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What Property Sector is Hot, and What is Not, in Central and Eastern Europe?

Avison Young recently released its H1 CEE Property Investment report,  which found significant structural market shifts taking place in Central and Eastern Europe (CEE) that have not been seen since the aftermath of the 2008 financial crisis.

Unsurprisingly, Industrial and Logistics, which was the biggest loser in 2008, is now the biggest winner. The report states: ‘Almost every institutional investor is seeking this asset class and yields are sharpening every quarter. Czechia (Czech Republic) registers the lowest prime logistics yields at 4.50%; Hungary and Romania look exceptionally good value with prime yields at 6.50% and 7.50% respectively.’

For Retail Parks, Avison Young says that over the past 12 months every geography in its CEE region (Czech Republic, Poland, Slovakia, Hungary and Romania) has recorded yield compression in the Retail Park sector. Investor demand is strengthening and prime yields in Czechia (5.75%) are now converging towards those of Shopping Centres (5.50%). AY expect this trend to continue as investors seek “Covid-proof” assets; so investors could grab a bargain at a retail park in Poland where prime yields are currently 7.00% against Shopping Centre yields of 5.75% (see table below).

As is almost always the case, the office segment dominated total investment volumes in CEE in the first half of this year, accounting for €1.95bn or 46% of total investment volumes. However, Avison Young says that there is a new asset class on the block. ‘Multi-family Residential properties for the Private Rented Sector (PRS) and the Build-to-Rent (BTR) sector are popping up on the shopping lists of all major institutional investors; domestic and international. Competition is high and yields are extremely low, as investors count on long-term capital value growth.

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