JLL: Commercial real estate investments amount to EUR 375 mln in Q1, but sentiment is improving

The total value of transactions in the Polish commercial real estate market amounted to around EUR 375 mln in Q1 this year, thus reaching the lowest result for the first quarter since 2010. Warehouses remain the most active sector with EUR 138 million, according to JLL data. Nevertheless, investor sentiment is positive due to the stabilisation of yields and a significant increase in the number of bidders.

The Polish commercial real estate market has not yet [...] recorded any large transactions. Price spreads remain high and sellers‘ expectations often exceed buyers’ offers, which in turn leads to uncertainty in the valuation process. Nevertheless, sentiment is improving and yields appear to be stabilising after a strong upward trend in 2023. The current increase in the number of bidders reflects a favourable change from previous months. Owners and investors are looking forward to larger deals that could provide new benchmarks, potentially still achievable in 2024, JLL reported.

Regardless of the obstacles encountered in 2023, the outlook for 2024 is positive, as European markets, including Poland, see a significant weakening of macroeconomic barriers, characterised by a decline in inflation expectations. Confidence among investors is growing while financial indicators in the property market are stabilising, it added.

Warehousing and logistics properties enjoy unwavering investor interest. However, the prevalence of this asset category in Q1 2023 was not as pronounced. Over the course of Q1 2024, six industrial real estate transactions were concluded, thus reaching a value of around EUR 138 million. Overall, this represented a market share of around 37%, confirming that the industrial property sector showed the greatest resilience of all the major asset classes.

The office real estate sector started 2024 with a total investment volume of around €100 million, which was in line with the Q1 2023 result. As in the previous year, the majority of office property transactions took place in Warsaw, underlining the direction of buyer interest. In terms of sources of capital, investors from Central and Eastern Europe once again led the way.

In the retail sector, from the point of view of investment activity, the start of 2024 looked promising. Seven deals were concluded in Q1, which was not far from the long-term average. Nevertheless, the total value of transactions remained moderate at around €100 million, reaching the lowest quarterly figure since 2019. The preponderance of the transaction value fell on retail parks and free-standing retail developments, which are currently the preferred formats for investors, JLL also reported.

In 2023, rising financing costs, coupled with the economic slowdown and geopolitical tensions, have significantly dampened investor activity in commercial real estate markets, both in Poland and globally. Thus, sellers' price expectations, resulting from years of growth and economic prosperity, were clearly higher than the offers that bidders were able to match in the current market situation. The discrepancy between the expectations of both parties significantly reduced investment activity, resulting in low transaction values in 2023 in all market segments. The start of 2024 brought moderate optimism, with sentiment improving significantly, partly due to strong market factors. Regardless of the challenges ahead, the Polish commercial real estate market is characterised by resilience and potential for growth in 2024," said JLL's Head of Capital Markets Dmytro Havrylenko.

Source: JLL and ISBnews