Industrial investment and occupier activity saw an upswing in the first half of 2010 in the CEE region, although volumes remained below pre-credit crisis levels with recovery in the industrial investment market still fragile and uneven. That is one of the key conclusions of Jones Lang LaSalle’s latest European Industrial Markets Autumn 2010 report.
Industrial investment and occupier activity saw an upswing in the first half of 2010 in the CEE region, although volumes remained below pre-credit crisis levels with recovery in the industrial investment market still fragile and uneven. That is one of the key conclusions of Jones Lang LaSalle’s latest European Industrial Markets Autumn 2010 report.
Investment activity in the three core Central European markets remained uneven in H1 with stronger growth recorded only in Poland thanks to a Panattoni portfolio sale in Q2. Compared to H1 2009 when no investments were recorded, 2010 started with more activity but volumes have still declined by 21% compared to the weak H2 2009.
Outside the core markets, EUR 96 mln was invested in Croatia, the first major institutional investment in some years and with hardly any product in the market we expect this to remain an exception. Prime yields have benefitted from the overall recovery in investment sentiment with compression in the Czech Republic and Poland of 25bps respectively in H1. Outside the core markets, yields have hugely compressed, by 150bps in Bucharest, but these markets are untested and yield shifts are so far only happening on paper.
'Industrial investment volumes in the CEE reached a record share in European volumes in H1 2010. The market is dominated by forward funding transactions - the only feasible way for investors to secure healthy long-term returns in a compressing yield environment,' noted Tomasz Puch, National Director Capital Markets at Jones Lang LaSalle Poland.
A recovery in demand was achieved in H1 2010 when compared with the almost non-existent take-up in H1 2009. However, take-up declined 21% on H2 2009 and remains significantly below the 10-year average. Only Poland recorded growth on H2 2009 (+19%), accounting for 60% of the regions total take-up. Nevertheless, owing to low development activity over the last two years, take-up is now higher than new completions. As a result vacancy fell across the region. Pipeline volumes have stayed low as developers focus on reducing voids in units built speculatively in the pre-crisis market although a small number of build-to-suit developments did start in Q2. Rental movements over the last year have seen rents up in Prague, down in Warsaw and stable in Budapest.
Tomasz Olszewski, Head of Industrial CEE at Jones Lang LaSalle added: 'Increased activity on the investment market and improving moods of the investors have also very positive influence on developers' new activity. We are seeing increased demand for build to suit projects - especially production related - and easier access for funding will help developers to materialise a lot of these investments.'