Warehouses still on the radar of investors
According to the 7R and Colliers report “Logistics and Industrial Sector: Paths to growth in 2022 perspective”, the volume of investment deals on the Polish market of industrial and logistics properties in the first quarter of 2022 was €191m. And although the current economic situation and the high level of uncertainty related to the war in Ukraine pose new challenges for the logistics sector, in the long term, there will be no significant changes in terms of the volume of demand and supply. However, the growth rate of this part of the market may be lower than in previous years.
The geopolitical changes across our eastern border have incited an obvious shock on the capital markets, which has not bypassed the commercial property investment market. In the initial phase, fund managers focused on the processes that had already started and assessed the impact of these effects on the profitability, stability and liquidity of the assets being acquired. They simultaneously applied a “wait & see” strategy to all new investment processes. However, an important aspect that affected the strength and length of this strategy was the source of capital.
European capital had an excellent understanding of what being a member of the European Union and an active partner of NATO meant to the Polish property market, which contributed to the rapid identification of potential scenarios, most of which were positive for the warehousing property market and influenced the decision to also actively participate in new property purchase processes.
Łukasz Jachna, Board Member and Chief Capital Markets Officer at 7R
However, U.S. capital was more cautious in the initial phase, watching the steps made by other players on the market. Noticing that European capital remains active, it is also returning to look for interesting, reliable projects.
It is worth noting that capitalization rates for new processes are still very competitive, which is related to the growing pressure to increase rents, driven, among other things, by rising construction costs.
Another important factor is also the high level of certainty of high inflation in the euro area – this will translate into a higher indexation of already active leases in the coming year compared to previous years. Investors who are leveraging property purchases with a bank loan are currently closely watching the increase in the financing costs and the possibility of obtaining satisfactory returns for their shareholders, while ‘all equity’ investors believe that the warehousing sector has the greatest growth potential and continue to accept the current expectations of the sellers.