Poland next in line for REIT renaissance

Poland will play a key role in the next wave of listed real estate market growth in Europe, according to EPRA’s CEO Philip Charls.

‘We expect to see the first Polish REIT in the next 12 months and are optimistic that Poland could grow into a market of several billions of euros in the future.’

Earlier this year Charls and his team met with a wide range of government officials in Warsaw, representatives from the Warsaw stock exchange and leading corporates, to brief them on the economic benefits of REITs. The response was very positive, he said. ‘Basically it’s a question of copying and pasting the type of REIT regimes adopted by markets such as Spain and Ireland and also the recently reformed Belgian market.’

In recent years, the German market has been a key priority for EPRA as Europe’s biggest underlying real estate investment market and the world’s fourth-largest economy barely registered in the European index in 2012. But that initiative has paid off, Charls said. ‘The German market’s share of the index has doubled to over 16% from 8% in 2012, and it now boasts some of the largest companies in Europe.’

Deutsche Annington is a case in point, Charls said. The company already has the second-biggest market capitalisation of Europe’s listed stocks and is seeking to rival Unibail-Rodamco on this front. ‘Deutsche Annington is the new Mercedes model in the industry’s showroom,’ he said.

More potential to unlock
EPRA will continue to build on relationships with political decision-makers and investors in Germany and actively promote the benefits of the listed industry for investment in the urban landscape of German cities, he added. ‘Germany's listed market still punches far below its potential weight.’

Opportunities may arise via reforms to Germany’s state pension system, Charls said. ‘The German government is actively considering allowing state pension funds to invest in asset classes other than fixed-income, where ultra-low yields make it extremely difficult to cover future pension liabilities. We are hopeful that German state pension reform could release up to €75 bn for investments in other asset classes and we are confident that the listed real estate market will receive its fair share of these flows.’

Charls believes the legislation needed to open up Germany’s state pension system to other asset classes may be introduced in 2016. ‘We’re seeing that the whole thinking is moving and that federal and state officials are open to the idea. Some states are looking at the Netherlands where big state pension fund managers like APG and PGGM have double-digit allocations to real estate and sizeable stakes in listed real estate companies. There has been a turnaround in sentiment in Germany and a new opportunity thanks to the low interest rate environment which is making real estate relatively more attractive. That’s why it’s so important to talk to political leaders behind the scenes and hold debates behind closed doors at both federal and state level.’