The Eastern European investment market witnessed €7.7 billion worth of investment transactions close during the whole of 2012*. This represents a significant downturn in trading across the market, with turnover reduced by over one third in comparison to the €12.2 billion which closed in 2011, according to Colliers International’s report regarding “Eastern European Investment Overview 2012”.
“This figure should not be taken at face value” commented Damian Harrington, Regional Director of Research for Colliers International, “as the closing of large deals distort the statistical year-on-year trends”.
Looking back at the deals closed in 2011 investment market turnover was witnessed to be driven by some very large ‘one-off’ deals – the Europolis Portfolio and Galeria St Pete’s deal – at a total of €2.3 billion this is almost 20% of the total transaction volume for the year. If these deals had officially closed either side of 2011, the overall figure for the year would be significantly lower.
Whilst the year-on-year statistics depict strong volatility, the clear underlying trend which is visible to us is that the markets which continue to attract real estate capital offer a combination of the following:
- Liquid capital markets, including competitively priced debt provision.
- The availability of strong, core assets at reasonable pricing levels.
- Positive economic and property market growth fundamentals.
The markets which most benefit from these conditions are Russia and Poland. In 2012 they accounted for over 80% of all transactions and this trend will continue in 2013.
On a Greece country level, 2012 followed the trends as witnessed in 2011 since the recession affected the investment market harder than the rest of the economy. The majority of the investors were on a standby mode for investment product to get distressed.
The Greek market turned into a buyer’s market as a result of lack of financing. The buyer interest that so far came from local private investors looking for bargain deals and distressed properties provided typically by high yields.
However, the first encouraging investment actions started to take place in Q3 2012 with the first major investment sale through privatization being announced; the Usufruct Right on the Exploitation for 90 years of the International Broadcasting Centre (IBC) to Lamda Development, the highest bidder.
Ana Vukovic, Managing Director of Colliers International Greece
commented: “We are expecting to see the turning point within 2013 regarding investment volume in Greece. Low price levels combined with high yields and reduced political and economic uncertainty can increase the market’s attractiveness and investment interest. Various restructuring funds have started to express their interest and we estimate that they will be followed by foreign direct investments, new production lines and deals.”
In summary, the Eastern European investment market has performed well over the last couple of years despite the negative factors it has had to contend with - including weakening economic sentiment and growth; the partial closure of traditional forms of debt via the banks outside of the main markets of Poland and Russia, the Czech Republic and Slovakia: and rafts of regulation impacting operational capacity.
Looking ahead, whilst the European economy should bottom-out in 2013 leading to improvements at the end of the year, the operational capacity of banks and investors will remain hindered, curtailing activity outside of the larger, core markets.
* Turnover figures relate to income-producing assets only, excluding land & end-user deals. These figures only include deals which have been publically confirmed as closed at 30 Jan 2013.