Investment Properties in CEE

Attractive and advantageous investments opportunity.  

Over the past few years, economic growth in countries in CEE outplaced global economies on the whole. The greatest advantage of the region is location, which opens markets of over 200 million consumers, qualitative labor force for relatively low cost, good atmosphere for foreign investment and business development. Along with the growing economies, the CEE[1] countries appear as the most dynamic real estate market in Europe in 2016. The total investment in properties grew over 42% in comparison to 2015 and reached over €12.56 billion[2].

There is no better time to invest in CEE region than now as it is one of the most attractive marketplace and still offer profitable investment opportunities in properties.

Both the macroeconomic trends and the real estate market fundamentals remain favorable in the CEE market. Against a backdrop of continuing low interest rates, the difference between real estate and interest rates and/or bonds yields remains a motive for further development of the properties market. The new investors coming to the market, along with the preferable conditions indicate further increase in real estate transactions to continue.

Yields from Investment Prime Properties in CEE countries in 2016

Poland
Czech Republic
Hungary
Slovakia
Romania
Bulgaria
Offices
5 – 5.25%
5 %
7 %
7 %
7.50%
8– 8.5 %
Retail
5.00%
5.25%
6.75%
6 %
7.25%
8 %
Industrial
6.75%
6.5% - 7.5%
8.5 %

8.75%
9 %
Source: Colliers International, CBRE and Cushman & Wakefield

In general, yields have seen a stable evolution across all markets, with the exception being Hungary, where prime yields have compressed for offices, high-street retail and for retail warehouses, reflecting the ongoing negotiations for best-in-class assets. As from the start of the year prime yields have reached record low levels for this current economic cycle, further yield compression in Czech Republic and Poland are possible only on the basis of prime assets being transacted. Within other markets, as investor’s interest show signs of increase, new pricing levels will be established. As CBRE[3] has predicted interest for the region in 2016 was strong, considering a solid macro-economic base and quality of assets available for transaction. The projections is, if the rhythm of transactions continues, investors will face scarcity of attractive products, up for sale. With Poland still the primary destination for international capital and most of the CEE markets considering themselves undervalued, there is no doubt that CEE is a good choice for doing business and investing in real estate. The region is creating a new image for itself as Bulgaria appear to be the most appealing investing destination in the region with yields from rents up to 9%.

The Bulgarian Investment Property edge

  • Active property market – properties remain on the market for 3 to 6 months;
  •  85% of the real estate deals are in investment generating properties;
  • Up to 9% yield from rents on investment properties in Bulgaria;
  • 40% of the investors are foreigners;
  • Stable economic growth  - 3% in 2016;
  •  Stable bank system.

Bulgaria’s real estate investment climate has marked a turnaround in 2016, according to the latest Colliers International report[4]. Income-generating transactions prevailed (85 %) over speculative. 40%[5] of the property investors are coming from abroad. Compared to 2015 the contribution of business users significantly shrunk to 6 % in favor of the classical property investors. This is yet another evidence of the growing appeal of the market to professional investors. The higher bank activity and the lower interest rates additionally triggered the trend. Over the surveyed period the investment appetite was predominantly focused on office buildings, followed by retail properties (22 %) and hotels (13 %). The experts expects the increased demand for office space to continue. At the same time, projects that entered the market over 2016 as well as projects under construction in established office locations will increase supply in response to higher demand.
The ongoing boom in Bulgaria’s property market is also being supported by heavy public spending on infrastructure projects. Economic growth and rising private consumption are also fuelling growth in the value-added Bulgarian real estate market. Bulgaria’s GDP grew by a real 3 %[6] in 2016. The banks in Bulgaria operate in accordance with the highest international professional standards. The head of the IMF to Bulgaria, Reza Baqir, expressed the satisfaction of the fund’s experts with the evaluation of bank assets in Bulgaria and the stress tests of commercial banks carried out in the country. The results of the procedures revealed that the Bulgarian banking system is stable and secure.
Forton Markets Snapshots 2016 reveal encouraging data for sustained development path of the sector. On the supply side of class “A” offices, a limited number of new completions and the growing demand push up the rents. In the beginning of 2017 the yields of such investment properties reach up to 8, 5 %.
Economic upturn and increasing consumption boosted the Bulgarian industrial property market in 2016. With almost 26,000 sqm newly occupied industrial space in Sofia, the total annual leasing volume reached 46,000 sqm*. Income of such investment is highest possible in the region, up to 9 % annually.
“Revetas Capital” purchased the Sofia Airport Center office and logistics complex from Tishman International. In the beginning of 2017 NEPI (“New Europe Property Investments”) shall finalized the transaction of the ownership of one of the biggest shopping centers in Sofia with TBA of 66 000 sqm. for the price of 180 million euros. According to the balance sheets of the shopping center the yield of the commercial and advertising areas is 8%.

Take a perspicacious step and make your investment now. Get the best profit at the fastest developing property market in Europe


[1] Central and Eastern European countries: Hungary, Poland, Slovakia, Czech Republic, Romania & Bulgaria
[2] Eurostat data
[3] Commercial Real Estate Services, CBRE: http://www.cbre.com/
[4] Global Investor Outlook Report, 2016, Colliers International
[5] National Statistics Institute data
[6] National Statistics Institute data
[7] Data source: Investment Guide, Volume 1, October 2016 by www.eoropaproperty.com
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