Warehouses remain on investors' radar

According to the 7R and Colliers report“Logistics and Industrial Sector: Paths to Growth in 2022,”the volume of investment deals in the Polish industrial and logistics real estate market in the first quarter of 2022 was €191 million. 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 sent shockwaves through the capital markets, and the commercial real estate investment market has not been spared. In the initial phase, fund managers focused on projects already underway and assessed the impact of these developments on the profitability, stability, and liquidity of the assets being acquired. At the same time, they adopted a “wait-and-see” approach to all new investment projects. However, an important factor that influenced the strength and duration of this strategy was the source of capital.

However, U.S. capital was more cautious in the early stages, watching how other market players were proceeding. Noting that European capital remains active, it is also returning to seek out promising, reliable projects.

It is worth noting that capitalization rates for new projects remain very competitive, a trend linked to growing pressure to raise rents, driven, among other factors, by rising construction costs.

Another important factor is the high likelihood of high inflation in the euro area—this will result in a higher rate of indexation for existing leases in the coming year compared to previous years. Investors who are financing property purchases with bank loans are currently closely monitoring the rise in financing costs and the ability to generate satisfactory returns for their shareholders, while “all-equity” investors believe that the warehousing sector offers the greatest growth potential and continue to accept sellers’ current asking prices.