Investment interest in the CEE region has continued in 2022 despite war in Ukraine, although dealmaking is increasingly 'fragile', according to new research from Cushman & Wakefield.
Several large transactions have taken place in the first quarter of 2022, including EPP’s acquisition of the M1 retail portfolio and landmark transactions such as The Warsaw Hub in Poland.
These were recorded despite the Ukraine conflict, inflation uncertainty, increasing construction costs, and fast-changing interest rates, the research notes.
'The war in Ukraine has delayed some deals leading to overall smaller volumes. Despite this interrupted momentum, continuing over from Q1, we observe some liquidity returning to retail – a trend we expect to continue,' said Jeff Alson, international partner and head of CEE capital markets at Cushman & Wakefield.
'Commercial real estate investment transaction activity is likely to remain slow during Q2 with a subdued market. Agreed deals are being closed but they are considered "fragile” in the light of the regional economic slowdown, inflation, and uncertainty.
'The fragility of the CEE real estate investment market is most acute in the sector most dependent on rental growth – industrial. As rental growth continues over the coming months, we expect to see pent-up capital being more easily deployed. This should boost deals in the region, particularly in the industrial sector.'
Regional results
Poland, which saw a total transaction volume in Q1 of €1.6 bn, registered its largest deal volume in offices since the end of 2019, at 56% of total transactions.
This was the result of the largest single project acquisition in Poland's history - Google's acquisition of The Warsaw Hub office scheme for €583 mln.
In the Czech property market, low supply has continued to create market drag, although industrial remains in significant demand.
The report shows that Hungary got off to a bold start in 2022 with transactions such as Akademia Business Center in Budapest leading the way. Whilst the war in Ukraine has increased investor caution, transactions have continued to close – notably Adventum Group’s acquisition of the cross-border Tesco portfolio and OBI.
In Slovakia, there are several ongoing transactions in all asset classes, the majority of which Cushman & Wakefield expects to close this year. As post-pandemic interest rises, deal closing is still being dampened by the country's proximity to Ukraine, the report notes.
The local investment market in Romania, meanwhile, has already absorbed the initial shock of the war in Ukraine, with investors remaining confident that the fundamentals of the local market are solid. With hot asset classes in the country including retail and hospitality, the broker said it expented 2022 'to be at least as good as the last few years'.
