According to Colliers’ report, which analyses real estate trends in 13 Eastern European property markets, positive economic growth is forecast across the region for the year ahead. Only Greece is set to witness a recession as the country gets to grips with austerity planning and the fall-out of Europe’s sovereign debt crisis. In all other markets economic prospects remain, although it is noticeable that forecasts have been gradually and regularly pared back over the last three months, as economic sentiment worsened at the end of 2011.
With regard to investment turnover, 2011 saw the Eastern European region hit over €12 billion, the second best year since records began, albeit only two thirds of the peak year of ca. €18 billion in 2007. The majority of transactions were focused on three markets – Russia, at around €5billion made up for ca 41% of total market activity, followed by just over €2 billion worth of transactions in both Poland the Czech Republic, making up for a further 35%. Remaining market share was made up by the Europolis cross-border portfolio sale at the start of the year, which at €1.5bn accounts for around 12% of activity – this comprised assets in Poland, Czech Republic, Slovakia, Hungary, Romania and the Ukraine. Finally, deals in Hungary, Romania, Bulgaria and Croatia made up the remaining €1.5billion, or 12% of investment market share for the year.
Looking forward, Colliers believes that investment turnover will fall back in 2012 in response to contractions in economic growth, general market uncertainty and the availability of real estate debt. 2012 will primarily be a core/equity driven market with real estate investment turnover focussed on Poland, Russia, and the Czech Republic.
Damian Harrington, Colliers International’s Director of Research & Consulting for Eastern Europe, commented:
“Our recent analysis of the banks including a detailed survey of 45 lenders undertaken by our finance advisory team in Poland, point to the fact that new debt will only be made available for core product in the markets of Poland, the Czech Republic, Russia and Slovakia during the first half the year. We would expect that only the very best core investment and development properties will attract lenders interest for conservative new loans in the other eastern European countries. However these will be priced at premiums well over western European pricing levels.”
Further highlights from Colliers International’s report include:
• Moscow is the only city reviewed which will see 2012 rental rises in all three key property sectors – offices, retail and industrial.
• Office rents in most other markets will remain stable bar Zagreb and Kiev, where Colliers forecasts office rental declines.
• Retail rental uplift for prime shopping centres is also forecast in St Petersburg, but the capital cities of the South Eastern European markets; Sofia; Tirana; Athens; Bratislava and Zagreb, will see rental declines.
• Prague, St Petersburg, Moscow and Warsaw are the only cities which will see growth in the industrial and logistics sector.
Concerning our country for 2012, Ana Vukovic, Managing Director for Colliers International Greece adds “Regarding the office market, it will be dominated by strong subleasing activity and lease renegotiations. As for Retailers, they shall be demanding “turn key” delivery conditions on new properties and will be paying only turnover rent. And finally, the following years starting 2012 will see the privatization of state-controlled assets. These projects should finally regenerate the investment environment and mobilize the market.”