CEE Investment Market 2020

2020 will undoubtedly go down as one of the most memorable years for all the wrong reasons. The arrival of the Covid-19 pandemic in March 2020 has impacted the CEE real estate market across all sectors. Some with positive gains, such as in the logistics sector, but others with clear negative impact, such as retail and tourism

February 09, 2021

The total CEE investment volume represented a total of over €9.7 billion, representing an almost 32% decline from 2019.

In Romania, 2020 started with a large pipeline of transactions; several high-profile office deals were in advanced stages of negotiation. While the outbreak of COVID-19 had a significant impact on the investment market, the total transaction volume for 2020 represented a significant increase from 2019. The only country in the region to show an increase, driven mainly by the large NEPI/Rockcastle portfolio acquired by AFI.

Poland continued its dominance with 57% of total CEE volume and notably a strong year in logistics. Q1 was very active with roll-over deals from 2019 but as the year progressed volumes declined compared to previous years with a country total of €5.6 billion, showing a 30% decline from 2019. Still the 3rdhighest volume on record.

Czech Republic did see the largest deal in its history with the Residomo transaction of €1.3 billion. Excluding this transaction, in order to make realistic comparisons year-on-year, the Czech market saw a 52% decline in volumes. Investor demand remains strong for core product but there were limited core office transactions –notably only Churchill Square and Rustonka, both in Prague.

In Hungary there was a smaller decline of 25% with a market dominated by the office sector representing 65% of investment volume. The previous high dominance of domestic capital in 2019 has been reversed back in 2020 to an equal split between foreign and domestic capital.

In Slovakia, despite a very promising start to the year and expectations of 1bn, investment volumes actually declined by 32% as a result of Covid-19. Investor demand remains in strong for core and core+ industrial product as the occupational market recovered in Q4 2020. In 2020, prime yields saw some upward pressure in comparison to 2019, with the most visible decompression in the office and retail sectors. The logistics sector is expected to see some small compression as 2021.

The outlook for 2021 is with cautious optimism but the outcome will be dependent on the successful roll out vaccination programme and a return to confidence in the markets. Leading international and domestic regional investors are still heavily focused on investing into the CEE region, especially in the industrial sector which seems to be the least affected by the global pandemic.

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