CEE investment hits record high

Investment & finance

30 January 2018

Eurobuild CEE

Mike Atwell, the head of capital markets at JLL

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CEE REGION With EUR 12.98 bln transacted in 2017 the CEE real estate investment market set a new record high, according to JLL.

Last year’s result marks also a 3.3 pct increase over the EUR 12.56 bln previous record result in 2016. “For the second year running I have seen the CEE achieving record investment volumes - plus further increasing its percentage of overall European volumes. I also sense that investor demand will continue to increase through 2018 as new capital tries to enter the CEE market, encouraged by the positive yield differential to Western European markets, but also supported by the strong occupational markets in the capital cities,” commented Mike Atwell, the head of capital markets at JLL.

Poland took the largest share (39 pct) in the overall EUR 12.98 bln CEE investment volume, followed by the Czech Republic (27 pct), Hungary (14 pct), Romania (8 pct), and Slovakia (4 pct).

Once again 2017 was another strong year for the Czech Republic investment market. Investment volumes remained robust with a total investment volume of EUR 3.54 bln in 2017 compared to EUR 3.62 bln in 2016. Even though there was a marginal decrease in volume, this was primarily due to the shortage of available product and not a lack of investor appetite. The most notable difference for 2017 has been the growth in domestic Czech Capital. Investment volumes from Czech institutional investors, which made up 31 pct of the total volume, the highest on record and the highest level of domestic activity across the CEE. Additionally Czech investors have moved abroad with CPI investing in Germany and REICO investing in Poland. JLL expects this trend to continue through into 2018.

The Polish Investment market, which saw EUR 4.54 bln traded in 2016 , continued to perform strongly in 2017, with a volume of EUR 5.03 bln. This was comparable to the country’s highest investment volumes from 2006 of EUR 5.05 bln.

The volume of transactions on the Hungarian commercial property market reached EUR 1.84 bln, a 7 pct increase on 2016, but just short of the record volume set in 2007 (EUR 1.97 bln). The outstanding weight of capital clearly signals that investor confidence has returned and strengthened on the Hungarian market and that liquidity has increased for every asset class.

The 2017 property investment volume for Romania is estimated at almost EUR 1 bln, which is around 10 pct higher than in 2016 (EUR 890 mln). The number of transactions increased, with the average deal size standing at around EUR 28.5 mln. Bucharest accounted for approximately 36 pct of the total investment volume, which is less than in 2016 and shows that liquidity in secondary cities has improved.

The total investment volume in Slovakia for 2017 was recorded at just under EUR 525 mln, with more than two thirds being closed in the second half of the year. The volume came in at below the JLL estimate of EUR 600 mln estimation as several deals did not close before the year end and will slip into 2018. From an occupational perspective, Slovakia is seeing improved market conditions in both, industrial as well as office markets with low vacancy levels and a healthy development pipeline, resulting in stable to increasing headline rents. The overall attractiveness of the investment market is boosted by increased demand from local as well as international investors, looking at a wide range of risk levels. For 2018, JLL expects the total investment volume to reach EUR 650 mln.

As investment momentum continues across the CEE, the SEE sub-region has also been part of this regional trend. In the second half of 2017, the focus of investors has been in Bulgaria and especially in Sofia, driven by two large shopping centre transactions, both of which involved South African investors, showing that international investors still have an appetite for investments in these regions. Significant transactions in various sectors, involving foreign investors, also took place in Belgrade, Serbia, and in Slovenia, Ljubljana.

“As ever the question is always how long can this market continue, we are now coming close to ten years since the last decline – in my view, with the benefit of continuing low interest rates, a strong yield gap between real estate yields and government bonds, a sustainable and strong occupational market and strong macro-economics, I feel we have a little further to go on this market – we should all enjoy it, as these market conditions cannot continue unabated.” added Mike Atwell.

Three key deals H2 2017 for each country

Property name

City, Country

Approx. Sale
Price (mil. €)

Vendor

Purchaser

Logicor Portfolio

Various, CEE

ca. 1,100

Blackstone

CIC

Magnolia