Damian Harrington, Regional Director of Research for Colliers International, Eastern Europe, said: “In 2013 commercial real estate volumes for Eastern Europe reached €10.8 billion, up around 20 per cent on 2012. Through the first half of 2014, investment volumes across Eastern Europe have slowed marginally, losing some of the momentum that was gained during 2013.”
At the start of 2014 we provided three scenarios for investment volumes in 2014 and beyond.
The 'Best-Case' scenario would see 2014 investment volumes close to the cyclical peak of 2007 at ca €16 billion, surpassing it by 2016 when it reaches almost €19 billion.
More modest 'Mid-Case' scenario, forecast an increase in regional investment volumes as international investors are continually attracted to the region is search of positive yields with rental and capital-value upside. However, volumes would be tempered by limited product choice, despite an increase in buyer appetite.
The 'Worst-Case' scenario forecast a dip in investment volumes in the first half of 2014 as a result of concerns over the current Russia/Ukraine conflict. A weakening of international investment sentiment to Russia would reduce transaction activity, leading to a decline in regional volumes in 2014 before picking up again in 2015.
At the half-way point in the year it is the 'Worst-Case scenario' which has held true. This may appear negative but it should not detract from the increasing popularity of the core Polish and Czech investment markets which continue to see increasing deal volumes.
Equally, investment activity is also picking up across the Tier 2 markets of the region - notably the Baltics, Hungary and Romania - and there are signs of increasing activity further south and east in Bulgaria and Serbia.This has led to some yield compression in these locations during the first half of the year.
If investment demand continues to diversify across the region in the second half of the year this could take us back towards a more robust mid-Case scenario. However, it is more likely that it won't be until 2015 before regional investment really picks up pace outside of the CEE core of Poland and the Czech Republic.