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CEE Investment Volumes Remain Relatively Healthy

World

Despite the negative impact of COVID-19 on the CEE-6 (Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia) investment markets, flow volumes have remained relatively healthy for the first three quarters of 2020 at around EUR 8 billion, although this is sill 12% down compared to the same period of 2019.

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According to “The CEE Investment Scene Q1-Q3 2020” by Colliers International, Hungary achieved EUR 524 million in investment volume for the period. Poland attracted EUR 4 bln, which represents 50% of the CEE total, and the Czech Republic attracted EUR 2 mln. Average transaction sizes are up 31.5%, while the number of transactions are down 32%.  

The office sector has again dominated in 2020 with 40% of volume, followed by industrial with 29%, residential 16% and retail 12%. Predictably, the retail and hotels sectors are down considerably on last year, with logistics significantly up and greater volumes held back only by a shortage of supply.

The I&L (industrial and logistical) sector in the wider CEE-17 has become one of the most sought-after asset types since 2019, after offices and residential, according to research by Colliers International, law firm CMS, and HR company, Randstad.

Colliers estimates the lowest yield for the Czech Republic at 4.25% for prime office, 5% for prime industrial and 5.25% for shopping centers. This compares to 5.25% for prime Budapest office, 7% for prime industrial and 6.25% for shopping centers.

From a regional perspective, industry has remained stable, office has moved out by an average of 25 basis points and retail by 50 basis points.

“The theoretical yield level relevant for prime offices is set to grow to 5.5% by the end of 2020. However, no such deal is currently under negotiation, and even core-plus opportunities would trade at a further price reduction given deteriorating conditions on finance and increased risk levels,” comments Bence Vécsey, head of capital markets at Colliers Hungary.

Acquisition Mode

CEE domestic investors, consisting mainly of Czech and Hungarian capital, have remained in acquisition mode, investing both in their own markets and cross border within the region, concluding 28% of total volume for the first three quarters of the year.

Capital from Asia, particularly Singaporean and South Korean, has also continued to secure opportunities in the region. Looking at the wider economic environment, CEE economies are expected to take a hit in 2020, but a rebound is predicted from 2021 onwards.

“Despite investor appetite remaining strong for CEE, yearend volumes are likely to reach EUR 10 bln-12 bln, around 20% lower than in 2019,” says Colliers.

The consultancy forecasts EUR 800 mln for Hungary for the year, compared to EUR 5.5 bln for Poland, EUR 2.6 bln for the Czech Republic and EUR 360 mln-380 mln for Slovakia.

“Colliers anticipates the total investment volume turnover to be close to below EUR 1 bln in line with our conservative flash figure of EUR 800 mln. Another two to three sizable transactions will close by yearend, while the rest of the deals could slip into 2021,” Vécsey adds.

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