The major wave of South African investment in Central and Eastern European real estate may have peaked in 2016, but the Asian component could well match or exceed last year's volumes, according to new research released by Colliers International on the first day of MIPIM in Cannes.
Colliers bases its prediction on the 'the large number of potential sources that capital can hail from in that vast, deep and liquid arena' in Asia.
Asian investors see CEE as a risky, higher return diversification opportunity compared to Western Europe, Colliers says in the research entitled The Changing of the Guard New trends in CEE investment.
Mark Robinson, CEE research specialist, commented: The next “South Africa”, in the sense of capital from riskier environments for CEE might well be Turkey, or perhaps Brazil, Russia or MENA countries if oil and commodity prices sustain at present levels. We believe the €5 bn of investment from the G10 arena will stay around these levels in the face of slowly rising bond yields.'
Investment in CEE real estate has been on an upward curve since 2013 when €5.4 bn of property changed hands. The 2016 volumes of €12.2 bn was not far behind the absolute record of €13 bn during the boom year of 2007. The growth, Colliers says, is more impressive as smaller-ticket deals tend to make up a greater proportion of total activity.
Domestic investors
Cross-border capital has always been the vast majority of the market but domestic investors are becoming increasingly important. The report forecasts that the 21% CEE-sourced slice of the 2016 investment total will rise further 2017 and beyond. Yield comparatives and expanding routes to market are the most probable principal drivers of this growth.
While Hungary, Slovakia and the Czech Republic are developing well, Poland and Romania have the furthest road to travel in terms of improving access for local investors to the commercial real estate marketplace. Poland might opt to push for REIT legislation or see more companies listed. REIT legislation exists in Bulgaria and Hungary but listings are only active in the former. Only Slovakia out of the CEE-6 countries allows its pension funds to operate in the real estate sector. There is not much sign of this changing, Colliers concludes.
