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Central and Eastern Europe – is it Time to ‘Follow the Money’ Again?

The ‘big money’ is flowing back to CEE. Peter Hemple looks eastwards for opportunities

According to Colliers International, commercial property investment flows into Central and Eastern Europe (CEE) real estate rose substantially to €2.8bn in Q1 2017. In terms of destinations, money flowed heavily into the Czech Republic and Hungary and the retail sector dominated investor interest.

The data from Colliers shows that annual investment flows to CEE peaked at €13bn in 2007, falling to just €2.9bn in 2009. But they have been increasing every year since 2012 (€3.9bn) until last year (€12.2bn) and if the first quarter of this year is anything to go buy, 2017 could be a record year as Q1 investment flows this year were up 70% on Q1 2016.

Looking at investment flows by sector, so far this year there has been a clear move away from office and industrial investment and a big spike in retail and hotel investment.

However, despite the Romanian economy far outperforming the rest of the region, with Q1 GDP up by 5.7% compared to a year earlier, the majority (56%) of the commercial property investment is currently heading to the Czech Republic.

Czech the FX rate first
The investment climate in the Czech Republic began to heat up in November 2013 when the Czech National Bank (CNB) made a commitment to stop the Koruna from going below 27 to the Euro as an additional tool to stave off deflation. This move to cap the Koruna’s exchange rate followed the CNB’s decision to cut interest rates to close to zero in November 2012, two months after the Koruna had strengthened to just 24 to the Euro.

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