Colliers International presents Q3 2019 CEE Investment Scene report
Warsaw, 28 November, 2019. For the first three quarters of 2019, the CEE region has recorded an investment volume of ca. €9 billion. Offices dominate the deal flows with a 58% share, followed by a much slower retail sector with 18%, Industrial & Logistics (9%) and Hotels (8%).
Kevin Turpin, Regional Director of Research, CEE comments: “With the exception of the Czech Republic and Poland, most markets are down on Q1-Q3 volumes versus 2018 & 2017 respectively. However, with the fourth quarter of the year typically being the most active in terms of transaction closures, we expect the region to maintain a similar momentum to the previous 3 years and forecast a full year investment volume of between €12.5 and €13.5 billion.”
Appetite from investors for all asset classes in CEE remains positive, particularly as a vast amount of capital is seeking allocation and the market fundamentals in the region remain compelling. A shortage of core and core plus product can be found in some markets and sectors, as many of such properties are in the hands of long-term holders, portfolios and platforms. In addition, some owners may be hesitant to sell without the opportunity for redeploying their capital.
As a result, many investors are looking at different strategies such as value-add and opportunistic plays, plus looking into alternative sectors such as student housing, healthcare, private rental (residential), amongst others, although these are still in a relative early phase in terms of availability. More than 50% of capital deployed in the first three quarters of 2019 has come from continental Europe (incl. CEE), with 25% of the total volume coming from CEE investors alone. Asian Capital, particularly from South Korea, has also been active with a share of around 16%.
Flows by origin of capital in Q1 – Q3 2019 (%):
Prime yields across all countries and sectors are below, or close to, previous historical lows (pre-GFC). Despite the 375bps spread between Sofia (8.0%) and Prague (4.25%) on Prime offices, there is a further spread to similar product in Germany (3.0%) and to other, perceived, more risk averse investment vehicles, such as government bonds. Further yield compression should be limited, with a few exceptions as highlighted in the report.