Foreign investors are set to return to Central and Eastern Europe as the lockdowns are eased, delegates heard at Real Asset Media’s European Outlook 2021 – CEE briefing, which was held online recently.
‘We’ve partnered with Asian investors on a couple of deals, and we’re bringing more Japanese capital into Europe’, said John Harcourt, Managing Director, Kajima Properties. ‘Travel restrictions have affected capital flows, but it will change quickly once they are lifted’.
‘Sources of capital will be more diversified than in the past’, said Luke Dawson, Managing Director & Head of Capital Markets CEE, Colliers International. ‘Many investors from Japan, Singapore or Malaysia have set up offices or found partners who can execute’.
During the pandemic, as foreign capital was forced to stay away, domestic investors have stepped in, especially in the Czech Republic and in Hungary.
‘Domestic investors were back in the picture in the crisis, it was a visible trend in CEE’s top markets’, said Tomas Picha, Senior Director of Transactions, CEE, Invesco Real Estate. ‘Czech and Hungarian investors, both private and institutional, have dominated and driven prices in some segments, changing the dynamics of the market in their countries’.
Domestic investors have also stepped up their game, doing bigger deals.
‘€150 million tickets were usually reserved for German investors, but Czech investors’ experience and portfolios have grown, which is a great story’, said Dawson. ‘The downside is whether they are trading. So far they’ve been holding and the risk is that the market could stall’.
In some sectors 90% of the capital is domestic. An example is hypermarket portfolios, which were not seen as institutional products but are seen as anti-cyclical and generate 6.5% yields which you cannot find elsewhere, said Picha.
Poland lacks domestic investors, but it has size and liquidity. ‘It is a much more liquid market so, despite the lack of local players, there are still sufficient numbers of foreign investors interested in the market’, he said. ‘On the plus side, investors have gone past the initial shock and are starting to deal with uncertainty, buying into sectors and segments which they believe to be lower risk’.
Poland expected to return to pre-pandemic levels in Q3 this year, which shows how resilient its economy is.