“According to preliminary results, this is contrary to European and global results, where activity is still subdued. Given the current conditions, we expect 2024 volumes could reach up to circa EUR 5.5 billion, around half of the 10-year average,” comments Kevin Turpin, director of CEE capital markets at Colliers.
It has been a question as to when investment activity in the CEE region will pick up following a subdued period due to concerns over the cost of finance, longer-term demand in some sectors and the uncertain economic and geopolitical environment.
It had been expected that an upturn in investment activity in Western Europe would be followed by Poland, the Czech Republic and then other markets like Hungary, Romania and Southeastern Europe in the view of analysts. Poland was the standout market in the first half of the year regarding investment activity.
A period of price discovery is expected to continue throughout this year. At the same time, an ever more stringent and all-embracing imposition of ESG requirements on buyers and sellers dictated by EU Taxonomy is influencing all stakeholders in real estate projects.
Despite these issues, the CEE region is seen as having significant investment potential with strong assets, pipelines, demand and development possibilities in many sectors and countries. Further, in the view of Colliers, the region provides a significant yield premium and the various CEE countries have a yield spread compared to Western European markets to suit investors.
CBRE has recorded investment activity worth EUR 2.4 bln in the CEE-5 (the Czech Republic, Hungary, Poland, Romania and Slovakia), representing a year-on-year increase of 22%. Poland and Romania recorded the most substantial year-on-year rises in activity for the period.
“Several significant transactions are currently in the closing process and are expected to be finalized during the latter part of the year,” says the consultancy.
Prague has the lowest yields in the region, with office standing at 5.5%, industrial at 5.25% and shopping centers at 6%, according to estimates by Colliers. Looking at Warsaw alone, yields stand at 5.75% for office, 6% for industrial and 6.25% for shopping centers. Budapest yields are further out, with office at 6.25%, industrial at 6.75% and shopping centers at 8%. Romania provides still higher yields with offices and industrial at 7.5% and shopping centers at 7.25%. Compared with the markets in Western Europe, such as Germany, CEE has recorded a lower pricing correction over the past 12 to 18 months.
“Our outlook anticipates either a similar investment volume or potentially higher compared to the first half of 2024. Some significant transactions are currently in the closing process and are expected to be finalized during the latter part of the year, and the actual volume in the second half of 2024 will depend on whether or not these transactions can close before year-end,” concludes CBRE.
This article was first published in the Budapest Business Journal print issue of September 20, 2024.
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