Property investment in Central and Eastern Europe (CEE) totaled approximately 458 million in July/August 2009, through 17 mostly off-market transactions, according to the September edition of CB Richard Ellis' CEE Property Investment MarketView.
This brings the year-to-date investment turnover for the CEE region to 936 million. The turnover recorded in July and August alone was 96% of total H1 2009 turnover. The increase in activity was primarily due to transactions recorded in Russia (239 million in July/August, 52% of CEE total) and the closing of some long-term pending transactions in Central Europe. Almost all Russian turnover in 2009 has been the result of purchases by local investors. Elsewhere in CEE, activity has picked up somewhat, but most markets have remained quiet.
A defining characteristic of the CEE investment market so far in 2009 has been continued low levels of purchase activity by international investors. Jos Tromp, Head of CEE Research & Consulting, explains: "International investors continued to stay largely on the sidelines over summer in CEE. They have accounted for only 41% of CEE property investment turnover in 2009, compared to more than 80% from 2004-2008. Local investors have filled the void left by international investors in some markets. In Russia, for example, local buyers have accounted for 93% of Russia's 2009 turnover as they take advantage of significantly lower prices to acquire certain properties. In other markets, private investors have taken advantage of opportunities, mostly in the B-class segment. The question is now whether these local investors will continue to target attractive B-class products if international investment remains slow."
German open-ended funds (GOEFs) and other institutional investors remain focused on Central Europe and, more specifically, the Czech Republic and Poland. Pavel Schanka, Director, Capital Markets, explains: "Among other factors, the Polish economy's outperformance of other neighboring markets and its relatively positive economic outlook have formed the basis of investor interest. So far in 2009, five GOEF transactions worth roughly 200 million have closed in Poland and the Czech Republic with more likely to follow in upcoming months. Two hotel transactions have been closed by Deka Immobilien and Union Investment in Krakow recently, confirming interest in this property segment."
Occupiers are also influencing the CEE investment market by trying to take advantage of current market conditions. According to Tromp: "Occupiers are attempting to use leverage that they now possess in two ways: Firstly, they are conducting sale and leaseback transactions, which made up 21% of July/August turnover in CEE. Sale and leaseback transactions allow occupiers to leverage their intent to lease the space for a long term, while raising money for their businesses and obtaining lower rental levels than they likely otherwise could. Secondly, they are closing owner-occupier transactions and business acquisitions. Companies buying to occupy are taking advantage of lower prices for vacant space - given the higher risk profile of vacant space - while investing in property with the intent to sell it at a higher price in the future."