South East Europe Real Estate Market H1 2022

South East Europe Real Estate

Despite the continued disruption, high inflation and rising interest rates, real estate has shown remarkable resilience according to CBRE. The Texas-headquartered leading commercial real estate services provider, in its CEE Real Estate Market Outlook H1 2022 discusses the current economic and commercial real estate markets in Central Eastern Europe including CEE-5 core countries (Czech, Hungary, Poland, Romania and Slovakia), as well as Baltic and South East Europe (SEE) regions. Here are the key findings:

The total investment volume on the commercial real estate in the first half of 2022 amounted to EUR 5.9 billion in the whole region, up 20% y-o-y.

(Source: CBRE)

Office has been continuously the most attractive sector, registering around a 50% share in the whole volume. Strong office demand and growing rents are key factors, although finding investors for large towers remains a challenge.

Retail is coming back into focus for investors. In H1, almost EUR1.5 billion was invested in the retail sector, mostly in retail parks and convenience centres.

Demand for industrial and logistics space remained high in all the markets. Particularly in the first month of the Ukrainian conflict, the warehouse space was almost fully occupied.

The share of residential transactions is still low but alternative sectors, such as hotels or data centers, are getting a bit more attention.

It will take several months for markets to stabilize in terms of pricing, especially, if interest rates continue on an upwards trajectory.

Romania Real Estate Market Outlook H1 2022

In a separate report, CBRE focused on the Romania. Below are the main findings:

Mid-2022, the investment volume in Romania amounted EUR 323 mln., 6% higher compared with the amount transacted in the same period of the previous year.
In the first half of 2022, the total office leasing activity in Bucharest amounted 132,500 sq m, value with 18% higher compared with the same period of the previous year. 
In the first six months of 2022, almost half a million sq m of logistics spaces was leased throughout the country, with 38% more compared with the similar period of 2021.
The sentiment of recovery for retailers is backed by increases of footfall compared with the amount registered in 2019.
Development land for future residential schemes was the most sought after by developers, the overall surface of land in this type of transactions representing 63% of the total transacted during the first six months of the year.

2022 SEE Outlook

The US company’s 2022 SEE Outlook found that year 2021 wrapped up quite positive when considering investment volumes in SEE, outreaching by over 17% the year before. Office development varied across different SEE markets in the previous year. After severe contraction, overall retail sales have generally recovered. Ecommerce and 3PL players were look for opportunities and to serve growing consumer demand from online channels.

What lies ahead

With inflation remaining high, the next year will be much slower, bringing signs of
stagflation in some countries. Economic headwinds will shape the current markets and impact investment decisions. Investors will refocus on core, prime assets, including also retail, which is again starting to attract more attention. Nevertheless, all the markets will experience some yield decompression in all sectors.

According to CBRE, Central Europe should take advantage of their strong labour markets, lower costs and a relevant stability. The near-shoring, trend will attract a number of new business centers and producers to establish their business or manufacturing centers here. ESG, wellness and technology are the three key trends to shape commercial properties, the report concluded. The region is quite advanced in these areas.