A record-breaking volume of investments in commercial real estate in Slovakia was realized in the first half of the year 2022. Total investments exceeded €600 million. The record volume is largely due to the transfer of part of Penta´s original portfolio to the new developer Alto Real Estate. It influences the statistics so the office buildings gained a position of the dominant segment with around 70% share of all investments. The share of domestic capital is representing almost 70% of the total volume of transactions. Within the context of rising inflation and increasing interest rates, analysts consider yields to be bottoming out without space for further compression. Slovakia continues to maintain its reputation as a safe investment location with competitive yields, according to Cushman & Wakefield's latest report.
The total volume of commercial real estate transactions in Slovakia exceeded €600 million in the first half of 2022, making it the strongest half-year in the last 20 years. Despite the Russian invasion of Ukraine, which represents yet another test after two years of coronavirus pandemics, the optimism of investors persists, as evidenced by the number of ongoing investment transactions. The amount reinvested, which represents a slight increase over the first half of 2021 and a 52% increase over the average for the same period of the last five years, is proof of this. A total of eleven transactions were completed, five of which were outside Bratislava.
The office sector confirms its stable position in the market. Investors’ interest in office buildings is growing, which is confirmed by both closed and ongoing transactions. The acquisitions of the Digital Park II and Sky Park Offices, which are among the largest office buildings on the market, became the dominant transactions in the first half of the year as part of the transfer of part of Penta's portfolio into the hands of the new developer Alto Real Estate. At the same time, they contributed to a significant share of domestic capital in the commercial real estate market. Other transactions include the acquisition of the historical monument Pradiareň 1900, which was only recently converted into first-class office space and received the BREEAM certificate with the best rating of excellent.
“Due to rising inflation and increasing interest rates, we see very limited room for yet another compression of prime yields. This is one of the reasons why the expected yields decreased in 2022, reaching 5.00% for office buildings and 5.25% for industrial commodities. It has thus reached its historically minimum value for the given commercial real estate sectors. One of the sources of possible growth in the value of real estate for the coming year may be the indexation of rents,” says Marián Fridrich, Head of Cushman & Wakefield Slovakia.
The industrial sector, which has maintained a stable half-year reinvested amount on average of €130 million over the last five years, experienced a downturn in the first half of 2022. This is due to the lack of properties meeting the expectations of investors available for purchase, as in recent years most of the so-called "Class A" buildings changed hands. Although two transactions were carried out in the industry, they accounted for only 6% of the total transaction volume. This involved the acquisition of Billa’s warehouse by the Swedish real estate investment fund EQT Exeter, and a business transaction in Beluša, which was purchased by the third investment and development group Arete Invest.
The coronavirus pandemic has caused a decline in mobility and a thus lower turnover of shopping centres. However, lifted pandemic-related measures in the first quarter brought about a recovery in the retail sector, which is also confirmed by the increased interest of investors in these properties. This is also evidenced by the transaction of the Atrium Optima shopping centre in Košice, where Slovak investors, once again, took their place on the buyers' side. The sale of the largest shopping centre outside the Bratislava region with a total leasable area of 49,000 sqm reached a value of €118 million. The acquisition of the portfolio of four Max shopping centres by the Austrian real estate company Supernova only confirms the increased demand for these properties. The retail market is experiencing a major recovery in investment activity after fluctuations over the last two years.
The achievable prime yields for retail commodities are higher than in other commercial real estate sectors. It reaches the level of 6% for shopping centres with full occupancy and high mobility of people and is oscillating around 7% for the most attractive retail parks.
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