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Central Europe
April 7, 2017 www.intellinews.com I Page 10
Local and emerging markets drive investment in CEE real estate
bne IntelliNews
The trend of strong investment in Emerging Europe's real estate sector last year continued in the first quarter of 2017, with investment rising 41% y/y, a report released by Colliers International and law firm CMS on April 6 revealed. The ongoing enthusiasm leads the authors of the report to forecast that the record-breaking €12.2bn of investment recorded in 2016 is likely to be surpassed this year.
Premiums in commercial real estate yields compared to Western Europe, combined with strong GDP growth across the region, should stand the rapidly maturing real estate markets
of the region in good stead amid the uncertainty over what Brexit will mean both for Emerging
and Western Europe – traditionally the largest source of investment – states the “CEE Real Estate Investment Compass 2017” report, which examines key trends in the real estate markets of six Central and Southeast European countries (Bulgaria, Czech Republic, Hungary, Poland, Slovakia and Romania) over the last five years, and takes a look at what is on the horizon for 2017.
At the same time, the report also forecasts continuing diversification of funding sources. Asian, South African and domestic regional investors increasingly compete with peers from Western Europe.
“We stand at a particularly interesting juncture
in the CEE Real Estate investment cycle as the risks that are present in the maturing Western European market cycle challenge what is clearly a firm domestic economic environment across the region,” says the report.
Domestic and cross-border investments have become a growing phenomenon, reaching €2.6bn in 2016. The Czech Republic and Slovakia have
been the largest origins and destinations of cross- border funding within the region over the last
five years, while Hungary’s domestic flows have soared recently. In Poland, the share remains much lower at just 2%, but the report forecasts this could change in 2017.
“The further distance we get from 1989, the more developed the CEE markets become and the less reliant on outside investors we are. This can be observed not only in the real estate sector, but
in the whole M&A market,” says CMS partner Wojciech Koczara.
Capital is also arriving, however, from other emerging markets. Colliers and CMS forecast that large portfolio-type deals involving Asian investors may become more common in CEE’s real estate sector, which would most likely keep deal values at the same level as in 2016 or even higher. Within the last three years, interest from Asian investors has grown considerably, and total investments from the continent reached €2bn in 2016.
Meanwhile, South African investment reached a record €2.4bn in 2016; as bne IntelliNews reported in March, there are now at least 10 South African listed REITs directly or indirectly active in CEE. The report warns, however, that investment may not remain at the same level in 2017, although it expects some level of dealmaking to continue.