Record investment in CEE driven by US and Germany - CBRE

Investment into Central and Eastern European (CEE) countries (excluding Russia) increased by 25% in 2015 year-on-year to €9.9 bn thanks to significant foreign interest, according to new research published by CBRE.

'The strong investment volumes within the region are a result of US and German investors looking to take advantage of relatively high yields and strength of available stock on the market,' commented
Gijs Klomp, head of CEE Investment Properties. 'In 2016 we expect this to continue as the stage is set for strong economic growth in the CEE, with relatively high yields compared to Western Europe and increasing interest from banks to finance in the region. We also expect to see an increasingly diverse investor profile as Asian investors begin to increase their presence within the area.'

While year-on-year increases were expected, the overall performance exceeds forecasts and paints a picture of a solid rebound within all CEE countries, the report said.

The US accounted for 30% of investment into the region in 2015, compared to 23% in 2014, with US funds making investments in all core-CEE countries, as well as Latvia. Germany was the second largest investor, accounting for 23% of all investment into the region last year, an increase from 12% in 2014. Germany’s presence can be attributed in part to the activity of Union Investment, who was the largest investor in the region in 2015.

The high levels of investment in 2015 did push yields down, however. Cross-regional disparities in terms of pricing need to be assessed, CBRE said. While certain markets and sectors have almost reached the yields from the previous peak economic cycle (most notably Czech Republic and Poland), other countries have yet to reach their potential. As investment transactions for prime properties do not show any signs of slowing down, CBRE believes some markets may even see yields moving into new territory, beyond those from 2007.

While the outlook for 2016 is positive, a potential deterrent to further strong growth in investment volume may be the scarcity of attractive product available for transaction. As a consequence, office development in Warsaw and Bucharest is at record levels, making use of investor and occupier interest in the markets.