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CEE Attracting Growing Number of Asian Investors

Sustainability

Total office stock in major CEE cities now totals almost 21.8 million sqm and forecasted completions by 2021 will increase this number by another 20% to 26.5 million sqm, according to “Thriving Metropolitan Cities” by Skanska, Colliers International and Dentons.

The Nordic Light Trio office building, built by Skanska and sold to South Koreaʼs JR AMC.

This stock is attracting an increasing number of international investors from a widening variety of sources. The analysis was released at the annual Expo Real, the international trade fair for property and investment in Munich, which attracted 47,000 participants and 2,200 exhibitors, including the Hungarian Investment Agency and leading Hungary developers and consultants.   

The CEE region has enjoyed an unprecedented inflow of overseas capital, ranging from South Africa to Asia (originating from Singapore, the Philippines, China, South Korea and Malaysia). In 2019, South Korean investors have been the most active in the CEE real estate market.

“A favorable economic situation and a very good performance by the CEE cities is driving demand for new investments, including in the office market,” the report says.

“The office stock has been growing over recent years and now totals 21.8 million sqm throughout the entire CEE. Last year’s investment in real estate markets in CEE reached approximately EUR 13.2 billion, with over [sic] EUR 5 billion in the office market,” it finds.

“Since 2013, the CEE region has accounted for less than 3% of all capital spent by Asian investors outside their home continent. This year that figure jumped to 9.5% in CEE, and within Europe it has risen to 14.5%. The total value of Asian capital invested directly in CEE since 2013 is EUR 7.7 bln, compared to the EUR 8.6 bln inflow of German capital. South Korean companies alone invested over EUR 1 bln in the entire region,” the report continues.

1st Investment

In an example of this growing trend, developer Skanska sold the 14,000 sqm Nordic Light Trio office building to JR AMC, a South Korean real estate investment trust. This is first office investment in the CEE region by the investor.

The close to fully-leased property is valued at EUR 41 million and the transfer is scheduled to be completed in the second quarter of 2020.

“As the biggest office developer in the region, we have been observing the inflow of foreign investors with great interest, especially Asian investors looking for office assets in the CEE markets,” comments Adrian Karczewicz, head of divestments at Skanska Commercial development CEE.

“In 2018, we made the first transaction with a Philippine investor, whereas this year we have made a first and direct transaction with Korean funds in Budapest,” Karczewicz adds.

The report also highlights the development of CEE cities, which have gone through profound economic and social transformations. “For those of us that live and work within CEE, the evolution of the capital cities over the past decade is both undeniable and inspiring,” it says

It goes on to not that the quality of life has risen dramatically, domestic and international investments are increasing at a record pace, and CEE economies are now diversified and focused on the future.

“As real estate continues to globalize, we wanted to capture both the evolution and the opportunity with factual evidence and data,” concludes Luke Dawson, managing director and head of capital markets for Central and Eastern Europe at Colliers International, one of the people behind the report.

“More and more, international investors view their investment decisions based on comparing new opportunities against what they already know. By drilling down to the key components of what makes a city an attractive investment destination versus its peers, this report shows not only the differences between the key CEE cities but also against its established European counterparts,” he continues.

“We believe that the region offers the best opportunities for stabilized growth within Europe and the evidence clearly supports this,” Dawson adds.

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