"The commercial property market in Poland experienced a notable rebound in the first half of 2024, with more than €1.7 billion in investment transactions, representing an increase of nearly 80% year-on-year and of over 50% compared to the same period in 2022. This strong performance is attributed to lower interest rates and improving economic sentiment which is an additional incentive for buyers to invest in real estate. It is worth noting that the number of active investment funds is growing and the sector is also seeing transactions closed by domestic investors. Polish market players are filling the niche of lower-value deals by investing not only in developer projects but also in standing commercial buildings. Looking ahead, we expect these positive trends to continue", comments Krzysztof Misiak, Head of Cushman & Wakefield Poland. 

UK investors were the main driver of investment activity in the first half of 2024, raising their market share to 35% - mostly through a single big-ticket transaction. The Polish market continued to see strong demand coming from Czech investors (19%), as well as domestic and Scandinavian market players expanding their presence in Poland - each group accounted for approximately 9% of the total investment volume. Transactions finalized by Polish investors included the acquisition of the Rzymowskiego 34 office building in Warsaw by A&A Holding on which Cushman & Wakefield advised and the purchase of Warta Tower by Cornerstone IM.

"Although this year continues to be dominated by value-add transactions, the Polish market is seeing the first core+ deals whose share in investment volumes is likely to increase on the back of more stable interest rates, which in turn will attract major cross-border players. This year’s total investment volume is expected to reach €4 billion, nearly double 2023’s figure and accounting for 75% of the five-year average", adds Paweł Partyka, Head of Capital Markets Poland, Cushman & Wakefield. 

Offices are the top performer

Cushman & Wakefield estimates that the office investment volume exceeded €800 million at the end of June 2024.

"This means that office assets recorded a fourfold increase in transaction values year-on-year, with the strongest buyer activity reported in the second quarter. The growing number of promising, concrete negotiations between sellers and buyers bodes well for the future. This confirms the strong fundamentals of the Polish office market, which leads the way in CEE in terms of office stock, product quality and diversity. The coming months are likely to see an increase in the number of office transactions as interest rates and yields have stabilized at lower expected levels. This appears to be the last call to compete for trophy assets before the largest investors are back on the market", says Marcin Kocerba, Partner, Capital Markets, Cushman & Wakefield Poland.

Skanska`s sale of Studio B to Stena Real Estate AB has been the first prime/core transaction in Warsaw since 2022. Regional city office buildings also attracted buyers’ attention in the past six months. For example, Skanska sold Nowy Rynek E in Poznań to Eastnine AB. In Gdańsk, Greenstone AM acquired a majority stake in Format from Torus, while in Szczecin it sold Lastadia Office to a French investment fund managed by Arkéa.

Retail assets are back in demand

According to Cushman & Wakefield’s data, the retail transaction volume totalled nearly €0.5 billion.

"Although the retail investment volume for the first half of 2024 has already exceeded last year’s total, the best is still to come. From our observations, the retail sector is very likely to dominate this year’s investment volumes on a par with offices. We are seeing strong investor interest in retail assets across Europe, suggesting that retail is back in favour for good and is increasingly being seen as an alternative to industrial or office assets in investment fund strategies", comments Paweł Partyka.

Stabilization in the industrial market

Transaction volume on the industrial market in the first half of 2024 totalled €294 million, posting a 33% fall year-on-year. Interestingly, this sector in particular is attracting repeat investors and new market players hunting for opportunities, notes Cushman & Wakefield.

"Strong demand for industrial assets which as yet has not translated into transactional activity bodes well for a quick return to high trading volumes in 2025. The coming months are likely to see transactions finalized by buyers who have long been absent from Poland or are new market entrants. The main drivers of investor interest in Polish warehouses include their high quality. According to Cushman & Wakefield, Poland’s total industrial stock is approaching 35 million sqm, of which as much as 40% will be in projects completed in 2021-2024, signifying that the Polish market contains mainly modern and sustainable assets that are particularly sought after by investors", says Paweł Partyka. 

The market is waiting for REITs

It is expected that the introduction of dividend-paying REITs (Real Estate Investment Trusts) which are very popular in mature markets such as the US, Canada, the UK, France and Spain could additionally boost commercial property investment activity and lead to an increased presence of Polish capital. Such trusts are among key real estate investment vehicles, with their market capitalization totalling more than $600 billion in the US, €57 billion in the UK and nearly €50 billion in France.

REITs have so far been considered mainly in connection with residential market transactions which amounted to €130 million in the first half of 2024, more than last year’s total, reveals data from Cushman & Wakefield. However, Mira Kantor-Pikus notes that REITs should be a diversified investment vehicle allowing for investing in various asset classes. Fortunately, this view is shared by Polish lawmakers.

"Draft legislation on Polish REITs provides for an investment vehicle in the form of a publicly listed joint-stock company dubbed SINN (a Company Investing In Real Estate Leasing) and expected to invest in rental apartments, student houses, care homes, office, industrial and retail buildings. Such a company will be exempt from tax on rental income and property sales, with a one-off preferential 10% tax rate applicable to dividend payments. It is, however, required to generate 90% of income from property rental or a sale of a property leased for 12 months or longer", explains Mira Kantor-Pikus, MRICS, EMBA, Head of Equity, Debt & Alternative Investments, Cushman & Wakefield.

According to the experts of Cushman & Wakefield, REITs will provide an alternative way of long-term saving and investment for individual investors compared to bank deposits, treasury bonds and small-scale housing investments, as well as an interesting instrument for pension funds and insurers. Key to the success of REITs will be the participation of experienced investment market players: investment funds, developers and real estate advisers, as well as making manager fees dependent on the results important to shareholders, i.e. generated income.