The first half of 2024 marked a significant turning point for Poland’s property investment market, showing signs of a long-awaited acceleration. According to Avison Young’s recent report, the sector experienced a substantial increase in activity, driven by declining interest rates and a more favourable financing environment. By the end of H1 2024, the total transaction volume had reached €1.8 billion, doubling the year-over-year figure.
Key Transactions and Market Segments
The investment landscape was dominated by two major transactions in the second quarter, involving the CPI and Cromwell portfolios, which together accounted for 45 percent of the total investment volume. The office sector led the way, comprising 46 percent of the total investments, with several notable deals in regional cities. The retail sector also saw its largest transaction since Q1 2022, further indicating a market rebound.
The office market recorded a significant portion of the investment volume, with a notable shift towards regional cities. Six out of the 22 office transactions were in regional markets, including the acquisition of Krakowska 98 in Wrocław. This shift signifies a growing investor interest in well-performing office properties outside Warsaw, although the capital city still saw the largest transaction of H1 2024, with the sale of a portion of CPI shares to Sona Asset Management.
“This is a considerable shift, as recently the majority of transactions were seen in the Warsaw office market. Well-performing office properties in secondary cities present a solid investment opportunity while underperforming assets are attractive due to their location and pricing,” commented Marcin Purgal, Senior Director of Investment at Avison Young. “Despite the domination of the Warsaw office market, the growing investor interest in regional cities is evidenced by the increase of such deals in H1 2024, as well as ongoing discussions between sellers and buyers. We are aware of at least a few deals which are now in the last stage of the transaction process.”
Sector Performance and Investor Activity
Retail investments made up 28 percent of the total transaction volume, highlighted by the Cromwell portfolio sale for €285 million. This transaction marked the most substantial retail investment since early 2022 and underscored the sector’s renewed attractiveness to new investors, including Star Capital Finance from the Czech Republic.
“Interest in Polish retail parks remains robust, with over 20 investors actively seeking opportunities in this segment. The main challenge is identifying properties that satisfy both affordability and quality criteria. The most desirable retail parks are newly constructed, located in major cities, and anchored by a grocery store tenant secured by a long-term lease,” comments Artur Czuba, Associate Director of investment at Avison Young
The industrial sector, however, saw a decline in activity, with a total investment volume of €294 million, down 33 percent year-over-year. The sector’s performance was hindered by a lack of large portfolio transactions and high financing costs. Despite this, the sector’s future looks promising with anticipated interest rate cuts in the Eurozone and the United States, which could stimulate further investment.
“We anticipate a resurgence in the acquisition of larger warehouse portfolios by investors aiming to quickly scale up in the sector. However, finalization of the first significant transactions is expected towards the end of 2024 or the beginning of 2025,” commented Bartłomiej Krzyżak, Senior Director of investment at Avison Young
Residential investments totalled approximately €130 million, with all transactions occurring in Warsaw. The scarcity of residential land in large cities has pushed investors towards commercial-designated plots, which offer a cost-effective alternative for PRS developments.
Outlook for H2 2024
Looking ahead, the market is expected to continue its upward trajectory as interest rates decline further, providing more affordable financing options. Investors who have thoroughly analyzed the market and identified promising assets will be well-positioned to capitalize on these opportunities. The market anticipates an increase in larger transactions towards the end of 2024 and early 2025, especially in the industrial sector.
Overall, Poland’s property investment market in H1 2024 has shown resilience and adaptability, setting a positive tone for the remainder of the year. With economic stability and favourable conditions, Poland continues to be an attractive destination for real estate investments, drawing interest from both domestic and international investors.
