GTC Green Heart in Belgrade.
Global commercial real estate company Avison Young reported an investment volume of 4.2 billion euros for the first half of the year in the Czech Republic, Hungary, Poland, Romania and Slovakia. The consulting firm recorded € 2 billion in Poland alone.
This follows the pattern established with Poland as the dominant investment market in Central and Eastern Europe, followed by the Czech Republic, Hungary and Romania.
In a recent transaction already reported by the Budapest Business Journal, the Hungarian investor Indotek Group decided to buy the GTC Belgrade office portfolio for 267.6 million euros. The agreement will relate to the sale of 11 buildings totaling 122,000 m² in five business parks.
Analysts say once completed in this third quarter, the deal will become one of the biggest real estate deals in the Central and Eastern European market over the past five years.
Volumes are expected to be relatively similar to 2020 at around € 10 billion for the EEC and around € 1.1 billion in Hungary, according to Avison Young.
“After a quiet period in mid-2021, there is good momentum and a significant number of transactions underway. I am confident about the level of activity in the coming months ”, comments Benjamin Perez-Ellischewitz, director at Avison Young Hungary.
Domestic investors are particularly active in Hungary and the Czech Republic: in the first half of 2021, the share of domestic investors in Hungary was 80% and 44% in the Czech market. Over the whole of 2020, the proportion of domestic investors was 52% in Hungary.
“In addition to the usual Austrian and German capital active on the Hungarian, Czech and Romanian markets, these countries have experienced a real development of local capital pools in recent years,” notes Perez-Ellischewitz.
“Changes in the legislation and the financial and fiscal framework have made possible these developments,” he adds.
These national investors are also exploring possibilities in other parts of the region, given the lack of opportunities in their markets, and are effectively becoming regional players. Perez-Ellischewitz points out that Futureal, Indotek and Wing are Hungarian examples of this phenomenon.
Looking at the performance of various sectors on investment-grade stocks and pipelines, Perez-Ellischewitz argues that what he calls the “catastrophic scenario” for the office will not happen, and he is confident in his performance at long term.
“Obviously, as always, you have to be selective and different assets will show up differently. I think the end of the debt moratorium will trigger a price adjustment in the hotel industry. The logistics market is, of course, very hot right now.
Yields are expected to remain stable for now across all asset classes, but significant logistics compression in the coming months below 6% is expected. A large gap of 100-150 basis points persists between Hungary, the Czech Republic and Poland, reflecting investor preferences.
This article first appeared in the print issue of the Budapest Business Journal on October 22, 2021.