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Resilient CEE: lower volumes but deals were bigger in 2020

The CEE region performed better than the rest of Europe in a difficult year and it is ready for a post-pandemic bounce back, delegates heard at Real Asset Media’s European Outlook 2021 – CEE investment briefing, which was held online this week.

“Investment volumes in 2020 declined by 26% in the six CEE countries, compared to a 30% fall in EMEA,” said Kevin Turpin, regional director of research CEE, Colliers International. “Poland alone accounts for 50% of the region’s volumes.”

The number of transactions declined by 35% but the average transaction size increased by 16%. As an indication of the trend for fewer but bigger deals, just two large portfolio transactions accounted for 22% of total volumes.

These were the €1.3 billion acquisition by Nordics-based company Heimstaden of a residential portfolio in the Czech Republic and the sale by Lone Star Funds of a majority stake in the GTC portfolio, worth €2.3 billion, to Optima, a Hungarian investment fund manager.

“Offices, industrial and logistics and PRS have been the most sought after sectors, while retail and hospitality were heavily subdued,” said Turpin. “Investors are showing a desire to put their capital in robust sectors.”

Shift from just-in-time is a benefit

Leasing activity in the logistics sector has been strong, despite some factory closures, and the CEE region will continue to benefit from the shift in supply chains away from the just-in-time model to a more robust model.

On the negative side, the region’s reliance on the automotive sector, which is under strain, could be a problem down the line, he said.

In the office sector leasing activity was down 40%, in line with Europe, and as in the rest of the Continent there is a question mark over the working from home trend.

“Subleases and flex space are very strong and business services continue to be a very important sector,” said Turpin. “There have been some financing and market issues, so vacancies are likely to creep up.”

Looking ahead, prospects are bright provided coronavirus is brought under control.

“The spread between Germany and CEE, as well as the spread with bonds, make CEE real estate a very compelling opportunity,” said Turpin. “Investors’ appetite will return as soon as there is some clarity on the end of the pandemic.”