Outlook 2024: now is the right time to buy offices in Poland

Now is the right time to invest in offices in Poland, experts agreed at Real Asset Media’s European Outlook 2024: Focus on CEE, which took place last week in Warsaw.

“The fact that it was a very unwanted asset class last year has generated very good opportunities now,” said Piotr Mirowski, senior partner, director, head of investment services, Colliers. “You can pick up a new asset below replacement cost, or an older asset which is closer to land value than replacement cost, which is staggering, especially if you look at the supply/demand dynamics of the Polish market.”

Since the pandemic the office sector has taken a massive hammering, he explained, due to a confluence of negative factors. Yields moved out, there was no liquidity and tenants were re-evaluating their needs as more people worked from home.

In the past few years it has been all about industrial and logistics, in which Poland has a clear geographical and competitive advantage. The sector will continue to attract investments, especially from Western capital, but prices have not come down significantly because of its desirability factor.

“The point about offices is that they are trading at a discount, so you pay value-add prices for core assets,” said Mirowski. “There’s also virtually no development on the horizon, and space is needed. The entire GLA of Poland is less than the size of Berlin.”

The renewed attractiveness of offices is also shown by the fact that senior lenders are willing to finance new developments in the sector.

“Given the supply and demand dynamics of the sector, many banks are open to supporting new office developments in Warsaw, but it might be harder to get financing in other out-of-town places,” said Justyna Kedzierska-Klukowska, head of Warsaw office, Berlin Hyp.

The office sector will also benefit from the increasing popularity of brown-to-green strategies.

“You can buy old assets at less than replacement cost, upgrade them to modern, ESG-compliant standards and sell them on,” said Marcin Juszczyk, board member and partner, chairman of ULI Poland, Capital Park. “The office sector in general looks promising as there’re more interest. The pace of return to the office varies, but it is quicker in city centres where there are services, shops and amenities.”

Warsaw, for example, has a higher return to the office rate than many other European cities, but it also depends on the sector. Tech employees are more likely to work from home.

The residential sector, with all its sub-sectors like student accommodation, PRS or senior housing, is still at a very early stage of development in Poland, but demand is growing and investors with a long-term perspective should take note.

“Poland has 1.2 million students but only 125,000 beds, almost 90% of which in state-owned dormitories, while the private sector has a very small presence,” said Juszczyk. “The same goes for senior housing, with only a couple of players in the market. It is tempting to develop residential to sell, as it delivers the best short-term returns, but investors and developers should have more long-term strategic thinking”.