While I haven’t yet bought any commercial real estate in Poland, I’ve done a lot of research on it over the last few years and continue to look out for interesting deals — especially in the retail niche — every week.
As a result, I’ve developed a pretty good gauge on the different types of commercial property in Poland, how commercial leases are structured here, the yields one can expect, and tips for investing in these deals.
Types of Commercial Real Estate in Poland
It should come as no surprise that the types of commercial real estate you’ll find in Poland are very similar to those you’ll find elsewhere.
Retail space
At least for me, one of the most attractive types of commercial real estate is retail space. It comes in all shapes and sizes including single retail units, retail parks, shopping centres, and more.
Retail units
Perhaps the most accessible type of retail space in Poland is retail units (lokale użytkowe) in multi-owner buildings, which can either be entirely commercial or dual-purpose (i.e. both commercial and residential).
Most major residential developments in larger Polish cities set aside their ground-floor units to be sold as retail spaces, with square footages usually ranging from around 30m2 to as much as 300m2.
These retail spaces house many local shops and services, including convenience stores, pharmacies, beauty salons, medical clinics, and more.
From a passive investor’s point of view, retail units with long-term rental contracts are incredibly attractive, since they often provide higher yields than residential property, despite less complexity.
Large brands are a popular choice for low-risk, well-paying tenants. This includes convenience stores such as Żabka, drugstores such as Rossman or Hebe, and even restaurants such as Pizza Hut.
Retail parks
Another popular type of retail property in Poland is the retail park (park handlowy). These are entire commercial complexes, with numerous retail spaces and a parking area.
Retail parks are typically owned by a single owner who manages the entire complex, unlike most dual-purpose buildings where individual units are owned by separate owners.
There is no set formula for retail parks but they typically feature established tenants including:
- supermarkets (e.g. NETTO)
- convenience stores (e.g. Żabka)
- drugstores (e.g. Rossman, Hebe)
- electronics stores (e.g. Media Markt, Media Expert, RTV EURO AGD)
- clothing and home stores (e.g. Pepco)
- pharmacies
Another common trend for retail parks is for a small amount of exterior space to be leased out to a package locker company. Needless to say, the most established package locker tenant is InPost, but other delivery companies are also expanding into the package locker market.
Shopping centres
From time to time, you’ll also see entire shopping centres go up for sale in Poland. These are like shopping centres anywhere else, and have a lot of similarities to retail parks, in that they are typically owned by one owner and have a variety of tenants.
Office space
There is also a relatively strong market for office space in Poland. As in the case of retail property, you can draw a distinction between properties that constitute single office units inside a large, multi-owner office building, and entire office buildings that only have one owner.
Unfortunately, the market for office space in Poland seems a little more opaque to me, and I haven’t had as much of a chance to explore it. I’m sure you can get good returns on leasing offices, but I don’t think there as many established tenants in this sector of the market as in the retail sector.
Industrial space
Last but not least, there’s obviously a lot of industrial property in Poland.
In terms of industrial real estate, there are obviously entire, purpose-built factories, but perhaps the most “liquid” type of industrial property is the warehouse.
And there are a lot of warehouses in Poland. They are often located on the outskirts of big cities, typically in clusters adjacent to major roads.
Since the budget needed for industrial property is a lot higher (10mln+ for many warehouse spaces), it’s not something I’ve looked into as much.
Commercial Property Leases in Poland
As you might have gauged from the previous section, I’ve spent a lot more time analysing retail properties in Poland than I have other types of commercial real estate (such as office or warehouse space) so retail is what I’ll focus on when it comes to how leases are structured here.
With local tenants, there are fewer rules: leases are often shorter and the terms are often negotiated from scratch.
However, with major retail tenants, there are a lot of patterns. Firstly, most contracts are signed for either 5, 10, or 20 years. Typically, there will a portion of the contract (around 30-50% of its duration) when both parties are locked in, after which there will either be a one-off option to renew the contract, or an ongoing possibility to terminate it with 6 months’ notice.
In most leases for retail units, the tenant covers all of the utility bills and maintenance costs. All the owner covers is property tax. I imagine it would be similar for office space.
With retail parks or shopping centres, the owner will likely have to cover maintenance of the property themselves, since there are multiple tenants.
One important clause in many commercial leases is a pre-defined annual rent increase. In Polish, this is called waloryzacja, and it’s often tied to the official annual inflation statistic provided by the Central Statistical Office of Poland (GUS). In case of deflation, this clause sometimes stipulates that the rent shall be decreased the following year.
How Much Does Commercial Property Yield in Poland?
If you’re looking at commercial property in Poland as an investment, you probably want to know what kind of yields you can expect.
After expenses, most commercial real estate deals I have analysed in Poland generate pre-tax yields of 6-8.5%.
Lower yields are often found in particularly desirable locations, or when properties are under-commercialised, and may stoop to as low as 5%.
Higher yields are common in less desirable locations or as long-term contracts approach their expiry date.
For reference, I’d put the ROI of renting residential property somewhere around 5-7%, so commercial property in Poland seems like a pretty good deal, especially when you take into account that it often needs less time engagement and has lower tenant churn rates.
Tips for Investing in Polish Commercial Property
Based on what I’ve seen, commercial property is a growing asset class in Poland. Overall, I think it’s a pretty good investment vehicle, and it’s definitely something I will be exploring more myself.
If you are tempted to invest in commercial real estate in Poland, I’d most recommend opting for something with the least maintenance possible (unless you are willing to engage in upkeep), with as established a tenant as possible, especially in the retail sector.
On larger ticket sizes, from 5 to 30mln PLN, I’d say supermarkets with tenants like Biedronka, Netto, or Lidl are an interesting investment. On smaller ticket sizes, such as one or two million PLN, I’d say convenience stores might be the best bet.
Final Thoughts
Needless to say, there are a multitude of options for investing in commercial real estate in Property. If you have any questions or feedback, feel free to leave a comment below.