Deal volume in CEE plunges 60% in H1: CBRE

Commercial property investment volumes in Central and Eastern Europe (CEE) fell 60% to EUR 2.1 bn in the first half of 2012 compared to the same year-earlier period, according to the latest data from CBRE. The adviser attributed the sharp decline to continuing eurozone uncertainty combined with a focus on prime assets.

The majority of deal flow took place in Russia and Poland, which accounted for 83% of the CEE total. The most significant decreases were visible in markets perceived as being more risky such as Romania were deal flow plunged to EUR 50 mln in H1 2012 from EUR 250 mln in the year-earlier period.

A steep decline in activity was also visible in the Czech Republic. The main causes for this were a strong H1 2011 combined with reduced availability of top quality retail product after a period of strong retail trading in 2011.

The largest transactions recorded across CEE during the first six months were the sale of Zlote Tarasy in Warsaw from ING Real Estate Development to a fund managed by AXA REIM and a 50% stake in Golden Babilon Rostokino in Moscow - where Immofinanz bought the remaining shares from its co-owner.

Jos Tromp, Head of CEE Research & Consultancy, CBRE, commented: 'Continuing eurozone uncertainty combined with an almost pure investor focus on core product has caused market activity to contract in a similar way to that seen in 2009 / 2010. With the issues in the eurozone unlikely to be resolved soon, the negative spin-off this turbulence has on banks is therefore likely to prevail for longer. A consequence for real estate markets will be that the available amount of capital to be invested in real estate across CEE will remain lower than the market has previously been used to.'

The surge in CEE property investment activity in recent years was mainly driven by increased product availability. Significant deal flow in some of CEE’s markets has reduced the amount of available quality space rapidly, a factor which is likely to result in lower product availability in the years to come, CBRE said. Based on investor profiles currently active in CEE it is very likely that the search for top quality product will continue with limited spill-over effects into the secondary market.