“The war in Ukraine has delayed some deals leading to overall smaller volumes. Despite this interrupted momentum, continuing over from Q1, we observe some liquidity returning to retail – a trend we expect to continue. Commercial real estate investment transaction activity is likely to remain slow during Q2 with a subdued market. Agreed deals are being closed but they are considered “fragile” in the light of the regional economic slowdown, inflation, and uncertainty. The fragility of the CEE real estate investment market is most acute in the sector most dependent on rental growth – industrial. As rental growth continues over the coming months, we expect to see pent-up capital being more easily deployed. This should boost deals in the region, particularly in the industrial sector” – said Jeff Alson MRICS, International Partner and Head of CEE Capital Markets in Cushman & Wakefield.
The total value of transactions closed during the first three months of 2022 was €1.6 billion, 56% being in the office sector. The first quarter saw the highest deal volume in the office sector since the end of 2019. This was the result of the largest single project acquisition in Poland's history - Google's acquisition of The Warsaw Hub office scheme for €583 million. This transaction shows the continued confidence of foreign investors in the Polish market despite increased uncertainty.
The Czech property market is still defined by the limited number of properties available for sale. This leads to limited overall activity at present. There is no clear direction apparent on the market, though industrial properties are the most popular.
Due to ongoing evolution in key parameters like rental levels, expected indexation, as well as financing, operating and construction costs, the market is facing a high level of uncertainty. This is impacting deals in progress, as well as the willingness of buyers and sellers to enter new deals.
However, sectors, submarkets, and properties whose downsides are naturally hedged by the upsides - i.e. those with low vacancy and a low level of competitive threats - are resilient even amid this volatility.
2022 started very strongly with transactions such as Akademia Business Center in Budapest leading the way. Whilst the war in Ukraine has increased investor caution, transactions have continued to close – notably Adventum Group’s acquisition of the cross-border Tesco portfolio and OBI.
In Slovakia, there are several ongoing transactions in all asset classes, the majority of which we expect to close this year. This fact demonstrates strong demand among investors after two years of COVID-19 uncertainty. Although pandemic restrictions have already been lifted and businesses are now operating without any restrictions, the continuing war in Ukraine and its implications may harm investment activity.