Business

Asian investors look to Poland for high real estate yields

South Korea’s Eugene Investment and Securities has acquired the Feniks office building in Warsaw from German real estate company Patrizia AG, the latest major purchase by an investor from the Asian country, which is increasingly looking to Poland as an attractive destination.

Built in 2012, Feniks is an A-class, eight storey office building located on Żelazna Street in the Polish capital. It offers over 10,000 square metres of office and retail space and is currently fully leased. BOŚ Bank is the major tenant.

“Feniks is strategically located between the traditional central business district (CBD) and the new financial and service district of Wola,” says Matthias Brodesser, head of transaction management international at Warburg-HIH Invest, which advised Eugene Investment and Securities on the purchase. “This is precisely where the city is growing together. Warsaw is a vibrant market from many angles. This dynamism has a lot of parallels that we have seen on evolving Berlin in the past. And this is exactly where we see the city in the next years ahead.”

South Korean investors see huge potential in the Polish capital.

According to the Polish Investments and Trade Agency (PAIH), there are currently around 260 Korean companies operating in Poland, making South Korea one of the largest non-EU foreign investors in the country.

“We see our investment in the Warsaw office market as a proxy for capturing growth in one of EU’s fastest-growing economies,” says HK Kim, managing director at Eugene Investment and Securities. “Multinational corporations (MNCs) should continue to expand office space in Warsaw benefiting from the breadth of skilled labour and lower costs. We are eager to see Wola district’s continued expansion solidify its standing as the new CBD of Warsaw in the near future.”

“With yields in Western Europe breaking historic records, CEE has become a very appealing substitute whereby high yields can still be achieved, simultaneously minimising any trade-off in building quality or macro risk profile,” underlines Hyon Suk Jang, managing director at JR AMC, a Seoul-based advisory company. “We are convinced Poland, and especially its capital, Warsaw, is a perfect example of such a destination and moving further ahead, strongly growing to become serious competition to traditional Western European cities.”

With 5.6 billion US dollars in investment transactions in 2017, Poland is a leader in the CEE region in terms of capital allocated. In particular, the real estate market is thriving, providing new companies with the space necessary to run a business. The property market in January 2018 was estimated at 12.5 million square metres in warehousing space, 9.5 million square meters in office space and 13.8 million square metres in retail space making means the Polish market the largest in the region.

For Marcin Dudarski, managing partner of transaction advisory firm JP Weber, the Polish Investment Zone is a strong incentive, offering investors the opportunity to be exempted from corporate income tax for 10 to 15 years.

“This new solution allows investors to locate as desired – virtually all over Poland, and does not force them to limit themselves to the areas in the resources of economic zones,” he explains. “An important impulse is EU funds, still available, and support for R&D activities, attracting investments with a high degree of technological sophistication and opportunities for further development of know-how in Poland.”

It’s not only South Korean companies that are noticing the benefits of investing in the CEE real estate sector.

According to Skanska’s CEE Investment Report 2019, Asian investment in CEE is not exactly a new phenomenon for the region. A number of factors are facilitating this trend and the two most important are a favourable foreign exchange situation and the availability of higher yields. At the same time, the Chinese Belt and Road Initiative has had clear beneficial effects for CEE, with major Chinese institutional investors kicking the tires on prime opportunities.

“The opportunities for growth and development in Central and Eastern Europe are unbounded,” says Michael C. Cosiquien, chairman of Philippines’ investment management service company ISOC Holdings. “Amongst the CEE countries, of particular interest to ISOC Holdings is Poland due to its strategic location, economic and political stability, and its many similarities with our country, the Philippines. Aside from both being fast-developing economies in their respective regions, we see a robust and booming real estate market, as well as a workforce that is highly skilled, professional and most importantly, resilient.”

ISOC Holdings recognises a huge potential in the development of business process outsourcing (BPO), shared servicescCentres (SSC), and R&D centres, which in 2018 have helped propel Poland’s economy and property sector to new heights.

“Remarkably, the demand for BPO office spaces has grown tremendously, reminiscent of the same strong demand in the Philippines,” he says. “With the World Bank expecting the Polish economy to grow at a rate significantly better than its EU counterparts, driven in part by accelerated investments, we can’t help but being enthusiastic to be involved in this rapidly expanding market. Soon enough, we should see Poland transform into the key hub for worldwide business services.”