Deals

Cushman: European core cash heads to CEE

Data from the global property services firm suggests that European core investors are increasingly active in the region due to high pricing and low stock availability in Western Europe.

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There is an emerging trend in Europe of capital moving east from the UK, France and Germany to the notable benefit of property markets in Central and Eastern Europe (CEE), according to a study from Cushman & Wakefield (C&W).

The global property services firm’s research said that 2015 investment volumes for Central and Eastern Europe will reach €7.5 billion and will increase to more than €10 billion a year during the next five years.

“There is more money focusing on Central Europe than at any time in the past 7 years. We are seeing new key sources of core capital from across Europe starting to replace the recent dominance of North American capital. This is maintaining the downward pressure on yields in Warsaw, Prague and Polish regional cities,” the study said.

C&W puts this movement away from Western Europe down to a combination of push factors: extreme pricing, limited availability of institutional grade property and in some cases, weaker occupational markets. Yet, C&W said the CEE also strong pull factors such as exceptional GDP and consumer spending growth.

“The search for opportunities has continued to push investors towards quality assets in secondary cities across Poland, the Czech Republic and Slovakia as well as driving demand in Budapest and Bucharest,” commented James Chapman, partner and head of CE capital markets at the firm.

In the first quarter of 2015, the Czech Republic saw the greatest inflow of capital with €800 million transacted (a 228 percent increase year-on-year) primarily in the retail and industrial sectors. Notable deals included Union Investment’s acquisition of a majority share in the Palladium shopping center in Prague for approximately €570 million. AEW Europe LOGISTIS Fund’s industrial acquisition of Prague Logistics Park for €150 million was the second largest Q1 CEE transaction.

Retail was the leading sector in CEE with €762 million traded in Q1 2015 (a 66 percent increase year-on-year), followed by the industrial sector with €382 million (a 200 percent increase year-on-year). Offices attracted only €147 million investment capital (an 80 percent fall year-on-year).