August 14, 2018 – Polish volumes were the drivers of the momentum in the first half
of the year. Slovakia saw a rebound in deals whilst Hungary and Czechia saw
much slower flow than a year ago, reveals Colliers International, the global
industry-leading real estate services company, in its latest 2018 mid-year CEE Investment Scene.
into the CEE-6 region rose 4% yoy in H1 2018, marginally exceeding the pace of
2017’s record year.
A combined 26% of the money in H1 came from
domestic sources within the CEE-6 countries or CEE cross-border flows. US, UK
and Western European funds were all net sellers of CEE commercial real estate
in the period, broadly repeating the pattern observed in 2016 and 2017.
Polish volumes (58% of the CEE-6 total)
were the drivers of the momentum in the first half of the year, on the back of
a continued strong performance from the economy. Slovakia
saw a rebound in deals this year whilst Hungary and Czechia saw much slower
flow than a year ago. A relative lack of supply of product for sale appears
to be a factor in these latter two markets.
On the sector front, office (up 51%) nearly caught
up with retail (almost flat year-on-year) flow; the expected stimulus from more
development completions at this stage of the cycle appears to be occurring.
Bence Vécsey – Director and Head of Investment Services at Colliers
Hungary adds: "The first half of 2018, especially the second
quarter, was rather sluggish in Hungary both in terms of the number and volume
of commercial real estate transactions. The investment volume was down by 60% year-on-year closing the first semester at EUR 360 mln, whilst the number of
deals halved during the same period. The primary reason for the drastic drop in
activity was the delay of closing on some significant deals slipping through to
third quarter of the year. A number of these deals had been already completed
on adding EUR 250 mln to the year-to-date activity so far. The secondary reason
for the slow first half was relatively low supply of commercial assets, so
overall there is no need to be worrisome about structural or local investment
issues. The prime and core segments of the Hungarian commercial properties
provide excellent total returns to developers and investors through continuous
yield compression and strongly evidenced increase in rental rates. The capital
value gap of commercial investments in Budapest is closing in with Prague and
Mark Robinson, CEE
Research Specialist, adds: “The yield compression we
have observed in 2016-17 slowed markedly in the first half of 2018, with just a
narrowing of prime office yields in Prague and Warsaw to note. We expect
further compression over the next 12 months in just the Budapest and Bucharest
office/industrial sectors. Looking at fundamentals, we foresee 6 increases
amongst the 12 key capital city vacancy rates in Office and Industrial that we
follow, after several quarters of falling vacancies across the region.
Increasing supply appears to be a factor in play. Rental growth dynamics look
strongest in the CEE industrial sector and in Budapest.”