Global real estate services firm Cushman & Wakefield presents a summary of a record-breaking 2017 on the commercial property market in Central and Eastern Europe
• In 2017, all CEE countries grew at a similar rate y-o-y, thus maintaining their relative share of the overall regional volume
• V roku 2017 dosiahli investičné transakcie do komerčných nehnuteľností na Slovensku objem 470 mil. eur
• Commercial real estate investment activity in Slovakia reached EUR 470 m, in 2017
• 2018 has already seen the benefit of deals that slipped from late 2017 with the investment volume in Q1 2018 likely to exceed EUR 3bn
According to the latest analysis prepared by the Capital Markets team of global real estate services firm Cushman & Wakefield, investment volumes in Central and Eastern Europe reached nearly EUR 13bn. All CEE countries grew at a similar rate and maintained their share of the overall regional volume. Despite political risk perceptions, Poland grew most rapidly at 9% y-o-y from approx. EUR 4.6bn to EUR 5bn, which was the highest result recorded in the last 10 years.
In 2017, commercial real estate investment activity in CEE reached EUR 5bn in Poland, EUR 3.3bn in the Czech Republic, EUR 1.8 bn in Hungary, EUR 1bn in Romania, EUR 876m in Bulgaria and EUR 470m in Slovakia. The lowest yields were in the Czech Republic, standing at 4.25% for retail assets, 4.6% for office and 5.75% for industrial, coupled with strong investment volumes.
Foreign investors from North America, Asia and South Africa dominated the market, followed by German and Austrian buyers. Domestic and regional capital also increased their market share.
“The growth of local capital has proven itself across CEE, but perhaps most significantly in Czech Republic where it was responsible for over 37% of the volume of investment in 2017, with CPI, Reico and Mint all figuring strongly, as well as IAD in Slovakia. Home-grown capital is steadily on the rise now in other CEE markets, with OTP Fund and Diofa active in Hungary. Local capital as a proportional to market size may still be smaller in Poland but even here companies like PZN and PHU have re-entered the market and are bidding on core offices. So the growth, depth and maturity of local capital continues – and it is now moving cross-border,” said Jeff Alson, International Partner, Capital Markets Group, Cushman & Wakefield.
“The past 12 months saw the emergence of the ‘power play’ deals in the CEE region, including strategic game-changing platform and portfolio transactions, which resulted in a record-breaking volume noted in 2017. Growing demand across the region will probably result in high investment volume in Q1 2018 due to the slippage of a number of deals from 2017,” said James Chapman, Partner, Capital Markets Group, Cushman & Wakefield.
2018 is expected to be another good year for the commercial real estate investment market with a robust investment demand driven by a strong economic outlook, inflow of new capital from outside Europe, re-activation of some recently less active buyers and increased focus on alternative asset classes (e.g. PRS, student housing) and hotels.
2018 will see a return of major European names interested in office assets due to low vacancy levels and limited new supply in the region. We expect to see new capital inflow from the US, Canada, South Africa and Europe.
The CEE market shall witness further consolidation with a number of platform and portfolio deals. Prime yields will remain under pressure due to a solid investment demand and limited availability of assets especially in the core segment. We expect further net effective rental growth as well as yield compression in the office and logistics segments.
In the light of excellent consumer spending growth, we’ll observe value opportunity creating yield differentiation across retail sector.
“In Q1 2018, investment volumes are likely to surpass EUR 3bn, benefiting from deals closed in late 2017,” said James Chapman, Partner, Capital Markets Group, Cushman & Wakefield.
Largest regional transactions in 2017:
• CIC’s acquisition of Logicor’s warehouse portfolio, which was the largest industrial transaction in Poland in 2017 (Cushman & Wakefield advised the buyer)
• Union Investment’s acquisition of the Magnolia Park shopping centre in Wrocław for approximately EUR 380m, the largest retail transaction in Poland in 2017 (Cushman & Wakefield advised the buyer)
• Disposal of IKEA’s retail park portfolio (Cushman & Wakefield advised the vendor)
• RREEF’s acquisition of a portfolio of Fashion House outlet centres (Cushman & Wakefield advised the buyer)
• Reico’s acquisition of the Galeria Słoneczna shopping centre in Radom for approximately EUR 160m, the second largest single asset transaction on the Polish retail market in 2017 (Cushman & Wakefield advised the buyer)
• Globalworth’s acquisition of a majority stake in Griffin Premium Real Estate
• Disposal of a portfolio of 11 retail properties in the Czech Republic, Poland, Romania and Hungary by CBRE Global Investors for approximately EUR 650m (Cushman & Wakefield advised the vendor)