According to global property adviser Cushman & Wakefield, investment activity in the Central European markets of Poland, Czech Republic, Slovakia, Hungary and Romania maintained momentum with EUR 1.14 billion invested in Q2, 73% higher than in the same period last year. Approximately EUR 2.5 billion has been invested in the region year to date, up 38% on H1 2013. Given the significant pipeline of transactions, year end volumes are expected to exceed 2013 levels. Poland saw the highest volume of transactions over the second quarter, furthermore half year results show that Poland continues to attract the strongest investor interest.
Investment market by sector
The office sector continues to dominate across Central Europe with 43% of the investment volume in Q2. This reflects investors’ confidence in the robustness of best-in-class assets and prime locations against new supply in weaker locations. The largest transaction in the office sector and at the same time the largest investment deal made in the CE region in the second quarter was the PPF’s purchase of City Tower skyscraper in Prague 4.
The largest CE retail investment transaction in Q2 was ING Real Estate’s sale of their remaining 50% share in Allee shopping centre in Budapest for EUR 95m. Other significant deals included Meyer Bergman’s acquisition of Fashion Arena in Prague and CBRE Global Investors’ acquisition of Galeria Mazovia shopping centre in Płock, Poland. The retail sector is expected to see considerable activity in H2 2014 across the region.
James Chapman, Partner, Head of CE Capital Markets at Cushman & Wakefield, said: “Core investors are looking at Poland and Czech for prime, landmark shopping centres, viewed to offer better value against other core European countries whilst the regional cities across both countries have opened up with a significant shift of core and value-add capital towards this sector. Prime shopping centres in Hungary and Slovakia are also back on the radar for investors searching for stock.”
The industrial sector continues to outperform its 10-year average with 14% of all investment. The largest warehouse investment transaction and the second largest across all sectors was Blackstone’s acquisition of Standard Life Investments’ logistics portfolio in Poland for EUR 118.2m. Demand in this sector shows no signs of slowing down with several large deals expected to be announced in Q3. However, availability of stock is likely to slow this down towards the end of the year and into 2015.
Investment market by country
Appetite for Slovakia, Romania and Hungary has increased notably during H1 2014, with these markets clearly back on the radar for many funds. On the back of the transfer of 50% of Allee Shopping Center, Hungary recorded its best Q2 results since 2010, and further landmark deals are in their final stages of closing. We expect that this growth in interest will evolve into greater transaction volumes in these markets during H2 2014.
“There is currently more liquidity in the Slovak market than at any time in the last several years. We are aware of a number of transactions that are progressing across all asset sectors. We fully expect this year to be a strong year in capital markets, following on from the success of 2013,” said Andrew Thompson, Managing Partner at Cushman & Wakefield in Slovakia.
The Czech Republic is benefitting from a significant increase in transactions as investors pour back into the market on the back of the improving economy. Total investment volume in the Czech Republic in the previous quarter reached EUR 340 million compared with EUR 108 million in the same period in 2013.
Poland was restricted to a smaller number of deals, but a dramatic increase in volume is expected during Q3 with several significant deals close to completion. The country’s transaction volumes in the second quarter totaled EUR 497 million.