WARSAW-Central and eastern European commercial real estate investment turnover climbed 150% in the first five months from first quarter 2009. In April and May, turnover totaled $993 million, bringing the region’s five-month investment volume close to $1.9 billion, CB Richard Ellis reports.
Investors continue to focus mainly on core central European markets, accounting for 60% of total CEE investment so far in 2Q10. Poland alone accounted for 47% of the whole region’s deals, with levels not seen since mid-2006. This is largely due to Poland’s maturing real estate market and the continuing outperformance of central Europe’s largest economy. Russia was the second-largest market in terms of activity, accounting for 25% of investment transactions in 2Q10. The majority of other south-east and eastern European markets remain illiquid, with the likes of Serbia and Bulgaria not recording any open market transactions to date.
The average size of transaction in CEE increased to $52 million in April-May from $36 million in the first quarter. After some increase in activity in the retail sector in previous months, the office sector has so far dominated in 2Q10, powered by several large office transactions in April and May. The largest transaction in CEE to date in Q2 2010 was the $185 million sale of Capital Plaza in Moscow, bought by Russian VTB Capital. In Poland, Union Investment bought Warsaw’s Horizon Plaza for $129 million and in the Czech Republic, Generali PPF bought City Empiria in Prague for some $91 million.
The upturn parallels increased activity in west European retail markets, mainly driven by large retail portfolio sales in Germany. CBRE’s Head of CEE Research & Consulting Jos Tromp says CEE prime office yields remained stable at end-1Q10, with some compression in the shopping centre sector. “Whilst there is still investor demand at prime end of the CEE market and availability remains limited, some yield compression may still take place later this year. Yet the expected slowdown of German Open-ended Fund investment activity and sovereign debt issues across Europe may ease the downward pressure on prime yields in CEE.”
Cushman & Wakefield puts five-month Polish transaction volume at nearly $1.1 billiona, and estimates the total value of commercial property offered for sale at over $2.5 billion. The most active potential buyers are investment funds from Germany, UK, USA, France and Australia. Demand has clearly picked up and so has risk aversion, with investors focusing on prime properties and pushing up their prices. In the Polish hospitality sector, C&W notes growing tourist numbers both foreign and domestic at seaside destinations - most popular with the Poles - calls for a substantial increase in hotel accommodation plus improvement of existing hotel stock, especially on the central coast. But a crucial factor is still the development of transport infrastructure.
Focusing on Poland’s business and tourist city of Krakov, Jones Lang LaSalle notes the city’s attraction for BPO/SSC occupiers, expected to strengthen further in the short to mid-term. The office vacancy rate has stabilized at around 9% in the past six months on wider leasing availability. First quarter lease agreements totaled 204,000 square feet comparable to the full 2009 level, and current increased negotiating activity is expected to boost transactions volume later in the year.
Krak
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
