The Romanian real estate sector had the best investment performance compared with five other major Central and Eastern European economies – Bulgaria, Czech Republic, Hungary, Poland and Slovakia – in a context of subdued regional market activity where transaction volumes reached one of the lowest levels in a decade, Colliers said in its Highlights 2022 CEE Investment Scene Q1 2024 report published on Tuesday.
“There remains a disparity between the price expectations of buyers and sellers. Various factors affect returns and liquidity, including interest rates, maturity, loan terms, and ESG compliance, among others. However, the primary challenge persists in the cost of financing [...]. Compared to Western European markets like Germany, the CEE region has not undergone significant price corrections in the past 12-18 months," Laurențiu Lazar, Managing Partner and Head of Investment at Colliers Romania, said in a press release accompanying the report.
The total investment volume in the six CEE countries decreased by an annual 15% to 1.2 billion euro in the first quarter, with the Czech Republic accounting for 46% of the aggregate investment volume and overtaking Poland as the regional leader after an annual increase of 36%. Performance varied widely across the region, with investment activity in Slovakia, Bulgaria, and Poland plummeting by 94%, 78% and 49% on the year, respectively.
The retail sector accounted for 66% of the total commercial real estate investment volume in Romania in January-March, echoing its regional performance in CEE, where it sliced a share of 43%. The hotel sector was the runner-up both in Romania and the wider region, representing around 21% and 20%, respectively. Industrial and Logistics (I&L) investments were third on the podium in CEE with a share of 15%, while office investment volumes saw a continued deterioration, representing only 13% of the aggregate.
Bucharest and Sofia had some of the highest investment returns in the region for office, industrial and retail sectors. The Romanian capital saw prime yields of 7.5% for the industrial and office sectors, while shopping centres generated returns of 7.25%. In Sofia, the office and retail sectors achieved returns of 7.75%, while industrial assets generated 7.5%.
The CEE real estate outlook is strong, but external factors and high interest rates challenge liquidity, prompting sellers to reassess strategies and focus on ESG upgrades. At the same time international capital is essential for boosting market volumes, Lazar added.
Jun 28, 2024
