Commercial property investment volumes in Central and Eastern Europe
(CEE) reached more than €11.2 billion by the end of December 2011 –
twice the volume when compared to 2010, according to the latest data
Prime yields are expected to remain solid in markets such as Poland and
the Czech Republic.
Significant deal flow in Russia during December 2011 pushed CEE property
investment volumes over the €10 billion mark, which resulted in the
third strongest year in CEE history. The strong finish in the final
quarter of 2011 (Q4 2011) confirms the expectations CBRE had at the
start of December that several pending transactions would close by the
year-end. Of particular note was the closing of the Galeria center, a
large mall in St. Petersburg, for over €800 million.
Low levels of property investment activity were recorded in South
Eastern Europe (SEE), with Serbia and Ukraine not seeing a single
institutional transaction during 2011. However, increased investment
activity has been visible in the Hungarian and Slovak commercial real
estate investment markets in recent months.
This trend is likely to continue, especially in Budapest, since the core
segment of the market has remained mostly illiquid thus far and occupier
market fundamentals have remained occupier friendly. In total,
investment volumes in Hungary increased from around €180 million in 2010
to over €600 million in 2011.
Patrick O'Gorman, Director of CEE Capital Markets, CBRE, commented:
"There is some willingness to invest in Hungary, despite recent
increasing unrest in the country, but it remains to be seen how this
trend will continue with current negotiations with the International
Monetary Fund underway and limited financing available.
"Refinancing of current loan agreements and potential partnerships
between owners and opportunistic investors may lead to further deal flow
Despite the fact that in some Western European markets yields have
turned the corner, prime yields are expected to remain solid in markets
such as Poland and the Czech Republic based on strong demand and income
growth, while increasing bond yields and the poor performance of the
Forint are weakening fundamentals in Hungary.
Jos Tromp, Head of CEE Research & Consultancy, CBRE, commented: "Based
on the property transactions under way, 2012 is already following a
similar pattern to 2011. The search for security is set to continue and
lack of product availability at the top-end of the market may start
pushing money into the core markets such as Poland and the Czech
Republic, depending on how the general economic sentiment unfolds.
"Generally, financing will remain the key factor in determining which
way markets move in 2012."