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Hotel segment gained the most on the investment transaction market

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In 2019, the value of transactions in the commercial real estate sector in Poland once again reached record levels. The hotel segment has a rapidly growing share in the transaction volume.

Record year

According to Walter Herz, the value of purchase/sale contracts that were concluded last year in all segments of the real estate market in Poland amounted to EUR 7.7 billion. Thus, the record result of EUR 7.2 billion from contracts signed in 2018, was improved.

– Last year we saw a clear revival in the hotel segment, which carried out transactions worth approximately 290M EUR. The result of the first half of 2019 – 150M EUR was already higher than in the entire 2018, when the value of the transaction totaled at 120M EUR. This more than double result shows that this asset class has become more and more attractive to global investors, although their share in the entire transaction volume is still rather small – says Bartłomiej Zagrodnik, Managing Partner/CEO at Walter Herz.

The largest transactions made in the hotel segment include purchase of Sheraton Warsaw Hotel by Patron Capital from Benson Elliot and Walton Street, Holiday Inn Gdańsk City Centre hotel by Union Investment and Radisson Collection hotel in Warsaw.

2019 was also a record year for the office sector. Facilities worth over 3.8 billion EUR have changed their owners. In the case of offices, the transaction volume was about 25% higher compared to previous year. – This is the result of wider access to attractive office products, which will continue to develop in Poland this and following years – notes Bartłomiej Zagrodnik. Contracts which are under preparation will bring new transactions in the upcoming months, including those similarly spectacular to the purchase of Warsaw Spire Tower by Immofinanz from Ghelamco and Madison International Realty for 386M EUR.

Portfolio transactions dominated the commercial real estate market in 2019 and one of them amounted to 600M EUR. According to Walter Herz, the value of facilities from this segment was over 2 billion EUR. This is almost two times lower than  the sum recorded in the office sector, while a year ago both segments had a similar share in the transaction volume. On the warehouse market, the value of last year’s transactions amounted to EUR 1.6 billion.

New investors

Meanwhile new investors are coming to Poland and those already present in our country are expanding their portfolios. According to Bartłomiej Zagrodnik, large investment activity observed in Poland allows for predicting further transaction records in individual market sectors. – Hotel market is clearly more popular, gaining the interest of institutional and private equity investors planning to diversify their real estate portfolios – adds Bartłomiej Zagrodnik.

Hotels in Poland are mainly acquired by investors from Germany, the United States and the United Kingdom. In addition, capital from Asia and the Middle East already completed the first transactions in this segment. It is worth noting the growing group of investors who have not been interested in these assets in the past, as well as those who have not been present on our market.

Hotel segment attracts them with an increasingly interesting offer and changes in the structure of operators activities. Letting buildings has become increasingly popular on the hotel market, which guarantees owners a more stable profit than franchise agreements or management contracts. Some of the hotel chains already present in Poland and those planning to enter our market, offer long-term, direct rental of real estate. This is a more attractive form of security for investors and developers, because for 20-25 years the entire risk of running a hotel is transferred to the leasee who is also a franchisor and operator. In such case, the sale of the property is also easier and with higher capitalization rates, because it offers a stable financial flow in the long term.

This is one of the reasons why in several large mixed-use projects currently under construction in Poland, part of the lease area is intended for hotel tenants. We should expected that many of the buildings currently being built will change their owners shortly after completion. It will also bring more transactions this year with hotel products covered by direct and indirect lease agreements. This in turn will translate into another increase in the volume and value of transactions in this segment.

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