The volume invested in real estate assets in Romania, Poland and Slovakia increased in 2021, while the Czech and Hungarian markets witnessed a downturn when compared with 2020.
At regional level, the total transacted volume reached 9.98 billion euros, a 4.3% decrease compared with the previous year, says Cushman & Wakefield Echinox.
The Polish market registred a growth of 8.3%, while the transacted volume in Slovakia was 54.2% higher in 2021 than in the previous year.
On the other hand, Czechia registered a 36% drop in transactions pertaining to income-producing assets, while the volume in Hungary declined by 18.2%.
In Romania, 54 transactions with real estate assets were completed last year, twice more such transactions in comparison with 2020.
Total investment volume in Romania reached 916 million euros, up 0.2%.
At the Central and Eastern Europe (CEE) level, the investment flows are down by 22% YoY, with a total value of investment transactions worth about 4.9 billion euro in H1 2021.
Poland remained leader in the region, with investment volumes accounting more than half of the overall CEE6 invested capital in the first semester of the year.
Czech Republic and Hungary, with a 20% share and 10% respectively, followed, as Colliers stated in its CEE Investment Scene H1 2021 report.
The office sector was dominant all over the region in the first semester of 2021 in terms of transactional activity, with a share of 39%% of the total volume of investments.
It is followed by industrial and logistics spaces that are up significantly as investors diversify into this seemingly Covid-proof sector (25%) and away from retail and hospitality sectors (20%).
Furthermore, Colliers consultants estimate that CEE 2021 year-end volumes will accelerate to reach similar levels to 2020, of around 10 billion euro.
Romania almost doubled its share in the region’s turnover over the previous year and entered the big league, after Poland and the Czech Republic, but before Hungary, Slovakia and Bulgaria.
In a year severely affected by the pandemic, in which Poland, Czech Republic and Hungary all saw year on year declines in volumes, Romania, Slovakia and Bulgaria all saw positive trends.
Overall, volumes in 2020 declined by 24% compared to 2019 with the year closing at about 10.4 billion euro.
Poland remained leader in the region, with investment volumes accounting for 51% of the overall CEE6 total with a total value of investment transactions worth 5.2 billion euro.
Czech Republic followed with a 26% share, thanks to a large residential portfolio sale.
Romania completes the top with a 8.5% share and a volume in the area of almost 900 million euro (up by about 40% over 2019).
The transaction completed by NEPI Rockcastle, advised by Colliers, involving the sale of four office projects to AFI Europe accounted for almost a third of the local investment market in 2020.
The office sector was dominant all over the region in 2020 in terms of transactional activity, with a share of 41% of the total volume of investments, followed by industrial and logistics spaces sector (32%) and away from the more challenged retail and hospitality sectors (12%).
Bucharest, highest yields in the region
Bucharest has some of the highest yields in the region for the office sector (7%), compared to at most 4.25% in Prague, 4,65% in Warsaw or 5.25% in Budapest.
Going forward, rents will remain relatively stable, with prime headline still around 18 euros per square meter in the office sector in Bucharest (and an average in the region of 14 euro per square meter).
Real estate investors in Europe are increasingly targeting large cities and assets minimally disrupted by the health crisis which ensure stable incomes, such as logistics and residential, according to the Emerging Trends in Real Estate 2021 report produced by PwC and the Urban Land Institute.
Other segments that can benefit from relatively stable demand are data centers, buildings with life sciences facilities (pharmaceutical, biotechnology and medical device companies), new energy / infrastructure, industry and communications towers.
Top real estate assets in 2021
Given the strong growth in remote working and ongoing uncertainty around how that trend may play out over the longer term and the future role of the workplace, no office sectors feature in the top ten this year.
For 2021, the ”flight to safety” for many investors involves technology, so three of the top four property types are likely to benefit from the increased pace of digitalisation around the globe, as boosted by responses to COVID-19, including data centers, communication towers and logistics facilities.
The residential market remains highly favoured by investors, with three sectors in the top ten representing some form of residential real estate.
Top cities targeted by investors
The city rankings in this year’s report reflect both the caution and opportunities driving the market, with a focus on cities believed to offer liquidity and stability.
Berlin tops the list as the overall favourite for prospects in 2021, with investors encouraged by the relatively strong performance in tackling COVID-19 by Germany as a whole. In fact, three German cities appear in the top 10.
London has climbed two places to second as investors see it as providing good long-term value. Paris remains in the top three.
Overall ranking
City
1
Berlin
2
London
3
Paris
4
Frankfurt
5
Amsterdam
6
Hamburg
7
Munich
8
Madrid
9
Milan
10
Vienna
The industry sees the merits of small- and medium-sized cities, provided they are well connected, with transport connectivity overwhelmingly considered the most important factor in assessing cities.
Other forecasts for the European real estate market in 2021
Security of income in non-core assets is causing concern, but 55% of investors expect to be net buyers of real estate in 2021.
The survey shows a marked decline in business confidence for 2021, with almost half the respondents expecting a fall in profits and a quarter anticipating job losses.
Domestic investors are expected to come to the fore across Europe in 2021. About a third expect European investors to increase their commitments in 2021.
Real estate executives were cautious about the overall outlook, resulting in a marked decline in business confidence, with 28% foreseeing a decrease in business confidence, compared with 13% in 2019. In addition, 44% anticipated a fall in profitability, compared with 15% in 2019.
Almost two thirds (62%) of real estate investors confirm interest for acquisitions of new projects, both in Bucharest and regional cities, and are currently ready to buy at more favourable conditions, given the new economic context generated by the Covid-19 epidemics, according to a survey conducted by Colliers International on the investment market among nearly 50 real estate companies representing investment funds, developers, asset managers and banks.
Investors continue to show the most interest in industrial and logistics projects, with optimism increasing since April, when Colliers conducted a similar survey.
The share of respondents stating they want to better understand the situation before making a move has dropped from 67% in April to 30% in October.
Moreover, the percentage of investors ready to ”buy at more favourable conditions” has increased from 23% to 62%.
The share of market participants looking to expand their portfolios both in Bucharest and regional cities far outweighs that of those seeking an exit, according to another positive chart in the report.
Around 57% of respondents with assets/focus in Bucharest are looking for opportunities, as are 32% of respondents with assets in regional cities.
Regarding the financing availability, there are some improvements since the April survey conducted by Colliers, though the majority of investors (55%) still expect a short-term worsening, versus 74% in the April survey.
Meanwhile, investment volumes on the local real estate market reached nearly 820 million euro in Romania in the first three quarters of the year, up by 45% versus 2019’s same period and 27% more than in all 2019, making the best three quarters in the last decade, with office assets accounting over 90% of volumes.
While there is some inertia at play, it is encouraging that the year’s biggest deals – the sale of the NEPI Rockcastle office portfolio for over EUR 300mn to AFI Europe and the sale of Floreasca Park to the Fosun/Zeus JV for over EUR 100mn – were both finalized in August, in spite of the pandemic.[HA1]
A recession with a much swifter recovery
The investors are still looking at a recession with a much swifter recovery than that of 2009, with the real estate segment being resilient against this backdrop.
The main issue on the mind of real estate market participants is the uncertain global economic backdrop (51% of answers), followed by concerns about Romania’s fundamentals, like its fiscal imbalances (40% of answers) and uncertainties about real estate in general (38% of answers). This suggests a fairly difficult backdrop for conducting deals, but it appears that general concerns weigh a bit more than Romania’s specific problems.
