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RESEARCH
INVESTMENT MARKET2016
POLAND
INVESTMENT MARKET IN POLAND RESEARCH
2 32
GDP GROWTH 2.8% (GUS, 2016)
PASSENGER AIRPORTS 15
THE UNEMPLOYMENT RATE IN POLAND
(GUS, January 2017)8.6%
POLAND IS THE LARGEST MEMBER OF THE EUROPEAN UNION AMONG ALL THE COUNTRIES OF CENTRAL AND EASTERN EUROPE
38.5 m
INFLATION RATE 2.1% (GUS, February 2017)
KEY STATISTIC
GDP GROWTH FORECASTS
IN 2017
IN 2018
3.2% 3.1% (EUROPEAN COMMISSION)
2016SPECIAL ECONOMIC
ZONES14
INHABITANTS
DISPOSABLE INCOME
EUR 12,309EUR 330
GDP PER CAPITA (2016):
IN CEE andIN EUROPE
IN TERMS OF NUMBER OFFDI PROJECTS
1st 7th
POLAND IS THE LARGESTBENEFICIARY OF EU FUNDS.EUR 105BN OF EU FUNDSWITHIN 2016-2020
INVESTMENT MARKET IN POLAND RESEARCH
4
In 2016 investors allocated to Poland over
EUR 4.5bn representing 11% growth when
compared to 2015 (EUR 4.1bn). It was also the
second highest volume in the history of the
Polish investment market since the record
EUR 5.1bn achieved in 2006.
Poland, the most attractive market among the
CEE countries, is a perfect alternative location
to the Western European markets. As a result of
the wide range of modern assets of all categories
on offer, it attracts a growing number of investors
every year. They are interested both in the
acquisition of single assets and entire portfolios
which enable them rapidly to increase exposure
to the domestic market. This type of transactions
were seen in 2016, especially in the office and
warehouse markets. The best example was the
largest transaction in the history of the CEE capital
market, when South African fund Redefine
Properties acquired a 75% share in Echo Prime
Properties portfolio. Other significant transactions
concluded in the last year were the purchases of
large warehouse portfolios by Hines, CBRE GI
and GIC.
5
TRANSACTION VOLUME IN POLAND 2004 - 2016
Source: Knight FrankSource: Knight Frank
Industrial Hotels OtherRetailOffice
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
6
5
4
3
2
1
0
EU
R b
n
Industrial Retail Office
17%
40%
43%
TRANSACTIONS STRUCTURE IN POLAND
2016
2016 saw the highest
investment transaction volume
in the commercial real estate market
for the last 10 years.
INVESTMENT MARKET IN POLAND RESEARCH
6
ransactions in the office sector were mainly concentrated on Warsaw assets, in contrast to the previous year when investors focused primarily on the regional
markets. This was a consequence of the limited number of well-commercialized buildings available for sale, all located outside the administrative borders of the capital city.Nearly EUR 1.15bn was invested in the office segment in Warsaw, accounting for 63% of all funds allocated to that sector in Poland. The largest transactions were the purchase of Q22 by Invesco RE (EUR 273m), the acquisition of part of office complex Gdański Business Centre by Savills Investment Management (EUR 186m), the purchase of Konstruktorska
OFFICESECTOR
RETAILSECTOR
T
7
Business Centre by Golden Star (EUR 120m), and the acquisition of Prime Corporate Centre by Warburg-HIH Invest Real Estate (EUR 91m).The Warsaw office market attracted new investors last year. Skanska sold Atrium 2 office building to the German fund Hansa Invest making its first investment on the Polish market. On the other hand, office properties located in regional markets also attracted investors. The most significant finalised acquisitions are: the purchase of Aleja Pokoju 5 in Krakow by Warburg-HIH Invest Real Estate, and the acquisition by GTC of two office buildings developed by Hines - Sterlinga Business Center in Łodz and Neptun Office Center in Gdańsk. Currently, the most sought-after assets in the office sector are newly built, fully commercialized schemes located in Warsaw and in central locations of other large Polish cities. Because of the strong demand created by the rapidly growing BPO/SSC sector, investors are
In 2016, the retail schemes which most attracted investors were shopping centres with a dominating position in the region, retail parks, and outlet centres. Investors focused on schemes in the main regional markets but also on projects situated in smaller cities that are safe for capital allocation. The purchase of the Bonarka City Centre shopping centre in Kraków by Rockcastle for EUR 361m was the largest finalised retail deal in 2016. Investors also signed acquisition contracts for Galeria Warmińska in Olsztyn, Focus Mall in Zielona Góra and Piotrków Trybunalski.Other significant deals last year were the purchases of Nova Park in Gorzów Wielkopolski (EUR 88.5m) by MAS RE and
acquisition of 8 schemes by the Arcona fund for EUR 21m. Both transactions were signed by investors new to the Polish market. It is expected that the capital inflow for this sector will come from two sources in 2017. Funds active on the Polish market will seek the best assets with a stable position which are often bought for the long-term, while there is also an interest in projects that require recommercialization, new market positioning or additional financial resources. This type of projects are often resold after the assumed investment term.
INVESTMENT VOLUME in the retail sector
EUR 1.9bn
INVESTMENT VOLUME in the office sector
(32% growth y-o-y)
EUR 1.8bn
more willing to allocate their funds to regional markets. When compared to Wroclaw or Krakow, the difference in the valuation of office assets located in Warsaw, reached approximately 100-150 basis points, a significant compression within the last 12 months. This reflects the strengthening position of the office market in the major regional cities in the view of institutional investors. Last year in Warsaw saw a further increase in the difference in the valuation of the prime and secondary office assets, reaching approximately 200-250 basis points. On the one hand, that was the result of a decrease in estimated risk for the best assets, and on the other, a consequence of a slight growth in yields in the secondary segment.
38%
62%
INVESTMENT STRUCTURE BY SECTORS
RETAIL
Single transactions Portfolio
18%
21%
61%
OFFICE
Single transactions (Warsaw)
Single transactions (Regional markets)
Portfolio
INVESTMENT STRUCTURE BY SECTORS
Source: Knight FrankSource: Knight Frank
INVESTMENT MARKET IN POLAND RESEARCH
Ilmet, Skanska Property Poland, Warsaw
Pixel, GTC, Poznań
INVESTMENT MARKET IN POLAND RESEARCH
8
INDUSTRIALSECTOR
9
he enhanced position of Poland on the European logistics map is one of the main factors which attract investors to allocate funds to the Polish warehouse market,
with the development of road infrastructure reducing travel time to the major markets. Poland is also an attractive location for the e-commerce sector, with relatively low labour costs when compared to Western European markets. In 2016, the warehouse sector had the lowest share in total transaction volume but in comparison to the previous year saw a 66% growth in invested funds. The largest investment demand was for the portfolio of modern industrial assets which attracted over 70% of capital allocated to that segment. The significant acquisitions on the market
were the purchase of the Hillwood portfolio by CBRE GI, the purchase of P3/TPG portfolio by GIC, and the purchase of Hines portfolio by NBGI. Given the economies of scale, the purchases of entire portfolios represent an attractive investment opportunity for some funds. Diversified access to different locations in the country enables the creation of an interesting investment product for logistics operators and food chains operating nationally.
NEWINVESTMENT OPPORTUNITIESRESIDENTIAL SECTOR A new tendency is an increasing interest among institutional investors in residential schemes. The best examples are the purchase of Złota 44 by the Catella fund and the purchase of the residential building at 5 Pereca St. by Bouwfonds. Although both transactions were concluded in Warsaw, regional residential markets also attract investors.The Rental Housing Fund managed by BGK is constantly expanding its portfolio and Griffin has announced similar investments as part of the Res4Rent fund. Investment returns achieved in the residential sector attract many of the foreign market players with experience of the highly developed Western European rental markets.
PRIVATE DORMITORIES & NURSING HOMES A completely new area of investor’ interest on the Polish capital market is the private
student housing and nursing home sectors. As with the residential sector, each is a popular asset source for funds operating on Western European markets. Demographic changes and a significant growth in foreign students numbers suggest an increasing importance of both segments in Poland.The first investments have already been realized by funds such as Orpea or Griffin, and other investors such as Anderson Holding have declared an interest in the Polish market for a long time.
HOTEL MARKET An increased interest has also been shown in the hotel market in Poland. In the last year this segment has attracted investors which have already invested in Poland, and new entities such as Qatar holding Al Sraiya which acquired the five-star The Westin Warsaw hotel located in the city centre.
Hotel The Westin Warsaw, Al Sraiya Group, Warsaw
T
PRIME YIELDS
27%
73%
INVESTMENT STRUCTURE BY SECTORS
INDUSTRIAL
Portfolio Single transactions
Source: Knight Frank
INVESTMENT VOLUME in the industrial sector
EUR 774 m(66% growth y-o-y)
Source: Knight Frank
2004 - 2016
Office IndustrialRetail
10%
9%
8%
7%
6%
5%
4%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Distribution Park Żerań, Hines, Warsaw
Stable rental levels in all commercial sectors and low prime yields for the best assets enable foreign investors to look at
Warsaw – CBD 5.25%-5.50% Warsaw - non - CBD7.00%-7.50% Regional markets6.25%-7.00%
5.25%-5.50%
6.75%
Poland as an alternative location for risk diversification and offering a guarantee of stable investment returns in the long-term.
OFFICE SECTOR
RETAIL SECTOR
INDUSTRIAL SECTOR
INVESTMENT MARKET IN POLAND RESEARCH
PRIME YIELDS
INVESTMENT MARKET IN POLAND RESEARCH
1110
CAPITAL MARKETS espite the limited number of the best assets available for sale, investor activity remained high. Investors are looking for
investment opportunities in all real estate categories, not only those situated in the most prestigious locations. Poland’s attractiveness is confirmed by the entities operating on the market. 2016 brought new investors such as South African funds
Redefine Properties and MAS RE, German fund Warburg-HIH Invest Real Estate, Hansa Invest, and GIC - the Government of Singapore Investment Corporation.The capital market in Poland remained very attractive to investors looking for fund allocation, offering investment returns at the level of 125-175 basis points higher than Western European countries. The total volume of transactions in 2016 exceeded
D
Further capital inflow to the domestic market is expected
from both existing investors and those new to the market.
The team is one of the leaders in providing advice on property finance and investment. We have the knowledge, skills and resources to meet the requirements of the most demanding clients.
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Marcin Purgal Director
Capital Markets
[email protected]+48 668 382 482
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Krzysztof Cipiur Associate Director
Capital Markets
Katarzyna LaszkowskaAssociate Director
Capital Markets
forecasted. In 2017, further capital inflow to the domestic market is expected from both existing investors and those new to the market.In 2017, planned tax regulations and a new law concerning REIT funds should see investment volumes and yields for the most attractive assets remain at a similar level to 2016.
© Knight Frank Sp. z o.o. 2017This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank to the form and content within which it appears.
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RESEARCH
Elżbieta Czerpak [email protected]
ASSET MANAGEMENT
Monika A. Dębska-Pastakia [email protected]
ASSET MANAGEMENT - OFFICE AND LOGISTICS
Maja Meissner [email protected]
ASSET MANAGEMENT - RETAIL
Małgorzata Szychułda [email protected]
CAPITAL MARKETS
Joseph Borowski [email protected]
COMMERCIAL AGENCY - OFFICE
Izabela Potrykus-Czachowicz [email protected]
COMMERCIAL AGENCY - RETAIL
Paweł Materny [email protected]
PROPERTY MANAGEMENT
Aneta Rogowicz-Gała [email protected]
PROPERTY MANAGEMENT COMPLIANCE
Magdalena Oksańska [email protected]
VALUATIONS
Grzegorz Chmielak [email protected]
Contact in London:
INTERNATIONAL RESEARCH
Matthew Colbourne [email protected]
Knight Frank Research Reports are available at KnightFrank.com.pl/en/research/
Commercial Market in Poland 2016
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As one of the largest and most experienced research teams operating across Polish commercial real estate markets, Knight Frank Poland provides strategic advice, forecasting and consultancy services to a wide range of commercial clients including developers, investment funds, financial and corporate institutions as well as private individuals.
We offer:
strategic consulting, independent forecasts and analysis adapted to clients’ specific requirements,
market reports and analysis available to the public,
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Reports are produced on a quarterly basis and cover all sectors of commercial market (office, retail, industrial, hotel) in major Polish cities and regions (Warsaw, Kraków, Łódź, Poznań, Silesia, Tricity, Wrocław). Long-term presence in local markets has allowed our research team to build in-depth expertise of socio-economic factors affecting commercial and residential real estate in Poland.