According to Cushman & Wakefield, investment activity in the core Central European markets of Poland, the Czech Republic, Slovakia, Hungary and Romania increased significantly in Q4 2015 to €3.16bn, surpassing the 2006 record levels, and ahead of the €1.89bn invested in Q3 2015. Overall, €7.37bn was invested in CE markets in 2015, only marginally ahead of the 2014 result (€7.34bn).
Poland continued to be the primary destination for international capital as investment activity exceeded €4bn in 2015, compared with €3.13bn in 2014.
James Chapman, partner, head of capital markets CEE at Cushman & Wakefield, commented: “Of the five core markets in CE, it was Polish real estate that captured the majority of all investment capital in Q4. The record breaking €2.44bn worth of deals transacted in Poland represented more than three-quarters of all CE investments in Q4.”
The Czech Republic is next down the line with €1.90bn invested in 2015 (slightly behind the level recorded in 2014). Hungarian activity volumes improved in 2015 (€810m), albeit from a much lower base, and have seen a 31% rise in overall activity along the year. Slovakia and Romania have both seen activity levels cooling down, by -75% (€124m) and -52% (€528m) respectively over the year.
Performance across each of the property sectors was up, be it quarterly or over the long term average. Retail was the leading sector with €3.63bn traded in 2015 (58% increase on 2014), followed by offices with €2.35bn (-17% on 2014). The industrial market recorded 47% volume growth over the 5-years’ average (€1.16bn in 2015).
James Chapman added: “The €1.7bn worth of retail assets traded in Q4 set a new performance benchmark in the sector. Volumes in all sectors were ahead of Q3 with significant growth in the retail sector making it the most sought-after asset class followed by office and industrial investments.”
The largest single property transaction in CE in 2015 was the acquisition of a majority share in the Palladium Shopping Centre in Prague by Union Investment for approximately €570m. The largest portfolio transaction was the acquisition of Echo retail portfolio in Poland by Griffin Real Estate.
2016 is a year for new sources of capital to enter the CE market. The region’s occupational prospects are one of the most robust in Europe and yields have not yet fully compressed to reflect this. Income growth is likely to be the key driver of overall investment returns in the short-medium term. Such strong fundamentals continue to outweigh any perceived negativity from wider global economic challenges.
