Polish investment levels to rise after hitting 6-year low: JLL

Polish real estate transaction levels are set to rise after the investment market hit a six-year low in 2009, according to Jones Lang LaSalle. The property adviser's Warsaw City Report Q4 2009 suggests that while there is rather limited activity in the market in comparison to 2006 and 2007 there has been a substantial improvement in investors’ sentiment when compared to only six months ago. Recently completed deals combined with some ongoing transactions confirm improving market sentiment and this, together with reasonably good economic fundamentals of Poland, shall lead to improvement of market turnovers and some minor compression of yield levels in 2010, JLL concludes.

Poland, according to the report, was characterized by incremental slowdown in investment activities across all sectors with only couple of major investment deals such as Atrium City, Grzybowska Park, Marynarska Point or Mayland Portfolio. These four deals accounted for over 60% of entire 2009 volume of EUR 725 mln.

Tomasz Trzóslo, head of Capital Markets Central & Eastern Europe at JLL said: 'The investment volume in the property sector in Poland recorded in 2009 is the lowest level since 2003. Last year 21 investment transactions were concluded with a total volume around of EUR 725 mln. To put it in the context, in 2008 Poland had EUR 1.7 bn of transactions, in 2007 the total volume was EUR 3.2 bn and in 2006 which was a record year for Poland's investment transactions the total volume reached EUR 5 bn. Such a heavy reduction in investment volumes was nothing surprising and was in line with heavy reductions of investment volumes throughout entire Europe, as a result of the financial crisis.'

In Q4 2009, Jones Lang LaSalle analysts estimated prime office yields at approximately 7.25-7.5%, and prime retail yields possibly closer to 7%. Prime warehouse/logistic yields stood at 8.5-8.75% for 10-year leased schemes and closer to 9% for schemes with shorter leases. For a more secondary product (classified by either shorter leases, older quality or not prime location) office and retail yields continue at around 9% and this is unlikely to change in the foreseeable future.

Trzóslo added: 'We have started to see some yield compression in the market recently and so we are positive that yield decompression has now stopped - there are investors ready to buy offices at 7% or prepared to go at or below 8.5% mark for logistics product. Same applies to retail, where we believe the top product could now secure yields of below 7%. Secondary product will, however, continue to suffer in terms of values. The main reason for a spread of yields for secondary product is a limited pool of potential buyers for such product. The investors’ demand can, however, increase if substantial pricing discounts can be secured for such product. But that would only confirm the higher yielding approach to such assets.'