Industrial investment activity has remained surprisingly stable in recent quarters across Central & Eastern Europe (CEE), according to the latest research from global property adviser CBRE. A combination of increasing stock and developers willing to sell properties has increased the liquidity in the sector. During H1 2012 close to 375 million of logistics space was transacted across CEE.
Mike Atwell, Senior Director of CEE Capital Markets, CBRE, commented:
"Increased activity is linked to opportunities seen in the region's industrial market driven by the relatively low rental levels in Central Europe (CE), combined with an attractive yield gap compared to Western Europe. Some investors see core CEE locations as a less expensive alternative to Germany, based on similar market drivers.
"Others see an upside in strategic locations in the Czech Republic as well as in Poland where major new road infrastructure development is being undertaken. Investors are focused on strong locations, new buildings and reasonable length income; the limited availability of such product presents favourable opportunities for developers and asset managers to reposition assets as "prime." Based on the current deal pipeline, we expect to see increased activity in the industrial sector across CEE into 2013."
With a few exceptions, vacancy in the sector has dropped considerably in recent years and although still a problem in some regions, supply is increasingly tight in others.
Despite a decrease in new requirements in recent quarters, total leasing activity has remained stronger than expected and is considerably higher compared to 2010. With a significant re-pricing of land banks, new base levels have been reached from which development is possible again.
However, speculative development has not started beyond Russia and Poland as most developers remain focused on eliminating vacancy in their portfolios as market rents have remained low for some time now.
Jos Tromp, Head of CEE Research & Consultancy, CBRE, commented:
"The general view is that most CE markets have reached the bottom of the rental cycle. On the back of decreasing vacancy, rental growth is evident in some markets and anticipated in others. Another driver of rental uplifts is expected to come from an increasing number of build-to-suit projects as developers are generally unwilling to start speculative development in markets against current low rental levels."
Source: FTI Consulting