“Despite the slow start, we currently estimate that CEE 2021 yearend volumes will accelerate to reach similar levels to 2020, of around EUR 10 bln. Preliminary EMEA volumes are estimated to be down circa 32% year-on-year,” says Kevin Turpin, director of CEE research at Colliers International.
Total CEE investment volume reached EUR 10.4 billion for COVID-hit 2020, compared to the peaks of 2018 and 2019 recorded by the consultancy at EUR 14.4 bln and EUR 13.8 bln, respectively.
All countries in the region recorded year-on-year declines in volumes compared to the first quarter of 2020, except for Hungary. Despite that, investor sentiment suggests a strong pick-up in activity in the second half-year, subject to progress with measures against the pandemic and the opening up of travel, according to Colliers.
In the first quarter, Poland represented about 65% of the total volume, followed by the Czech Republic (14%) and Hungary (11%). This means around EUR 1.3 bln in investment for Poland, EUR 300 million for the Czech Republic, and EUR 230 mln for Hungary.
Regarding sectors, office secured 50% of the total transaction volume, followed by industrial and logistics with 28% and retail at 11%. Pricing has remained relatively stable overall, but further compression in the industrial sector is expected throughout the year, subject to transactional activity, which will, in turn, rely on product availability.
Colliers puts prime Budapest office yields at 5.25% compared to 4.25% in Prague and 4.7% in Warsaw; Budapest continues to offer attractive yields for high-quality products. The consultancy has recorded minimal movement in prime yields, primarily due to the ongoing lack of transactional evidence to support further shifts.
“Our view remains that while some shifts are inevitable, core, well-performing assets should hold up well, with more pressure on secondary product. Due to the high levels of interest from investors in logistics assets, we expect to see further compression in this asset class,” Turpin explains.
As for where the money comes from, Western and Northern European funds have dominated the first quarter of 2021, accounting for 50% of volumes, with capital coming mainly from the United Kingdom and Germany, representing 32% of the total transacted volume. CEE investors constituted 28% of the total volume.
“CEE domestic investors, consisting of mainly Polish, Czech and Hungarian capital, have also remained very active, particularly in their respective domestic markets. While travel restrictions challenge the ability for many investors to view opportunities and dampen investment volumes, capital from Singapore and South Africa managed to deploy,” says Turpin.
Subject to the pandemic being brought under control and allowing economies to function with fewer restrictions, CEE is expected to begin a recovery throughout 2021 and 2022, at an average pace of around 4.3% annually.
This article was first published in the Budapest Business Journal print issue of May 21, 2021.
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