CEE COMMERCIAL PROPERTY REMAINS HIGH ON INVESTORS’ AGENDAS
Total CEE Investment Volumes (Excluding Russia) Increase 15% Year-on-Year
Strong first half year results pushed commercial real estate investment volumes in Central & Eastern Europe (CEE) (excluding Russia) to €2.5bn, an increase of 15% on the same period for 2013, according to the latest research from global property advisor, CBRE.
Romania saw the greatest rise in commercial property investment volumes with close to 300% increase year-on-year, however, coming from low levels of activity. This can be explained by continued low interest rates, increasing allocation of institutional investors to real estate, relatively high yields and the belief that economic growth should be solid in the coming years.
The Czech Republic and Hungary also saw significant increases in investment volumes with uplifts of 36% and 35% respectively. These two countries in particular have benefitted from the challenge that many investors have had in finding the product they are looking for in Poland. This lack of supply has had a positive impact on neighbouring countries, which also can offer more attractive yields in the current market.
Despite these increases, Russia and Poland continue to dominate commercial property investment in the region. Together they account for over 60% of the investment volume at €1.2 billion and €1.1 billion respectively. Poland’s real estate market continues to attract strong investment and the Polish economy - after a slight dip in recent quarters - is moving back into growth mode. Poland has moved away from being a niche market and continues to mature into one of the core investment locations in Europe. Russia, however, saw investment flows fall almost 60% over the first six months of the year. This is largely due to the well-publicised tensions with the Ukraine, but also reflects the irregularly high transaction activity in Q1 2013.
CEE Investment Market (€ mln)
Source: CBRE (2014)
Mike Atwell, Head of CEE Capital Markets, CBRE, commented:
“The CEE investment market continues to benefit from a renewed interest from traditional CEE investors, but more recently the market has also begun to see new sources of global capital coming into the region. Poland remains the dominant market with numerous transactions ongoing and the forecast is for an overall increase in volumes by the end of 2014.”
Jos Tromp, Head of CEE Research & Consultancy, CBRE, added:
“Continued low interest rates, combined with an improved economic outlook, has ensured commercial real estate remains a favoured asset for investors. Within the CEE region, we believe that investor interest is actually stronger than the H1 2014 data suggests. Almost all markets have shown increasing liquidity levels, with the exception of Russia, which was clearly adversely affected by the Ukraine crisis. It is also important to remember that Russian deal flow was abnormally high for the same period in 2013. However, until the situation in the Ukraine settles down we expect cross-border investment into Russia to remain relatively slow”.
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CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue). The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through approximately 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.