Poland as the most attractive market
According to Cushman & Wakefield investment activity in the core Central European markets of Poland, Czech, Slovakia, Hungary and Romania increased significantly in Q4 2015 to €3.16 billion, surpassing the 2006 record levels, and ahead of the €1.89 billion invested in Q3 2015. Overall, €7.37 billion was invested in CE markets in 2015, only marginally ahead of the 2014 result (€7.34 bn).
Poland continued to be the primary destination for international capital as investment activity exceeded €4 billion in 2015, compared with €3.13 billion in 2014.
Commenting on the level of activity in 2015, James Chapman, Partner, Head of Capital Markets CEE at Cushman & Wakefield, said, “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 €2.44 billion worth of deals transacted in Poland represented more than three-quarters of all CE investments in Q4.”
Czech Republic is next down the line with €1.90 bn invested in 2015 (slightly behind the level recorded in 2014). Hungarian activity volumes improved in 2015 (€810 mn), 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% (€124 mn) and -52% (€528 mn) 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 €3.63 billion traded in 2015 (58% increase on 2014), followed by offices with €2.35 billion (-17% on 2014). The industrial market recorded 47% volume growth over the 5-years’ average (€1.16 billion in 2015).
James Chapman added, “The €1.7 billion 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 c.€570 million. 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.