Kevin Turpin, Regional Director of Research | CEE explains: “As the pandemic continues to impact on capital markets, CEE investment flows are down by almost 48% on Q1 2020, at ca. €2.0 billion. Despite the slow start, we currently estimate that CEE 2021 year-end volumes will accelerate to reach similar levels to 2020, of around €10.0 billion. Preliminary EMEA volumes are estimated to be down ca. 32% YoY”.
Poland captured, ca. 65% of all volumes, followed by the Czech Republic and Hungary with 14 and 11% respectively.
CEE FLOWS BY SECTOR
Offices secured 50% of the total transaction volume, followed by Industrial and Logistics (28%) and Retail (11%). Pricing remained relatively stable overall, but further compression in the Industrial and Logistics sector is expected throughout the year, subject to transactional activity which will in turn rely on product availability.
CEE INVESTMENT VOLUME GROWTH RATES
All countries in the region recorded year on year declines in volumes compared to the first quarters of 2020, except for Hungary, and 2019, except for Poland. Despite the slow start, investor sentiment suggests a strong pick-up in activity in H2, subject to progress with the pandemic and open travel.
Q1 2021 PRIME YIELDS (%) & 12 MONTH FORECAST
We have recorded very little movement in prime yields, primarily due to the ongoing lack of transactional evidence to support further shifts. “Our view remains that while some shifts are inevitable, core, well performing assets should hold up well, with more pressure on secondary product. Due to the high levels of interest from investors in logistics assets, we expect to see further compression in this asset class” adds Kevin.
CEE FLOWS BY ORIGIN OF PURCHASER
Western and Northern European funds have dominated the first quarter of 2021, accounting for 50% of volumes, with capital coming mainly from the UK and Germany. CEE domestic investors, consisting of mainly Polish, Czech and Hungarian capital, have also remained very active, particularly in their own respective domestic markets. While travel restrictions challenge the ability for many investors to view opportunities and dampen investment volumes, capital from Singapore and South Africa managed to deploy.
KEY ECONOMIC INDICATORS
Subject to the pandemic being brought under control and allowing economies to function with less restrictions, CEE economies are expected to begin recovery throughout 2021 and 2022, at an average pace of ca. 4.3% annually. Unemployment rates have risen during 2020, although perhaps not as high as some would have expected. As a result, this has reflected well on the outlook for growth in retail sales, which will hopefully deliver some much needed positivity to retailers and the property sector.