According to Savills, the war in Ukraine has resulted in limitations to the supply of materials and shortages of construction workers, compounding the challenges of rising inflation and energy costs. Following the slowdown triggered by the COVID-19 pandemic, in 2022 the commercial real estate market had once again to face factors weighing on investor sentiment.

“Due to the war in Ukraine, both non-local and risk-averse investors have again adopted a wait-and-see approach, which resulted in more subdued investor activity, with this year’s investment volume expected to remain at 2021’s level and lower than the forecast made earlier in the year,” says Tomasz Buras, CEO, Savills Poland.

Opportunistic investors and self-financing developers may be able to go bargain hunting, secure attractive land or redevelop and repurpose existing properties, says Savills. With the ageing stock of commercial space in prime locations and the continuously evolving needs of building users, landlords will be increasingly driven to either upgrade or repurpose properties to make the best use of land and maximise returns. HBU analyses may reveal that older office and retail properties could be successfully repurposed as mixed-use projects, last-mile logistics facilities or residential buildings, leading to an increase in the development pipeline of such projects.

2022 has also seen unprecedented growth in residential rents fuelled by rising mortgage costs and an amendment to Recommendation S. The shift away from home ownership towards renting, coupled with rising rents, is an incentive for PRS investors to enter Poland. Savills expects Poland’s PRS stock to double in the next 24 months. The current situation in the Polish residential market is also likely to boost the growth of student housing, with euro-denominated rents expected to become more common and provide an additional source of financing for PBSA projects, says Savills.

Although no COVID-19 restrictions were put in place this autumn for the first time in two years, in-office attendance did not return to pre-pandemic levels. The Polish office market witnessed the emergence of the long-predicted supply gap in 2022. According to Savills, around 256,000 sq m of new office space was completed in Warsaw over the year, a fifth less than last year. New office supply in 2023 is expected to amount to just 60,000 sq m, the lowest figure on record. On the plus side, sublease inventory is on the rise again due to new market challenges, which could help bridge the gap.

Savills estimates that new warehouse supply will hit a record high of 5 million sq m in 2022. Economic uncertainty has not dampened occupier demand for logistics space. This has, however, caused yields to move out and resulted in more restricted availability of financing for new projects. Savills expects that the industrial sector will lose none of its appeal for investors in the longer term as it has seen rents rise after several years of stability and is likely to see more rental growth.

“In anticipation of an economic turnaround, it is positive to see that market challenges have not caused a shift away from ESG, which remains one of the key priorities for CRE leaders,” adds Tomasz Buras, CEO, Savills Poland.

With rents denominated in the euro and rising service charges accounting for an increasing proportion of total office occupancy costs, even companies which now do not need to secure new leases at higher rental rates will also be impacted by inflation due to annual rent indexation. Faced with rising costs and the energy crisis, tenants will be looking for ways to make savings in 2023.

Landlords will, on the other hand, be more willing to invest in improving the energy efficiency of buildings by installing more modern and efficient systems and implementing ESG policies - these measures are expected to significantly reduce energy usage. Energy self-sufficiency and access to own renewable energy sources will be key criterion in choosing a property for manufacturers reporting the highest energy requirements.

2023 will see companies begin preparations for reporting non-financial data under the CSRD, which will require them to publish not only sustainability information but also social data. As a result, companies planning long-term real estate strategies will no longer be allowed to disregard the social element. Savills also expects to see more engagement of landlords and tenants in green leases who will work together to develop solutions to achieve ESG objectives through better environmental management, cutting occupancy costs and supporting inefficient data collection for non-financial reporting.