The deal spree in the Polish capital was the main factor propelling investment activity in offices across CEE, including Russia, to a 10-year high of €7.6 billion. Warsaw has been the most active market in the region in the last 12 months, followed by Prague, Budapest, Moscow and Vilnius.
Simon Mallinson, Executive Managing Director at Real Capital Analytics, explains:
“Our data suggest that a broader group of investors is becoming more comfortable with real estate investing across Central and Eastern European markets. This is the first time, for example, that Vilnius has appeared in any RCA top regional markets list, which is due to capital coming from the UK and Sweden. One of the attractions of CEE is the relatively wide gap in pricing with the more expensive core Western European markets.”
Warsaw office transaction volumes were virtually double the long-term average at end-September, driven by a slew of big-ticket deals during the first nine months. So far this year, RCA has recorded €1.6 billion of office deals in Warsaw, just under the record level of €1.8 billion reported for full-year 2018, with another €1.1 billion of deals still pending.
In the year to date, the total investment volume for all real estate sectors across the CEE region currently stands at €11.1 billion (excluding Russia) and is set to rise to €13.9 billion provided pending deals complete. This would be roughly in line with last year’s figure, but below the €17.1 billion record hit in 2017.
The robust investment levels in the CEE region in general, and its office markets in particular, has resulted in rising levels of market liquidity. RCA’s Capital Liquidity Scores show that Warsaw is currently at its second highest level of liquidity ever, while Budapest has exceeded its previous record.
Simon Mallinson added:
“In Warsaw, liquidity is being driven by the very high proportion of institutional capital in the market and the fact that total investment volumes have increased. The city now also ranks relatively highly in terms of the proportion of global cross-border capital accounting for total transactions. The same is true for Prague, where the proportion of cross-border capital and the presence of major institutions is likewise driving liquidity.”
South Korean investors have been particularly active in CEE so far this year and are on target to reach or exceed €1.2 billion in total investment in the full-year 2019. This would make the South Koreans the single largest group of Asian investors in CEE over the 12-month period. On a five-year basis, investors from Singapore and China rank in first and second place in CEE, accounting for investment volumes of €2.6 billion and €2.0 billion respectively, with the South Koreans in third place, investing €1.7 billion in the region since 2015.
The South Korean activity has largely been through single-asset acquisitions, while the high levels of Singaporean and Chinese investment reflect logistics acquisitions at the entity/portfolio level. For example, Singapore-based sovereign wealth fund GIC acquired Prague-headquartered Point Park Properties in 2016, while China Investment Corporation (CIC) bought Blackstone’s pan-European logistics arm Logicor in 2017.