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The CEE Investment Scene | Q1-Q4 2020

Despite the many challenges brought about by the COVID-19 pandemic, the 2020 CEE investment volumes actually fared not too bad, ending at €10.4 billion, 24% behind 2019 levels. This trend is closely in line with 2020 European volumes which were down by ca. 27%. Poland and the Czech Republic secured 51% and 26% shares of the CEE total respectively.
Outside of the large €1.3 billion Czech residential portfolio traded earlier in the year, offices maintained a 41% share. However, unsurprisingly, it was the Industrial & Logistics sector with 32% that outperformed previous results as investors looked for opportunities to diversify and deploy capital. Meanwhile, retail, particularly shopping centres, and hospitality sectors, battled with the worst of the restrictions enforced by the pandemic, resulting in significant drops in volumes. Of what did transact, grocery assets and retail parks made up the largest share of volumes during the year.
Findings from the recently launched Global Capital Markets: 2021 Investor Outlook reportshow that the majority of investors are keen to increase their AUM by as much as 10-20% in the year ahead. Provided that the pandemic is controlled and there is sufficient product available in the CEE markets, we could see volumes returning to pre-COVID-19 levels of €13-14 billion.
In terms of pricing, prime Industrial & Logistics yields have remained stable, with some compression in select markets. We have moved prime office yields out on average by 25 bps and prime shopping centres by 50 bps. Although there has been a lack of transactional evidence to support further movement in some sectors, our view remains that while some shifts are inevitable, core, well performing assets should hold up well, with more pressure on secondary product.