23. April 2010 
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Yields decrease for prime assets in certain CEE markets
Central & Eastern European (CEE) commercial real estate investment totaled approximately €600 million in the first quarter (Q1) of 2010, a 140% increase on Q1 2009 turnover, according to the latest data from CB Richard Ellis (CBRE). This growth reflects the increased confidence and liquidity in the CEE property investment market, however institutional investor interest remains largely restricted to core markets and prime property.
Key investment trends which developed in 2009 continued to characterize the CEE investment market in the first three months of 2010. Jos Tromp, Head of CEE Research & Consulting, CBRE, commented: “Institutional investors’ sights remain set on high quality assets in core Central European capital city markets. The limited amount of prime stock in these markets continues to restrict turnover, even though the investor base is significant and expanding, especially in Poland and the Czech Republic. Meanwhile, market activity remains low in Southeastern Europe and Ukraine, and is still mostly limited to opportunistic purchases of non-prime assets.”
Turnover from the sale of distressed assets in CEE generally remained low in Q1 2010, but is, however, increasing. Tromp explained: “Despite continuing expectations of a jump in the number of distressed transactions closing across CEE, transaction levels remained low. However, over half of Russia’s quarterly turnover was made up of distressed property transactions.”
Local purchasers continued to drive regional markets, accounting for almost 70% of Q1 2010 turnover compared to only 30% in capital cities. According to Tromp: “Whereas investors active in capital cities are seeking the relative safety of prime product with sustainable income generating ability, investors in regional markets are looking to earn returns on purchases they can now make at lower prices in markets that they know.”
In line with expectations and the trend seen across Western Europe in the second half of 2009, some prime yield compression was recorded in selected CEE markets in Q1 2010. Pavel Schanka, CEE Capital Markets, explained: “While prime yield levels in the region remain mostly hypothetical, ongoing negotiations and strong demand for limited product in segments such as the Warsaw, Budapest and Bucharest shopping centre markets, caused 25 basis point prime yield compression in these markets. Still, yield compression across CEE remains limited and restricted to prime product.”
Key investment trends which developed in 2009 continued to characterize the CEE investment market in the first three months of 2010. Jos Tromp, Head of CEE Research & Consulting, CBRE, commented: “Institutional investors’ sights remain set on high quality assets in core Central European capital city markets. The limited amount of prime stock in these markets continues to restrict turnover, even though the investor base is significant and expanding, especially in Poland and the Czech Republic. Meanwhile, market activity remains low in Southeastern Europe and Ukraine, and is still mostly limited to opportunistic purchases of non-prime assets.”
Turnover from the sale of distressed assets in CEE generally remained low in Q1 2010, but is, however, increasing. Tromp explained: “Despite continuing expectations of a jump in the number of distressed transactions closing across CEE, transaction levels remained low. However, over half of Russia’s quarterly turnover was made up of distressed property transactions.”
Local purchasers continued to drive regional markets, accounting for almost 70% of Q1 2010 turnover compared to only 30% in capital cities. According to Tromp: “Whereas investors active in capital cities are seeking the relative safety of prime product with sustainable income generating ability, investors in regional markets are looking to earn returns on purchases they can now make at lower prices in markets that they know.”
In line with expectations and the trend seen across Western Europe in the second half of 2009, some prime yield compression was recorded in selected CEE markets in Q1 2010. Pavel Schanka, CEE Capital Markets, explained: “While prime yield levels in the region remain mostly hypothetical, ongoing negotiations and strong demand for limited product in segments such as the Warsaw, Budapest and Bucharest shopping centre markets, caused 25 basis point prime yield compression in these markets. Still, yield compression across CEE remains limited and restricted to prime product.”
