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Significant growth seen in investment volume

Investment volume for 2015 is up 42% year-on-year and is set to rise in 2016 as investors are showing increasing interest in making investments in Hungary according to CBRE.

This is on a similar level to Romania but well below the two dominant CEE investment destinations, Poland and Czech Republic, both of which put in a particularly strong performance, recording investment volumes of €2.7 billion and €4 bln respectively. Investment into CEE (excluding Russia) for 2015 reached a historic high level at over €9.5 bln, representing a 19% increase y.o.y.

CBRE sees Poland’s performance as a testament to the country’s outstanding macroeconomic growth and stability. For Czech Republic, growth came on the back of two large investment deals signed in 2015 according to CBRE. Poland is four times the size of Hungary with several large regional cities; Czech Republic, however, is a similar size and Hungary should, in theory, be returning investment figures on par with that state.

“We saw a remarkable 60% growth in investment volume last year, putting Hungary back on the CEE investment map,” Gábor Borbély, head of research & valuation at CBRE Hungary, commented on the figures. “The high interest is sustainable and we expect further growth in investment volume this year; we could get close to the €1 bln mark. An increasing pool of investors is making arguments in favor of acquisitions in Budapest with reference to strong occupational fundamentals. On the other hand, the low development pipeline is making some investors nervous with regard to whether they are able to enter the market. We have seen compression in prime yield and expect this trend to continue towards 7% in the case of offices.”

Hungry for retail

The appetite for quality retail products translated into strong numbers in 2015. For the first time, retail accounts for 43% of the total investment volume for CEE. This y.o.y. increase is based on a number of big-ticket investment deals done for prime, dominant shopping centers in Czech Republic and Poland. The key obstacle to development of the retail investment market in Budapest is the lack of quality shopping centers available for purchase, as owners are holding on to stock and no pipeline projects have been announced.    

Looking ahead for CEE, Romania and Slovakia are earmarked for success with increased interest being shown from investors. Larger deals are expected in Serbia, Croatia, and Slovenia with investors looking to have a presence in these markets.

“This year we have seen strong investment into the region as investors from within Europe are looking to take advantage of relatively high yields and the strength of available stock on the market,” concluded Gijs Klomp, head of CEE investment at CBRE. “In 2016 we expect this to continue as the stage is set for strong economic growth in CEE, relatively high yields compared to Western Europe and increasing interest from banks to finance in the region. In addition, another major factor that will contribute to higher interest is the strong expansion seen in the retailers’ reported sales across the region. We also expect to see an increasingly diverse investor profile as Asian investors aim to increase their presence within the area.”