Office investment up 43% in CEE, while hotel deals soar

The office market continues to dominate the CEE investment scene, according to new data from Colliers, rising 43% year-on-year in a robust set of quarterly figures.

However, hotel investment volumes topped the deal surge, registering a 320% increase over 12 months. Industrial also fared well, up 26%, while retail continued a difficult year, falling by 69% in the second quarter.

Overall, investment volumes into commercial real estate achieved a cycle-high €3.3 bn for the quarter, bringing half year figures to €5.5 bn, just 3% down on H1 2018's record. Czech and Hungarian deals dominated the first six months of 2019, up 83% and 35% in H1 2019 compared to a year ago.

Colliers said that Romanian, Hungarian and Slovak deals also picked up in Q2 following a weak Q1.

In terms of origin, Asian purchase flows rose at the expense of CEE players in H1 2019. CEE cross-border purchases and domestic flow in Poland in particular are very weak, according to the research. US funds remain net sellers, while UK and Western European money turned net buyers in H1.

Backing up solid flows, prime capital city office yields have compressed very moderately in the past 6 months. Colliers said they were likely to compress further in the major capital cities in the next 12 months, with Budapest leading the trend, and Warsaw also performing positively.

Conversely, vacancy rates are likely to keep increasing in Bucharest, while yields are forecast to move out in the Bratislava office market over the next 12 months.

Rent growth in the key office sector looks likely in Budapest and Prague, with rent decreases more likely in Bucharest and Bratislava, Colliers confirmed.

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