Polish capital targets commercial real estate market with growing momentum

The Polish commercial real estate market has seen a significant shift in its investment landscape, with domestic capital making a strong comeback. According to Bartłomiej Zagrodnik, Managing Partner and CEO of Walter Herz, the share of Polish capital in commercial real estate investments has doubled in the past year, reflecting the changing dynamics of the Central European property market.

With international institutional investors largely stepping back from the Central European real estate market, local investors have stepped up to fill the gap. In particular, entities from across the CEE region, including the Czech Republic, Slovakia, Hungary, and Germany, have become key players in Poland’s commercial real estate sector. Additionally, capital from the United States continues to flow steadily into the market.

After years of limited activity, Polish investors are now playing an increasingly pivotal role. In the first half of 2024, domestic capital accounted for 12% of commercial real estate investments in Poland, up from just 6% a year prior. This growth marks a notable shift from previous years, when Polish capital contributed as little as 2% to the market.

Polish investors are exploring a range of investment avenues, from purchasing shares and bonds of real estate developers to acquiring land for joint ventures or independent projects. They are also investing in commercial units, residential properties, and select hotel assets. Many domestic investors are particularly focused on value-add assets—properties that can be revitalized or repurposed for greater profitability.

Retail investments, especially in standalone buildings and retail parks, have been a significant area of interest. A prime example is the expansion of the Aura Park network by Polish company Terg. Similarly, Polish investors have been active in acquiring older office buildings, with recent transactions including the acquisition of the Ludna 2 office building and the Curtis Plaza in Warsaw.

The hotel sector has also seen heightened interest from Polish investors. In the first half of 2024, all hotel acquisitions were financed by domestic capital, including purchases by the Satoria Group and TMS Inwestycje.

Polish capital is driven by both institutional investors and smaller family-owned businesses looking to diversify revenue streams through real estate. As the market continues to evolve, there is growing interest in establishing new legal structures, such as family foundations, to facilitate these investments.

However, experts caution that Polish investors still face challenges in fully capitalizing on opportunities in the commercial real estate sector. The absence of a legal framework enabling Real Estate Investment Trusts (REITs) in Poland has limited investment options. REITs, which operate in over 40 countries—including 14 EU member states—could unlock significant potential in Poland. Government departments are currently working on legislation to introduce REITs, which could allow Polish investors to engage more actively in the commercial property market. It is estimated that Polish capital potentially available for investment in the commercial sector amounts to PLN 20 billion, including PLN 11.5 billion from individual investors.

The overall investment climate in Poland and the broader CEE region has shown signs of improvement in 2024. After a slow first quarter, investment activity surged in the second quarter, with Poland recording €1.7 billion in real estate transactions in the first half of the year—almost double the amount seen during the same period in 2023.

Notably, the office and retail sectors saw major portfolio transactions, with acquisition volumes surpassing those of 2023. The European Central Bank’s decision to begin cutting interest rates in June 2024 has also raised hopes for more affordable financing, further boosting investor confidence.

As Polish capital continues to play a larger role in the real estate market, the country is poised to strengthen its position as a key player in the CEE region, offering promising opportunities for both domestic and international investors.