• In the first half of 2023, the heightened financial costs and uncertain outlook kept investment activity subdued and required further price discovery across all sectors. Steep interest rate increases continued to lead to the re-pricing of transactions, valuation adjustments and investment activity.

• Many market players have adopted a “wait-and-see” approach, tracking how the current economic environment and shift in sourcing strategy is going to affect the decision-making processes of tenants. Investors are expected to remain patient in preparation for a market rebound. These factors have resulted in undermining transaction volume, which in turn, has led to the relatively good availability of product across all major sectors - retail, warehouse, residential and office.

• While some global players are opting for the aforementioned "wait and see" approach, investors from Central and Eastern Europe are active. Buyers from the region are currently among the most competitive.

The Industrial sector is driving the market

In the warehousing sector, the first half of 2023 saw 14 transactions with a total value of €438 million, the largest of which was the acquisition of Campus 39 by P3 for nearly €140 million. Another significant transaction was the sale of City Logistics Wrocław II, purchased by Czech investor Trigea, illustrating the increased activity of investors from Central and Eastern Europe. Notable among the facilities with long-term contracts was a logistics property in Swarzedz near Poznań, which Palmira purchased from Akron Group.

“Warehouses, which have been the hottest sector for years, continue to attract investor attention. However, rising financing costs have affected both sentiment and prices in the sector with prevailing macroeconomic and geopolitical environment stretching decision-making processes. Fluctuating market conditions have reduced capital activity and significantly reduced competition for the product on offer in the market. As a result, investors have been more cautious in the deployment of equity, with investment volumes predominantly driven by smaller and medium-sized transactions” – says Sławomir Jędrzejewski, Head of Industrial Investment, JLL

The warehouse market has seen a clear upward trend in rental levels since the beginning of 2022, especially in new developments which faced unprecedented increases in construction costs at the time. Simultaneously, financing costs have also risen rapidly. As a result, yields have continued their upward movement, although this should slow in the coming months as a result of lower interest rate volatility and a narrowing of the bid-ask spread which will lead to a market consensus in pricing.

Investments in the retail real estate market

“In the first half of 2023, the total value of retail real estate sales in Poland was almost €200 million, which represented only 26% of the 2022 sales volume (€760 million). The large volume of sales in H1 2022, however, was predominantly generated by the JV portfolio transactions closed by EPP, comprising multiple assets (20 shopping centres, two retail parks and three office properties); accounting for about €600 million. The total number of retail transactions concluded in H1 2023 was only 12, involving 17 assets – this seems low compared to the last few years, but there are some larger deals in progress, including portfolio and single asset deals. As some of these transactions are scheduled to be completed over the summer or later in the year, we expect results to be substantially better for H2 2023”, says Agnieszka Kołat, Head of Retail Investment, JLL

The largest retail transaction recorded in H1 2023 was G City's sale of the Atrium Molo shopping centre located in Szczecin. This convenience mall with a total GLA of approx. 27,500 sq. m. houses brands including Carrefour, Media Markt, TK Maxx, New Yorker, H&M, Komfort, Reserved, and Douglas. The transaction proves that well-established and well-functioning shopping centres which meet the everyday needs of customers are still on investors’ radar.

CEE investors interested in offices

In the first half of 2023, total investment in office buildings in Poland amounted to €190 million, the lowest transaction volume for the first half of a year since 2004. This also marks an 86% drop from H1 2022, when Warsaw HUB was acquired by Google, and in the process set a new record for Poland’s office investment market. All office acquisitions so far in 2023 have involved properties located in Warsaw. Interestingly, the structure of capital placed in this asset class was dominated by investors from the CEE region.

“The moderation of bidding intensity led to a further upward movement in office yields. At the end of H1, the yield for prime Warsaw assets, with lease agreements exceeding five years, was approx. 5.50%. The prime cap rates in Kraków, which remains the core regional city, are currently estimated at approx. 6.25%”, says Marcin Sulewski, Head of Office Investment, JLL.

The largest office transaction in H1 2023 was the sale of Wola Retro. This office complex, developed by Develia in 2019, was sold to a Hungarian investor - Adventum International for approx. €70 million. Another substantial transaction was the acquisition of My Place II, sold by Echo Investment to a Czech investor – Trigea. The value of this transaction was almost €45 million. Equally meaningful was the purchase of four buildings of Wiśniowy Business Park by a Hungarian real estate company – Indotek.

Sentiment in the living sector is slowly returning to normal

“Following a 28% drop in investment volume due to a turbulent macro-economic and geopolitical environment in 2022, investor sentiment in the Polish living sector seems to be slowly recovering. As foreign exchange risk and expensive financing continue to pose an obstacle to single-asset transactions, there is a growing focus on JVs, particularly equity stakes in PRS platforms, as well as M&A opportunities”, says Dmytro Havrylenko, Head of Capital Markets, JLL Poland.