"In the CEE CEE region, we are registering a return of some investors to a wait-and-see tactic before an investment decision is made," explains Kevin Turpin, Colliers' Regional Director for Capital Markets in Central and Eastern Europe. "We have also seen the postponement or complete cancellation of some leasing transactions. Some of them were allegedly related to the participation of Russian companies and others to the uncertainty associated with the war and its physical proximity. At the same time, there will always be entities that will always look for and find opportunities even in the most difficult times. "
Volume of investments in Central and Eastern Europe in 2017–2021
Despite the disruption of the entire pandemic economy, total investment in 2021 totaling € 11.07 billion was 6% higher year-on-year but 20% lower than in 2019. Colliers originally estimated that full-year volumes for 2022 could reach more than 12.0 billion euros, however, the war in Ukraine negatively affected this outlook.
Investment growth rate in the CEE region
Most countries in the CEE region lagged behind the volume of their markets before the pandemic in 2021, but Poland, with a 57% share of the total in 2021, reached its five-year pre-pandemic average. There was no doubt that activity picked up in the last quarter of the year, but some markets are still hampered by a shortage of available investment products.
The most interesting yields in the 4th quarter of 2021 and the forecast for the next 12 months
In many markets in the region, we have seen only limited movements in returns from the most interesting properties. This was mainly due to the persistent lack of transactions from which movements could be deduced in some sectors and markets. An exception is the yields from the most lucrative logistics investment projects, which have fallen by an average of almost 100 basis points throughout Central and Eastern Europe since Q1 2020, and by more than 180 basis points in Poland. Colliers continues to believe that yields will be further compressed in some markets, although the pandemic and the effects of the war in Ukraine are causing inflation, rising interest rates and negative economic pressures.
Shops by industry
For the first time since 2008, the most transactions took place in the industrial sector, with a 38% share of transactions in 2021. Offices and residential real estate continue to record stable transaction volumes, even though there is a relative shortage of available investment projects for sale on the market. In retail real estate, there is a higher volume of transactions in retail parks and supermarkets, while the volume of hospitality transactions remains limited overall.
Financial flows according to the origin of the buyer
In 2021, Western and Northern European funds accounted for 36% of all transactions; in particular, it was the capital of Germany, Great Britain, Austria and Sweden. The role of capital from Central and Eastern Europe was also very strong, with a 32% share of total trading volumes. Overall, the most active capital was from the Czech Republic with an 18% share; He was responsible for 52% of transaction volumes in the Czech Republic, 68% in Slovakia and also participated in acquisitions in Poland, Romania, Hungary and Bulgaria.
Economic indicators and drivers
Due to the pandemic and geopolitical crises, the global economic outlook remains extremely volatile and difficult to predict. The current situation is very complex and has an impact on many sectors of the economy. Most likely, the economic situation will deteriorate during 2022, with possible improvements expected. The war in Ukraine and related sanctions, factors associated with the pandemic and the ESG, will all have an impact on the real estate markets in terms of supply, demand and affordability. Not all of these impacts will be negative and will vary across the real estate market. "We are monitoring rising inflation and interest rates very carefully, as they will put an end to a long period of consistently low rates. In real estate, this will affect debt and pricing costs, but it will also affect a number of other costs, whether for investors, developers, tenants or consumers, ”adds Kevin Turpin.
ESG is integrated into the commercial real estate financial clearance processes
The integration of ESG factors into real estate investor decision-making is increasingly urgent, mainly due to the differences in benchmarking and ESG implementation that exist between real estate entities and sectors in the CEE region.
Oana Stamatin, ESG's Director for Central and Eastern Europe and Romania at Colliers, comments as follows: Depending on whether you are buying, holding or selling real estate, you will perceive these risks completely differently. The elements that make up the ESG will become increasingly important for investment strategies in the future. An ESG review may be performed during the due diligence process