositioning,
than expected exports contributed to strong that underpins the economic growth. and probably also in 2020. This again shows repurposing and repricing will be
GDP growth in 2019, estimated at 4.2%, how the Polish economy has so far weathered the theme of retail investment
according to Oxford Economics. Relatively Muted industrial production and lower the slowdown in the eurozone much better activity in 2020, Poland is among
weak public investment and a slowdown of public investment than some of its neighbours in Central and those countries, in which strong
consumer spending should prevent
external demand will weigh on activity and The industrial production slowed down, Eastern Europe.
yields from softening.
the growth is expected to decelerate in 2020 muted by lower external demand, and is
and beyond. expected to remain low as there are no Interest rates to remain low Fundamentals for the industrial
signs that German industrial sector is going Despite rising inflation, main interest rates sector remain particularly strong,
Consumption driven economy to bottom out. Uncertainty around lower are expected to remain unchanged in 2020 driven by rising e-commerce and
Private consumption remains strong, external demand and lower trade flows has and probably also in 2021. logistics. Industrial assets still offer
fuelled by buoyant consumer confidence also contributed to a slowdown in public attractive risk-return profile
and social programmes. It is expected to investment. compared to other asset classes.
€7.0-8.0bn Projected investment volume
remain high in 2020, supported by significant
Bearing in mind the fierce
growth in nominal wages. Significant rises in Exports growth exceeding lacklustre
minimum wage are expected in 2020 - 2024 imports
competition for prime assets there in Poland in 2020.
is still room for further compression
and will boost consumer confidence further, Net trade seems to have a small positive of prime yields.
savills.pl 6 7For further information please contact:
Investment
Tomasz Buras Marek Paczuski John Palmer Daniel Oponowicz Łukasz Fromiński
CEO Poland Director Director Associate Director Associate Director
Head of Investment Deputy Head of Investment Head of Industrial Investment Investment Investment
+48 22 222 4000 +48 666 042 891 +48 501 203 821 +48 602 767 868 +48 660 438 433
tburas@savills.pl mpaczuski@savills.pl john.palmer@savills.pl daniel.oponowicz@savills.pl lukasz.frominski@savills.pl
Research
Michał Stępień Karolina Wójcik-Wrześniewska Wioleta Wojtczak
Associate Associate Associate Director
Investment Investment Head of Research
+48 600 228 399 +48 666 363 307 +48 600 422 216
mstepien@savills.pl karolina.wojcik-wrzesniewska@savills.pl wwojtczak@savills.pl
Savills plc: Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the Americas, the UK,
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