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Investment volumes for the first three quarters of 2022 in Central and Eastern Europe region were up by 3% YoY

CEE Investment Scene Q3 2021 sm assets  hero

Due to strong Q1 activity, partially spilling over from last year, investment volumes for the first three quarters of 2022 totalled €7.5 billion. Year-end 2022 volumes could reach between €9.0 and 10.0 billion reveals a report by Colliers: “CEE Investment Scene Q1-Q3 2022”.

 

Kevin Turpin Regional Director of Capital Markets, CEE adds: “Individually, most countries saw mildly improved results year on year, with Hungary seeing a 53% increase. However, the typically strong fourth quarter is likely to be less active as there are fewer products on the market, amid elevated costs of financing and an ongoing period of price discovery. In terms of activity, Poland has secured 58% of CEE volumes so far in 2022”.

 

Q3 2022 prime yields

Despite the lack of evidence in some markets, we have started to record outward movements in prime yields of between 25 and 50 bps initially. The cost of financing has grown rapidly over the past quarter, with all in costs now ranging between 500 and 600 bps and could go even higher if the ECB puts its base rates up further to combat inflation. “We are also seeing similar responses in other markets across Europe, with

the UK and other western European markets typically adjusting quicker than in the CEE. As quoted in our Global Capital Markets report, published in October, we could expect a correction of between 0% to 30% in capital values, depending on how other factors come into play over the next 6 to 24 months”, adds Kevin.

 

CEE flows by sector

The office sector continued to hold on to the top spot with a 38% share of Q1-Q3 2022 volumes. Logistics remains in high demand but is held back by a lack of product. Retail saw the shares in two large portfolios change hands. Otherwise, we still record a lot of interest for PRS/Living assets however they also remain in short supply. With much higher mortgage rates and falling sales, we may see developers switching towards rental product.

 

CEE flows by origin of buyer

CEE domestic capital has been the most active so far in 2022, with a 35% share of total volumes. Czech and Hungarian capital continue their drive with 19% and 10% of the total regional volume, respectively. Capital from CEE combined was responsible for over 10% of volumes in Poland.

Hungarian capital investing in Hungary was at 80% of its volumes and Czech Capital was responsible for 56% in its own market. This was followed by North American (27%) and

European (22%) capital, although in general we have recorded a slowdown or hold pattern from international capital while pricing corrects.

 

Economic indicators & drivers

The risk of recession is increasingly likely in many parts of CEE and Europe as we head into winter. In addition, high inflation is causing a lot of problems, and not just in CEE, brought about by the energy, fuel and food crises that were triggered by the war in Ukraine, on top of an already delicate economic backdrop following the pandemic.

 

“As a result, central banks have been raising interest rates to help counter the rise in inflation, which in the meantime is greatly impacting consumers on the cost of products and mortgages, and therefore creating lower consumption. Equally, it is hurting businesses and their ability to grow amid reduced demand for products and services, plus a workforce calling for increased salaries, to cope with a cost-of-living crisis, further adding to inflation. At the same time, investors will have some upside from the higher inflation on rents but, will also be impacted by the higher debt and operational costs”, concludes Kevin.


Related Experts
Czech Republic

Kevin Turpin

Regional Director of Capital Markets | CEE

Prague

Kevin has over 23 years of experience in the property industry, with 17 of those active in the commercial real estate sector in CEE. As the Regional Director of Capital Markets for CEE, Kevin is responsible for delivering investment opportunities and a regional service platform to Colliers’ clients. The 35-strong regional investment team advises investors on acquisitions or disposals of existing and future real estate assets and portfolios across all property types. This advice is backed-up with robust market data and intelligence. Kevin also oversees Colliers’ research and consultancy services and, since joining Colliers in 2019, he has executed the rollout of a coordinated Central & Eastern European research platform, including strategic advice to clients and publications. Kevin's previous roles have been in the HR consultancy, Information Technology and Public sectors, where he has gained valuable international experience working with people, technology, business and finance.

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Poland

Aleksandra Wasilewska

PR Director | EMEA

Warsaw

I have 16 year experience in PR and marketing communication. I worked among others for NFI Magna Polonia; Skanska Polska; Apsys Polska and Polish Council of ShoppingCentres. I implemented projects from the field of consumer marketing; market research; corporate communication; as well as brand building; positioning and evolution in Skanska  and Apsys. I am the author of numerous articles on PR and marketing communication.

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