Commercial real estate closer to balance in Poland
According to the latest RICS Commercial Property Monitor, occupier demand in Poland grew relatively firmly during Q2, with the pace of growth broadly matching that of the previous quarter. Notably for the first time since 2014, the reading for occupier demand broadly matched that of supply, pointing to a more balanced trend emerging.
The Occupier Sentiment Index (a composite measure capturing overall momentum) slipped to -5 from -1 in Q1. Nevertheless, the index is still pointing to a broadly stable picture in the occupier market. Occupier demand grew relatively firmly during Q2, with the pace of growth broadly matching that of the previous quarter. The sector breakdown shows demand rose most significantly in the office and industrial sectors and more modestly across retail space.
Availability of leasable space continued to rise, albeit more moderately than in the prior quarter. Notably for the first time since 2014, the reading for occupier demand broadly matched that of supply, pointing to a more balanced trend emerging. Alongside this, development starts continued to increase, led by the firmest growth in the office sector, although construction activity gained momentum in the industrial and retail sectors over the quarter.
Despite excess supply pressures easing somewhat in Q1, twelve month rent expectations have fallen further into negative territory. Indeed, with the exception of prime retail, rents across all sub-sectors are expected to decline in the coming year.
The Investment Sentiment Index dropped from +19 in the previous quarter to a broadly neutral -1 in the latest results. This suggests conditions were more or less flat in the investment market during Q2. Investment enquiries have once again steadily increased, with the pace of growth evenly spread across all sectors. At the same time, foreign investment enquiries also continued to rise, however the pace of growth moderated noticeably in the office and retail sectors.
The supply of property for sale increased at an enhanced pace relative to Q1, this was driven by the office and industrial sectors. Capital value expectations over the next twelve months edged lower in Q2. However, this was largely due to downward revisions to projections in secondary markets. On the other hand, capital values across prime markets are expected to grow over the year with the prime retail sub-sector anticipated to post the strongest gains. Around 50% of respondents sense conditions in their local market are consistent with the early to middle stages of an upturn.
Daniel Bienias MRICS, Managing Director, CBRE in Poland, said “Although, RICS Investment Sentiment Index remains little negative for Poland, we notice a robust demand among investors, mainly for prime retail and prime office assets. Strong demand entails the downward trends for retail and regional office yields. It was proved by retail investment volume, which accounted for more than 60% of investment activity in H12017. Due to the shortage of prime office supply in Warsaw CBD, some investors turn their interest to regional markets as well. Above all, these two factors have strengthened the pressure for yields downward trend. The pipeline for second half of the year looks strong and we predict that total investment volume could break record 5 billion EUR by the end of 2017”.
Report by RICS.