Poland joins core European real estate markets

Warsaw's rise in ULI/PwC’s 2010 ranking of European cities which offer the best investment prospects has placed it in a league of its own within Central and Eastern Europe.

The Polish city ranks eighth in this year’s overview, five places higher than the 13th position it held in 2009. 'The shift in sentiment to more transparent and more liquid markets has left Central and Eastern Europe generally out of favour,' the authors write in the section Markets to Watch. ‘Warsaw is cited by many respondents as a possible exception.’ As one respondent put it: ‘Warsaw is a possible exception to general CEE gloom - a larger, more secure transparent market.’ There is also positive sentiment regarding development, for which the city rises up the rankings from seventh last year to fourth this year.

The economic case for Poland is sound, argues Alex Jeffrey, the European CEO of Polish investor MGPA which bought two regional shopping centres in the country and a call option on a third earlier this year . 'Overall, Poland has been an outperformer at the macro-economic level. It was the only European economy to book positive GDP growth in 2009. We believe that 4-5% growth is sustainable for long term, which is at least double that for Western Europe as a whole. Inward investment from Western Europe is growing, consumer spending is up, and Poland combines relatively low wage costs with high educational levels.'

Markus Leininger, Head of Corporate Banking Northern, Central and Eastern Europe at Eurohypo, is not surprised by Warsaw’s rise in the ULI ranking. He claims its current popularity is the result of 'herd instinct' within the industry. ‘When we set out our strategy last year we decided we would focus on Paris, London, New York, Germany - and Poland. Funnily enough, when I talk to my colleagues at other lending institutions, they all have the same strategy. We all ran to the Champs Elysees, to Bond Street, we went to Frankfurt, Berlin and Hamburg - and to Warsaw. So you don’t see any diversification in people's strategies. Everyone is putting risk aside and sticking to what they see as a safe bet.'

Greg Clark, Senior Research Fellow at ULI, believes that investors are currently engaged in a flight to quality and that this is reflected in the ULI/PwC Emerging Trends ranking. ‘Capital is currently focused on relatively risk-free deals although no deal is completely risk-free. I expect the established Western business capitals to perform the strongest at present: Paris, London, Hamburg and Munich, but also the Polish cities in particular. Poland enjoys strong economic growth, it is stable, it borders on Germany, has a strong manufacturing base and services growth. What we’re seeing now is that Warsaw has joined the established Western business cities.'

For the full story see the March edition of PropertyEU Magazine