Bullish twelve months ahead for CEE

According to the analysts who analysed key regional markets, both rents and capital values in Bulgaria and Hungary were expected to rebound over the next twelve months. At the same time, similar drifts were projected for capital values in the Czech Republic, while the outlook for rents in the country showed “a more mixed picture across market sectors.” But not every CEE market were set to enjoy the growths. In Romania, the boost in capital values was projected to slow in the next twelve months with rents expected to fall. On the contrary, rents were expected to increase across all three sectors (office, retail and industrial) in Bulgaria and Hungary. “Hungary shows signs of being on the path of recovery. This can be seen on the occupier market, where there is increasing occupational interest; lack of available, larger prime space in practically all market segments. Although vacancy rates are still high, occupiers have rather limited choice of modern, good quality, large contiguous space. This trend will lead to pre-let or built-to-suit agreements and impose an upward pressure on rental levels,” said Balázs Czifra, country head of DTZ Hungary.

Rentals in Hungary Source: RICS

In Bulgaria, it was the office market that was set see the most significant surge in the upcoming twelve months. In the Czech Republic, on the other hand, the office rents could be expected to fall further, while the retail and industrial sectors of the real estate market should see growth, the analysts write. In the second quarter of 2014, occupier demand increased for all the sectors in Bulgaria, Hungary and Romania, particularly in the office sector in Bulgaria and in the office and retail sectors in Hungary. In addition, in the Czech Republic, growth in availability outpaced occupier demand in both the office and retail sectors. However, in the industrial sector, demand was outpacing availability and tenant inducements are falling. Meanwhile, in Romania growth in availability accelerated, especially in the office sector, says RICS. “In Bulgaria, investor interest is going up on the back of brighter outlook for occupier demand and rental growth across all three commercial real estate segments. The fundamentals further improved in the office market with positive spill-overs seen beyond the prime segment. Retail rents are supported by reasonable pre-leasing rates for new developments and a return to growth of consumer expenditures since the start of the year. And in industrial and logistics real estate the shortage of supply is putting upward pressure on rents whereas demand builds up,” said Michaela Lashova, the managing partner at Forton.