Commercial real estate services firm CBRE has just released data that paints a bleak picture for commercial properties in Central Eastern Europe, Poland and Russia being the two exceptions. The company's latest report shows a 35% decrease in overall commercial real estate investment across CEE in 2012, with only 7.4 billion euros in total investments in this region. While Poland and Russia are the two most promising markets, investments still dropped 20% compared to 2011.
The report shows a great contrast between prime assets in key locations and the rest of CEE countries, the difference only getting bigger. Quality asset in Warsaw, Moscow and Prague are quite attractive, while the rest of the CEE region shows extremely feeble interest when it comes to commercial real estate investments.
Offices are the most liquid segment, amounting for 44% of the volume, according to the report, but that is due to a low supply in quality retail assets. The industrial segment is also showing some increase in investment interest, a trend to watch in 2013.
"Due to high levels of vacancy and relatively low net absorption in recent years, investment in the office segment in Prague has remained low. Prime assets are in demand, however, and are proving difficult to obtain," said Jos Tromp, Head of CEE Research & Consultancy, CBRE. "The purchase of City Green Court by Deka from Skanska for around €54 million confirmed the prime yield levels quoted for Prague. In Warsaw more offices were traded during 2012; however, investors have also started to price in the risk of vacancy increasing over the next 12-18 months."
Mike Atwell, Head of CEE Capital Markets, CBRE, added:
"With the pricing of prime office assets relatively stable in most segments and markets, thus far pricing for secondary offices – even in the most liquid cities – has moved by at least 75-100 basis points to date. Some investors have started to show interest for value-add opportunities in prime office locations in order to pro-actively prepare for the anticipated increasing vacancy. The yield gap between prime offices in the capital and regional cities amounts to around 150 bps. Generally the gap between prime and secondary is expected to increase through to the end of 2013."