Despite the ongoing disruption of the pandemic, investment volumes for the first three quarters of 2021, totalling €7.3 billion, are down just 10% year-on-year and ca. 20% lower than the same period of 2019. Colliers estimates that 2021 year-end volumes will reach similar levels as in 2020 of between €10.0 and €11.0 billion.
Individually, most countries are behind their pre-pandemic volumes, but Poland, with 56% of 2021 volumes, Hungary and Slovakia are up on 2020 levels. The typically strong fourth quarter for transactions may however fall short due to the lack of available product in many markets and continued travel complications for investors.
Q3 2021 prime yields and 12 month forecast
Kevin Turpin, Regional Director of Research, CEE explains: “We have recorded limited movements in prime yields for many markets in the region, primarily due to the ongoing lack of transactional evidence to support further shifts. The main exception, however, is prime logistics yields that have come in by almost 100 bps on average across CEE since Q1 2020, with Poland reaching over 180 bps. Our view remains that while some further inward shifts are inevitable, core and well-performing assets should hold up better, with more pressure on secondary product”.
CEE flows by sector
The office sector just about managed to hold on to the top spot with a 36% share of Q1-Q3 2021 volumes. Logistics and residential continue to record increasingly strong volumes, held back only by the shortage of available product for sale on the market. Retail volumes continue to be supported by retail park and supermarket assets, while hospitality volumes remain limited overall.
CEE flows by origin of buyer
Western and Northern European funds were behind 42% of all investment volume in the first three quarters of 2021, most notably capital came from Germany, the UK and Sweden. CEE capital was also very busy with a 30% share of total volumes. Czech domiciled capital was the most active overall with a 19% share and responsible for 53% of Czech volumes, 80% of Slovak volumes and with acquisitions also recorded in Poland, Romania, Hungary and Bulgaria. Hungarian capital also remained active, with both domestic acquisitions and others across the region, including Romania and Poland.
Economic indicators and drivers
Commenting on what lies ahead, Kevin concluded: “Economies across the region have held up relatively well. However, there are several issues that are causing a great deal of concern and debate, many of which will impact the property industry in terms of supply, demand and affordability. First of all, the ESG agenda has become and will continue to be a key factor for change and success when investing in real estate. In addition, supply chain and labour issues are causing shortages and price hikes for construction materials and essential components and goods in other industries. Residential prices are spiking, causing concern over affordability, on top of the energy crisis and other inflationary pressures. It is ultimately the consumer that will bear the cost of this or, an uncertain period of belt-tightening will prevail while things settle”.
