This year-end figure will depend principally on known activity closing as expected. The region has seen less pricing correction than Western Europe over the past 18 months, leading to a slower recovery. Further correction is expected in 2025 as deal activity picks up, though at varying rates across the six CEE countries. Total investment for Hungary for the first three quarters of the year fell to EUR 190 million, according to Colliers.
“Donald Trump’s 2024 election win has raised concerns in Europe, with analysts expecting a return to his 2016-2020 policies,” comments Silviu Pop, director of research for CEE & Romania at Colliers.
“This could negatively impact Western Europe, especially Germany, which is CEE-6’s top export partner, with 27% of exports in 2023. A decline in capital flows and increased risk perception for the Eurozone are anticipated, adding uncertainty to CEE economies and local asset risk. Clarity on Trump’s geopolitical stance will be crucial in early 2025,” Pop adds.
For the 2024 three-quarters period, Poland recorded EUR 2.73 bln in transactions, reflecting its position as the dominant CEE investment market. The Czech Republic recorded EUR 1.03 bln for the same period, with EUR 650 mln in investment activity traced for the rapidly developing Romania market.
Given the lack of evidence in the market, it remains a challenge for all players to pinpoint where yields currently stand. Colliers put prime yields for Budapest at 6.25% for office, 6.75% for industrial and 8% for shopping centers. This is a significant premium on both Western Europe and the Czech Republic and Poland. Prime office yields for Prague stand at 5.5%, with the Warsaw figure at 5.75%.
Avison Young estimates yields for Hungary at 6.75% for prime office, 6.75-7% for prime industrial, and 7.5-8% for strip malls.
Consultancy CBRE puts prime office yields at 7% but adds that a new benchmark is required. Industrial yields start at 7%, underpinned by a recent Greater Budapest transaction, and best-in-class retail parks are estimated at 7-7.25%. Hotel with a lease contract is put at 7.5%
Real Estate is still not fully back on its feet, with most deals happening off-market. A more meaningful recovery is expected in 2025 but will depend greatly on an improved economic, inflationary and interest-rate environment.
“Looking ahead to 2025, there is cautious optimism as pricing appears to have stabilized, and expected European Central Bank rate cuts could boost market activity. However, a broader recovery in transaction volumes is not likely until the third or fourth quarter,” Colliers says.
“The region’s economic growth, especially compared to Germany’s recession, combined with stabilizing prices and returning institutional capital, point to better conditions by 2026. Current deals focus on value-add and opportunistic strategies, particularly in re-priced sectors, though a significant pricing gap remains, especially in logistics with regard to Central European investment,” the agency concludes.
This article was first published in the Budapest Business Journal print issue of November 29, 2024.
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