Commercial property investment volumes in central and eastern Europe (CEE) reached more than €11.2bn by the end of December last year – twice the volume compared with 2010, according to CBRE.
Significant deal flow in Russia last December pushed CEE property investment volumes over the €10bn mark, which resulted in the third-strongest year in CEE history.
A notable deal was the closing of the Galeria centre, a large mall in St Petersburg that a Morgan Stanley Real Estate fund bought for over $1bn (€800m).
Low levels of property investment activity were recorded in south-eastern Europe (SEE), with Serbia and Ukraine not seeing a single institutional transaction during 2011.
But there has been increased investment activity in the Hungarian and Slovak commercial real estate investment markets in recent months. This trend is likely to continue, especially in Budapest, said CBRE. In total, investment volumes in Hungary increased from around €180m in 2010 to over €600m in 2011.
Patrick O’Gorman, director of CEE capital markets at CBRE, said: “There is some willingness to invest in Hungary, despite recent increasing unrest in the country, but it remains to be seen how this trend will continue with current negotiations with the International Monetary Fund underway and limited financing available. Refinancing of current loan agreements and potential partnerships between owners and opportunistic investors may lead to further deal flow in 2012.”
Despite the fact that in some western European markets yields have turned the corner, prime yields are expected to remain solid in markets such as Poland and the Czech Republic, which are based on strong demand and income growth, while increasing bond yields and the poor performance of the forint are weakening fundamentals in Hungary.
According to Jos Tromp, head of CEE research and consultancy at the firm: “Based on the property transactions under way, 2012 is already following a similar pattern to 2011. The search for security is set to continue and lack of product availability at the top end of the market may start pushing money into the core markets such as Poland and the Czech Republic, depending on how the general economic sentiment unfolds. Generally, financing will remain the key factor in determining which way markets move in 2012.”
