According to Savills latest report on Poland’s investment market, the annual transaction volume is likely to hit €3.0bn which would be a record level since 2006 with the majority of deals (up to circa 70%) attributed to retail.
According to Savills latest report on Poland’s investment market, the annual transaction volume is likely to hit €3.0bn which would be a record level since 2006 with the majority of deals (up to circa 70%) attributed to retail. The firm states that H1 2013 saw over €1.26bn transacted, comprising 28 transactions compared to 12 in H1 2012. A further €850m of deals have also been signed this year in the form of preliminary sale and purchase agreements which should complete before year end and these combined with a number of pending deals will boost the 2013 investment volume.
Whilst the international real estate advisor finds retail to be the most popular sector, with €475m traded in the first half of the year and a significant increase on that figure expected in H2 2013, offices have in fact accounted for 51% of transactions in H1 2013 but that proportion is expected to decline by year end. Interestingly however, transactions in the warehouse sector, which peaked in 2012 totalling 17% market share, are anticipated to remain above average share (6.2% between 2002-2011) at 10-12% by year end.
Michal Cwiklinski, director of investment for Savills Poland, says “The total volume of warehouse investment transactions by year end is expected to be in the range of 10-12%, almost double the long-term average. Retail assets will account for up to 70% of the annual volume reflecting the shrinking supply of decent investment product in the office sector which may only account for 20-30% of market share as a proportion of the entire 2013 volume.”
In terms of location, Warsaw remains the preferred destination for office transactions accounting for 11 of the 14 office deals in H1 2013, but Savills reports that some areas such as the Mokotow district have received slightly less interest from investors as many already have assets in this location. The report suggests that prime yields in central Warsaw stand at 6.0% and that the yield gap between prime CBD and non central locations has widened recently to circa 150 bps. Savills predicts some yield compression over the coming months as the long-term sustainable gap should be 50-75bps. Activity outside Warsaw is rising with Wroclaw and Tricity also on the map in the first half of the year and Krakow and Poznan also preferred locations – prime yields are now estimated at 7.50-7.75% in these markets.
In the retail sector, according to Savills, investors are focused on two types of assets: dominant regional shopping centres located in major regional cities and older, but well established shopping centres with good trading records located in both secondary and tertiary cities. Prime achievable yields are now at 5.75% for the best centres in Warsaw, 6% for dominant centres in major regional cities and 7.5-8% for leading shopping centres in secondary cities.
Finally the report suggest that prime achievable warehouse yields are now at 7.5% for a single occupier modern warehouse let to strong covenants for at least 10 years. In case of multi-let warehouse properties prime achievable yields are at 8.25%.