Record investment volumes in CEE driven by the USA and Germany
Investment into Central and Eastern European (CEE) countries (excluding Russia) for 2015 increased by 25% compared to 2014, reaching EUR 9.9 billion. While year on year increases were expected, the overall performance exceeds forecasts and paints a picture of a solid rebound within all CEE countries. Investment into the Czech Republic for 2015 increased by 40 % compared to 2014, reaching EUR 2.842 bln.
Foreign investors continued to dominate the region, with US funds making large portfolio acquisitions, with an average volume size of EUR 160 million.
The US accounted for 30% of investment into the region in 2015, compared to 23% in 2014, with US funds making investments in all core-CEE countries, as well as Latvia. The re-entry of core funds like Morgan Stanley and Goldman Sachs indicate increasing investor confidence in CEE. Germany was the second largest investor, accounting for 23% of all investment into the region last year, which was a significant increase on 12% in 2014. Germany’s presence can be attributed in part to the activity of Union Investment, who were the largest investor in the region in 2015.
2015 investment volume by country of origin
In the Czech Republic, the USA accounted for the greatest proportion of the total investment volume at 32%, while at 22%, German investors were the second largest investor group, closely followed by domestic Czech investors who made up 21% of the total.
The high levels of investment in 2015 had the impact of driving yields down. Cross-regional disparities in terms of pricing need to be assessed – while certain markets and sectors have almost reached the yields from the previous peak of the economic cycle (most notably Czech Republic and Poland), other countries have yet to reach their potential. As investment transactions for prime properties do not show any signs of slowing down, CBRE believes some markets may even see yields moving into a new territory, beyond those from 2007.
While outlook for 2016 is positive, a potential deterrent to the substantial growth in investment volume might be the scarcity of attractive product available for transaction. As a consequence, office development in Warsaw and Bucharest is at record levels, as a result of investors‘ and occupiers‘ increased interest in these markets.
The strong investment volumes within the region are a result of US and German investors looking to take advantage of relatively high yields and strength of available stock on the market. In 2016 we expect this to continue as the stage is set for strong economic growth in CEE, with relatively high yields compared to Western Europe and increasing interest from banks to finance in the region. In addition, the strong growth in retailers’ reported sales which we’ve witnessed across the region will continue to keep retail investors interested. We also expect to see an increasingly diverse investor profile as Asian investors intensify their presence within the region.
CBRE Group, a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2016 revenue). The Company has approximately 75,000 employees and serves real estate investors and occupiers through approximately 450 offices worldwide (excluding affiliates). CBRE offers a broad range of integrated services including project management; property management; investment management; valuation; property leasing; strategic consulting and research and consulting. In the Czech Republic, CBRE has almost 350 employees and manages nearly 70 commercial premises with a total area nearly 1.2 mil. sq. m. Read more at www.cbre.cz.