In 2021, commercial property investment volumes in CEE continued to trend upwards, increasing 6.9% on 2020. However, they still remained 15% below the five-year rolling average. Industrial and office investment activity predominated, and we saw notable evidence of price improvements with yield compression in all segments, but especially in the industrial sector, where the price growth was almost 20%. Cushman & Wakefield has summarized the 2021 investment activity in the CEE commercial real estate market.
“Transactions in Poland confirm the fact that pan-European investors are targeting CEE. Prices reflect the industrial rental growth in the Czech Republic and there are indications that this trend applies to Poland as well. Office investment demand remained stable across the CEE region, albeit with the market failing to offer a large supply of the “perfect product”. We nevertheless expect to see more core plus transactions in 2022 and higher volumes in general, driven by Warsaw and regional city markets in Poland. Retail is now showing signs of greater liquidity across CEE”, says Jeff Alson, International Partner, Head of Poland & CEE Capital Markets at Cushman & Wakefield
The situation on the CEE markets
Hungary witnessed an increase in overall investment volumes compared to 2020, but the real challenge there remained the availability of stock to transact – particularly in the industrial sector, where only €29 million was transacted in 2021, whilst continued demand thrust yields downwards by over 100 bps.
Developments on the Czech property market will continue to be determined by available products for sale. Currently, there is a minimal level of these compared to Poland, for example, but also as compared with Western Europe in general. Due to highly limited activity levels, the market will not have a clear overall direction – excluding the clear popularity of industrial properties. After the transaction volume of around €1.4 billion in 2020 and approximately €1.2 billion in 2021, moderate growth in activity is expected this year. The transaction volume in 2022 could reach €2 billion.
Total investments in commercial real estate in Slovakia in 2021 exceeded €750 million - surpassing the volume of investments in the pre-crisis year of 2019. Prime yields decreased over the past year, confirming the attractiveness of investment in the commercial real estate market in Slovakia. On the back of exceptional activity in 2021, we expect the trend to continue in 2022. Local and regional capitals are likely to maintain their dominant position on the investment market. We see activity across all segments, with the office sector likely to increase its share of closed deals for the year.
Investor interest in Romanian assets remained at a high level in 2021, amid a relative re-balancing of the relationship between landlords and tenants – a shift likely to ensure a more stable financial flow for investors. In a generally positive climate, we expect a higher number of landlords to re-evaluate the opportunity to commence a selling process – decisions which would increase market liquidity. A market segment with high potential is represented by sale & leaseback transactions, as the owners of various businesses may benefit from these deals to finance their core activity. In 2022, we can expect new records in the level of deals in Romania, possibly exceeding the €1 billion transactional volume threshold.
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