The third quarter of the year ended with an total value of closed deals of €2.6 billion; taking into consideration the number of projects which are either in due diligence or contractual negotiations, we expect the market to continue to perform well.
Historically, office and retail asset classes have accounted for in excess of 85% of the overall volume and the expectation is for retail to be the dominating asset class, which recorded €2.5 billion and a 55% market share in 2015. However, alternatives such as student and retirement housing are generating more interest nowadays, though the availability of such product which can be directed to institutional investors is limited. Platform/corporate deals have also been in high demand.
In terms of the geographical spread of the investments, five years ago, 85% of the capital invested in Poland was allocated to Warsaw, with the balance split between regional cities. An exact reversal of the above trend in the course of the last two years has been observed, with over 80% of the volume allocated to regional cities, highlighting the fact that Poland as a whole has been underwritten by the international investment community. Investors are more willingly looking into secondary and tertiary markets in search of quality assets.
In terms of office projects, Wroclaw and Kraków have been the frontrunners, but we see increased interest in the Tri-City, Katowice and Łódź. Cities compete for new occupiers, creating a critical mass for investors in terms of the size of the market, one of the criteria which is important when considering potential of a given city.
The geographical composition of investor pool also continues to expand. Historically, German investors have been the market-makers, particularly for core product. Currently the landscape is more diversified, with the most notable group of new investors originating from South Africa, South Korea and Malaysia, both directly as well as through money managers. Successful deals such as Redefine, Europe’s largest deal in Q1 2016, have generated more liquidity and increased Poland’s status as an established investment destination.
Poland over the last decade has emerged as a an undisputed regional leader, and EU’s sixth largest market (and eighth largest economy), CEE’s largest consumer market and the investment gateway for the entire region. Currently the real estate investment volumes account for around 40% of the overall transaction activity in the region.