Post-pandemic CEE sees return of foreign investors

The CEE region has been hit by the pandemic but prospects for 2022 look positive as foreign capital returns, delegates heard at Real Asset Media’s Hot Assets in CEE: Market Update & Investment Outlook – 2022 briefing, which took place online yesterday on the REALX.Global platform.

Transaction volumes have reached €7.3 billion in Q1-Q3 2021, with a forecast of €11 billion for the year. Still a far cry from the €14.4 billion recorded in 2018, but a definite improvement on last year.

“So far this year, CEE volumes are down 20% compared to 2019 figures, but it’s better than the -25% recorded in 2020,” said Kevin Turpin, regional director of research CEE, Colliers. “Considering that shopping centres and hospitality venues were not trading and that investors were not able to travel to see assets, it is not a bad result.”

Poland continues to be by far the biggest market in the region and has the most product available. This year it represents 51% of the whole CEE market, accounting for €29.9 billion, followed by the Czech Republic with €13.3 billion, Hungary with €6.8 billion and Romania with €4 billion. Slovakia and Bulgaria are next with €2.8 and €2 billion respectively.

“If you see CEE in the context of Europe, volumes are five to six times smaller than a country like Germany or the UK,” said Turpin. “Poland is similar to Norway or Switzerland.”

Investors looking for sizeable tickets head for Poland, which has become almost completely reliant on foreign capital. Across the CEE region the average is 76% versus 24% domestic, but percentages vary from a high of 98% in Poland to a low of 54% in Hungary.

“Hungary and the Czech Republic have a strong base of domestic capital that has become increasingly active in recent years and has been investing across borders in CEE as well as in their home market,” said Turpin. “We expect this trend to continue.”

European investors are the majority, accounting for 33% of all sources of capital, followed by intra-regional CEE capital with 26%.

“Middle Eastern, Asia-Pacific, South African and North American capital has dropped off significantly recently, but we expect these investors to come back when travel restrictions are lifted,” said Turpin. “They tend to look for scale and sometimes they cannot find the ticket sizes available, or the teams on the ground to follow the deal through.”