How is the Polish real estate market developing? A market commentary by Beata Latoszek, Managing Director of our Warsow office.
“Last year, the transaction volume on the Polish real estate market was as low as in 2010 (EUR 2.09 billion). The reason for the low volume was the gap between the prices of buyers and sellers. Investors continue to prefer refinancing a property via a bank loan, while they are hoping for price increases. We currently see a slight revival of the transaction figures, mainly centered around smaller ticket sizes (an average of around EUR 50 million). Smaller, opportunistic investors who are ready to take on development risks are particularly active. Large investors are still observing the market. The lack of investment activity of important investors with low risk appetite will probably continue for two to three years.
The Polish market is particularly interesting for investors and private funds from the Baltic countries and Asia. Currently, the most interesting asset classes are logistics, rental apartments (Resi 4 Rent) and office properties. In the logistics sector, distribution warehouses are still at the forefront of investor interest. In Q1 2024, rent reviews from the index-based rental contracts have helped to close the gap between the expectations of sellers and buyers on the office market. This should increase liquidity, especially in regional cities, where many A – class office properties are for sale. There are hardly any new construction projects in the big cities. Investors focus on the renovation of existing buildings in very good locations. Office buildings which have been adapted to the new work environment will attract buyers. We expect to see further transactions over the year in this segment.
High inflation levels have caused people to look for alternatives to invest their money. This led to a strong increase in housing prices in Poland, so that a large part of the population cannot afford an apartment in a big city. Rental apartments are therefore increasingly in demand. The development of the rental apartment sector has received additional impulses because developers are willing to sell entire buildings or projects at a price that is below the market value of the individual apartments to free up liquidity for further projects.
In the retail sector, small-scale retail assets like supermarkets, grocery stores, hardware stores and retail market centers continue to be in demand.
Inflation fell to 2 % in March 2024. Due to increasing energy prices and an increase in VAT to food, an increase of 7 % is forecast in July. The desired growth of gross domestic product by 3 % is projected to be achieved through increased consumption and investments. The change of government from the PIS to the KO should release funds from the EU, which is a good sign for investors. However, the main reason for slowdown in the transaction market continues to be high financing cost. Despite forecasts of lower interest rates in the next three years, I believe this will take longer due to the number of global crises.”