“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”.
Colliers point out that:
Firstly, if we look back at the deals which closed in 2011 we can see that investment market turnover was 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.
Secondly, there are four deals in Moscow which equate to over €2.2 billion in value which were due to close in 2012 but, at the time of writing at end January 2013, were not reported as closed. If they had closed in Q4 2012, this would halve the year-on-year drop in activity to 20%. If Galeria St Petersburg had closed in Q1 2012, rather than Q4 2011, the annual difference would be as low as 5%.
Damian Harrington went on to comment that “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 into 2013.”
Even though Ukraine posted the highest year-on-year growth as a result of completing their most successful volume of transactions for the last five years, transaction volumes comprised a small number of deals dominated by one large, core asset in the shape of Ocean Plaza shopping centre in Kyiv. Such one-off transactions are unlikely to be repeated every year, especially given the emerging nature of the Kyiv investment market.
Equally, bar Romania and Poland, all other markets posted a fall in activity, but we would expect an uplift in volumes in a number, if not all, of these markets longer term.
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.
Colliers International communicates also the CEE investment market share 2012. Colliers team continued to do more deals in more markets than any other competitor. We transacted the only Investment deal in Slovakia for the year and the largest office deal in CEE for the year (WFC, with JLL). The team transacted the same volume of deals as in 2011, despite the CEE investment market shrinking by over one-third in 2012. The graphic illustration of the market share is also attached to this press release.
* 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.