GTC Pillar office complex.
“We currently see more than EUR 600 mln worth of deals that could realistically close this year and unexpected opportunities could [also] emerge,” the consultancy says.
“As such, while there is lingering uncertainty as to how the latter stages of the COVID-19 situation could play out, currently it seems like a recovery in investment activity can be expected in the second half and the annual investment volume can end up comfortably above the EUR 1 billion mark, with a stronger rebound in 2021.”
JLL put the first half year volume even higher at EUR 610 mln, with an estimation for the year at EUR 1.4 bln-1.6 bln.
“The super-cycle, witnessed during the previous years, has ended. That said, real estate investments remain attractive due to their relative returns and we expect the transactions to pick up after the summer when the market normalizes,” comments Benjamin Perez-Ellischewitz, head of capital markets at JLL Hungary.
“In most asset classes compression is not on the horizon, but volumes should be back to their usual levels by 2021,” he adds.
Eston International have traced first half year investment volume at EUR 300 million, although that excludes the Optima deal in the figures. A moderate estimation by the consultancy places the 2021 volume at EUR 1 bln, assuming a second wave of the coronavirus causes no further disruption.
Regional Leader
Poland remains the leading CEE investment market; JLL has recorded EUR 2.9 bln in transaction volume for H1 2020, in what it described as the second best first half year in the history of the market.
“Despite the global pandemic, the first months of the year saw a continuation of the trends that have been observed on the market for some time now,” JLL explains. Office remains the leading sector in Poland with EUR 1.3 bln for H1.
Again, much of this is put down to the aforementioned purchase of a majority stake in GTC by the Optima that included both office complexes and shopping centers across the region. This follows the CEE trend of developers and investors concluding the acquisition of companies and platforms in other countries the region.
The yield gap between Budapest and Warsaw and Prague remains at around 100-125 basis points according to JLL. CBRE puts prime office yields at 5.75%, shopping centers at 6.25%, high street retail at 5.75% and industrial at 7.25%.
“Prague remains the hottest and most expensive market in the region and Budapest is catching up, but a considerable 100 basis point gap remains between these markets, offering great value to investors focused on Hungary,” comments Bence Vécsey, head of capital markets at Colliers Hungary.
Domestic investors are expected to continue to play a key role on the market. “In recent years domestic investors dominated the Hungarian market and their market share is expected to remain significant,” says Perez-Ellischewitz of JLL.
“Nevertheless, international investors are just as capable of carrying out transactions as their local competitors. They might need the support of a local advisor or a local asset manager for market intelligence. Good examples are the recent acquisition of Eiffel Square by Allianz RE or Rumbach Center by Galeon Capital during the lock down period,” he adds.
