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News Release

Prague

Deals worth €2.55 billion finalised on the CEE real estate market in H1 2015

Czech Republic leads the CEE region with €1.2 billion of finalised transactions, followed by Poland with a total volume of €813 million. Liquidity increases as an influx of capital hits CEE.


​Prague, 22 July 2015 – According to international advisory firm JLL, total real estate investment volumes in H1 2015 reached approximately €2.55 billion in Central and Eastern Europe. The Czech Republic led the region in terms of volume with a share of approximately 47% (€1.2 billion), followed by Poland (32% - €813 million), Hungary (€280 million - 11%), Romania (7.5%), Slovakia (0.5%), and the SEE market at 2%.

Troy Javaher, Regional Director, Head of CEE Investment at JLL, comments: “As prime European real estate market returns become increasingly tight, other investment locations look more attractive. The positive economic news from Central and Eastern Europe coupled with healthy yields, are attracting capital and re-pricing, with investors especially focusing on Poland and the Czech Republic. Other CEE capital cities along with Poland’s regional markets will also be highly sought after. The weight of international capital seeking core CEE opportunities has provided increased liquidity for large lot-size properties and portfolios. In addition, attractive and more easily attainable financing has widened the pool of investors who are able to offer more competitive pricing. This is especially the case for sources of capital, which previously only looked at more opportunistic products”.

Czech Republic
H1 2015 saw a transactional volume of €1.2 billion as the momentum from 2014 shows no signs of abating. An 89% increase on the same period of the previous year’s figure was underpinned by the sale of Palladium. H1 2015’s volumes have only once been higher – 2007’s record €1.50 billion figure also featured Palladium, that time as a forward sale.

“Ongoing deals and the continued weight of capital targeting real estate carry the potential of a record year in 2015. Importantly, the market is no longer relying on the prime / core sector; liquidity has returned to both core-plus and value-add  profiled-assets as the much vaunted search for yield provides movement up the risk-curve” says Stuart Jordan, Head of Capital Markets at JLL Czech Republic, and continues: “A key trend observed in H1 has been the continued strengthening of appetite from Czech Qualified Investment Funds. QIF’s are now active, competitive parties across a range of risk profiles and on increasing lot-sizes. Their development looks set to permanently bolster liquidity, adding further maturity and depth to the Czech property investment market.”

Retail volumes totalled €878 million for the first half of the year with Palladium and Arkady Pankrac standing as the largest deals. Regionally, Campus Square in Brno was sold by AIG to CBREGI, while a portfolio of secondary retail assets was sold by Atrium to Peakside. Ongoing transactions show fierce competition for strongly performing centres with a deep buyer pool comprising of domestic, European and global capital.

Industrial transactions totalled €85 million over four transactions, the largest being IAD’s Q1 acquisition of TREI’s Penny Market distribution centre for ca. €29 million. The logistics market is well consolidated in the Czech Republic, a situation which causes significant competition for smaller product whilst also increasing the attractiveness of limited portfolio opportunities.

Office volumes were €79 million and included the sale of Riverview by Skanska and the purchase of a mostly vacant building in Florenc by Creditas from J&T Real Estate. There are additional, significant office deals in the pipeline, while larger lot activity continues to be limited by a lack of available, quality stock.

Looking forward, a supportive financial environment and yield arbitrage against western European markets continues to reinforce the attractiveness of Czech real estate. Given known and anticipated demand-side pressure, even additional stock unlocked via improved liquidity will not be sufficient to halt further yield compression.