According to a recent report published by Cresa, portfolio transactions are on the rise on the Polish retail market. Two of last year’s three largest commercial real estate transactions were retail portfolio deals: the €600 million acquisition of the shopping centre portfolio from Cromwell Polish Retail Fund by Cromwell Property Group and the disposal of Atrium Koszalin and Atrium Felicity to ECE Group for €298 million.
The Polish commercial investment market volume reached €7.57 billion in 2019. The retail sector turned over €1.92 billion, accounting for more than 25% of the investment total and posting an average annual growth of 7.5% in 2010-2019.
Retail assets accounted for 25% of last year’s total commercial real estate investment volume. In 2019, the retail sector lagged behind the office sector, which accounted for as much as 50% of the total investment activity.
Although single asset transactions continue to dominate the retail investment market, the share of portfolio deals is steadily rising. The annual growth in portfolio transactions averaged 20.9% in 2010-2019. This significant increase results from the low base effect (two retail portfolio deals in 2010 versus 11 in 2019). In 2019, as in the previous year, deals ranging between €500 million – 1 billion had a considerable share of the retail investment volume.
In 2019, prime Polish retail yields held firm at 4.9-5.0%.
“Investors’ interest in retail assets remains strong. Recent years have shown that the retail market’s growth will be driven mainly by large portfolio deals. Looking ahead, investors will target dominant retail schemes in Poland’s key cities and schemes that are successfully adapting to changing demographics and shopping habits of consumers who expect increasingly enjoyable shopping experiences,” says Paweł Nowakowski, Head of Capital Markets at Cresa Poland.
Yields for convenience assets, including retail parks, hardened from just under 8.0% in 2018 to 7,4% in 2019.
In 2019, investment activity was traditionally driven by investors from the US, Western Europe (mainly the UK, Germany, Austria, and the Netherlands), Israel, and South Africa. Polish investors were also active and closed several deals involving small-scale shopping centres and retail parks. In addition, Hungarian-based Wing acquired Echo Investment last year, marking the presence of CEE capital on the Polish retail market in 2019.
Prices per square metre of floorspace ranged between approximately €1 000/sqm in the case of retail parks in small regional cities and approximately €6,100/sqm in the shopping centres in Warsaw. Shopping centres in Warsaw took the top spot with the highest prices per square metre.
In addition, transaction prices in regional cities (Katowice and Lublin) were similarly valued by investors. The average acquisition price per square metre in Galeria Libero and in Atrium Koszalin and Atrium Felicity ranged between €2,600–2,825.
