Total office stock of CEE capitals (Bratislava, Bucharest, Budapest, Prague, Sofia and Warsaw) exceeded 20.5 million sq m at the end of 2020. While supply continued growing in Warsaw, Budapest or Bratislava, other markets’ development slowed down, facing difficulties with financing or prolonged planning processes. As a result, Prague’s vacancy rate stayed relatively low (7.0%) while Budapest increased (9.1%). Net absorption remained positive in all markets.
The impact of increased working from home schemes can be seen throughout the region, although occupiers’ activity declined less than expected. Some companies are reconsidering their office space needs, offering part of their premises for sublease. Headline rents keep stable in most markets, while incentive packages are scaled up to include more extended rent-free periods and more generous fit-out contributions, leading to more pressure on effective rents.
At the end of 2020, there were more than 39 million sq m of modern industrial and warehouse space in the CEE; about half of that (51%) in Poland. The industrial market develops fast in the region: about 11.5 million sq m of new space were completed in the last three years. Markets in Poland, the Czech Republic and Romania have been growing the fastest. More than 3 million sq m are currently under construction—about a third of that built on a speculative basis, which demonstrates a good condition of the markets seen as less risky for the investors than in the past decade.
Companies from various industries (especially retailers) are intensively developing multichannel sales strategies. They increase the demand for logistics services and warehouse space of multiple types – logistics centres for domestic and cross-border distribution and projects dedicated to “last mile” logistics.
The traditional in-store model is changing in Europe as well as in the CEE countries. Retailers face a new situation that drives innovation and flexibility. The growing importance of e-commerce is undeniable, although there is no reason to imply that retail will not work in the longer term. Shopping centre saturation in most countries in the region stays well below the average in Western Europe. Some sectors (electronics, home equipment) did well despite closed shops during 2020. Investments currently flow into the construction and expansion of smaller schemes and retail parks, providing a convenient shopping experience that is more resilient to current challenges.
The global hotel sector had undoubtedly faced serious challenges in 2020. Hotels in the CEE were no exception, with average revenues per room down by about 80% across the CEE-6 capitals (Bratislava, Bucharest, Budapest, Prague, Sofia, Warsaw). Unsurprisingly, transaction activity in the region declined significantly, with transaction volume falling by nearly 75%, as many deals were put on hold or withdrawn. However, little distress has yet been seen on the market, buoyed by government support and loan moratoriums. Conversely, investors have been awaiting greater visibility on the market recovery before making commitments. As vaccination rollouts continue and with the market showing signs of optimism around summertime, hotel performance and transaction activity is expected to pick up towards the latter half of the year.