The IPD Central and Eastern European Annual Property Index released yesterday, delivered a positive total return on all property of 5.6% in 2012, albeit 2% lower than the total return for 2011.
In common with other European countries that IPD has reported on thus far for 2012, income return was the key component of performance, returning 6.8% although somewhat below its long-term trend of 7.0%, while capital growth stood at -1.1% for 2012.
Dr. Nassos Manginas, Managing Director of IPD DACH, said “These returns indicate pressure of higher operating costs and increased vacancy rates, while negative capital growth in 2012 saw a reversal of the average capital appreciation, compared to what the CEE region experienced two years ago, standing at 0.9%. It also demonstrates the continued economic uncertainty and fragile recovery of real estate markets.”
“Looking at sector performance, a clear pattern of polarization emerged in 2012. Retail, which accounts for 42% of the overall value of the CEE databank, delivered a total return of 8.5%, while offices with a similar value weighting (40%) produced only 3.8%. Industrial assets with a weight of less than 17% generated the lowest performance of 3.5%. With income return broadly comparable among the three sectors, it was capital depreciation for offices and industrials that was the key factor in determining this gap in performance.”
Despite the 2012 decrease in returns, the CEE region produced over the last 8 years, an annualized performance of 6.9% p.a., driven almost exclusively by an income return of 7.0% p.a. Manginas added: “This provides evidence of the focus on the stability of cash-flow generation as a defining element of real estate performance”.
The CEE databank includes Poland, the Czech Republic, Hungary and the rest of CEE with a total market capitalization of 14.6 billion EUR, 50 funds and 529 assets as of December 2012.