Property values plunge across CEE, says JLL

Investor and developer activity in Central and Eastern Europe decreased markedly during the first months of 2009, according to Jones Lang LaSalle's latest CEE Capital Markets Outlook report.

JLL said that only the best assets in the best locations attracted attention from investors in Q1. The pricing of these assets was much lower than 18 months before.

Rapidly decreasing values will create issues for borrowers and banks as additional equity will be needed in many cases to maintain Loan-To-Value ratios, the report warned.

Tomasz Trzós³o, head of Capital Markets in CEE at JLL, said yields in Central Europe had increased significantly, and are now around 7-7.5% for prime office and retail assets and above 8% for distribution and logistics. This is about 150 basis points more than average sustainable yield level in Western Europe, including the UK, where current pricing for core non-distressed product is around 6%.

'We are of the opinion that pricing of real estate will be under further pressure in the next couple of months and we may see some further yield decompression until late autumn 2009. From autumn 2009 we expect that activity levels will improve and there will be more core investors looking for product in Central Europe, Poland and the Czech Republic,' Trzós³o said.