Commercial real estate investment activity in core Central European markets up 56 per cent

Strong commercial real estate investment activity in the core Central European markets - Poland, the Czech Republic, Slovakia, Hungary and Romania - continued in the second quarter of 2016.
Commercial real estate investment activity in core Central European markets up 56 per cent

(Paul Brennan, CC)

It reached EUR2.6bn, a 56 per cent increase on the first quarter, according to Cushman & Wakefield. This pushed volumes over the last twelve months to EUR9.3bn, close to 2007 record levels.

“All of the CEE markets are in a growth phase in terms of transaction volumes,” James Chapman, Partner CE, Capital Markets at Cushman & Wakefield, said, adding that investor demand is expected to continue into 2017. “BREXIT has been a hot topic for the past month but deals are continuing throughout the summer and pricing has not been demonstrably affected,” he went on.

Poland is still the primary destination for international capital with over EUR1.5bn of investment in the second quarter, or 59 per cent of investment in the CEE region. Over the last twelve months EUR5.4bn has been invested in Poland, close to the record EUR5.6bn in twelve months ending in Q2 2007.

The Czech Republic was the next active market with EUR0.5bn of investment in Q2, taking volumes over the past year to EUR1.5bn. This is below the record volumes set in 2007 and 2015 of over EUR2bn.

Foreign buyers continue to dominate, with over 80 per cent of capital invested in the last twelve months. Close to two thirds of this capital is from three sources – the US (27 per cent), Germany (19 per cent) and South Africa (18 per cent). In the last quarter alone over EUR1bn was invested from South African investors, as a number of listed South African vehicles target CEE markets and predominantly focused on Poland, Cushman & Wakefield said.

During the second quarter, retail accounted for the majority of investment at close to EUR1.5bn, a further EUR0.8bn was invested in offices. In the last twelve months close to half (48 per cent) of all investment was in retail sector, with a further 36 per cent invested in offices.

Unlisted funds were the dominant purchasers over the quarter with just over EUR1bn invested, taking their investment over the last twelve months to EUR5.3bn (reflecting a 58 per cent market share). Listed companies (predominantly South African) invested over EUR1bn this quarter – they were the most active investor group over the Q2 2016. In the last twelve months they invested EUR1.4bn (15 per cent of total investment).

“Pockets of locally originated capital continue to play a role within the institutional market; this is particularly the case for the Czech Republic where yields for the best assets are level with prime for the CEE region,” Jeff Alson, Partner CE, Capital Markets, Cushman & Wakefield, said. “The relatively low proportion of investment volume for Hungary in Q2 (8 per cent) does not reflect the renewed activity we see in this market which comes from the positive underlying property market fundamentals.”

The largest single property transaction in CE in Q2 2016 the Sibiu Shopping City retail park in Sibiu, Romania acquired by Nepi from the Argo group for EUR100 million. The largest portfolio transaction was Redefine’s acquisition of a mixed asset portfolio across Poland for EUR890 million from Echo Investment.

Polish offices looking strong

Meanwhile, at the end of H1’16 total modern office stock in eight regional cities in Poland amounted to 3,665,200 sqm. The largest regional office markets are Kraków (almost 832,900 sqm), Wrocław (757,100 sqm) and the Tri-City (629,300 sqm).

This according to Polish Office Research Forum, which published its figures for eight major regional cities in Poland (Kraków, Wrocław, the Tri-City, Katowice, Poznań, Łódź, Szczecin, Lublin).

In the first half of 2016 over 219,500 sqm of office space was completed, the majority – 66,500 sqm – in Kraków and in the Tri-City (52,700 sqm).

In eight major regional markets almost 395,700 sqm remained vacant. The highest vacancy rate was noted in Szczecin – 17.7 per cent, the lowest in Kraków – 6.0 per cent.

Gross take-up in H1’16 amounted to around 268,100 sqm. The strongest leasing activity occurred in Kraków (110,100 sqm leased).

The largest transactions concluded in H1 2016 include an owner occupier deal for 16,000 sqm by Kaufland in Wrocław, a 10,800 sqm renewal by Credit Suisse in Grunwaldzki Center in Wrocław, a 10,700 sqm pre-let by Aon in Enterprise Park E in Kraków, a pre-let of 10,000 sqm by Euroclear in Bonarka for Business G in Kraków and an expansion of some 10,000 sqm by ABB in Axis in Kraków.

(Paul Brennan, CC)

Tags