The first half of 2024 saw CEE investment volumes increase by ca. 29 percent y-o-y. According to preliminary results, this is contrary to European and Global results, where activity is still subdued. Given the current conditions, we expect 2024 volumes could reach up to ca. €5.5 billion, around half of the 10-year average, reveals Colliers in its latest “H1 2024 Investment Scene” report.
H1 2024 Prime yields
With the continued lack of evidence in the market, particularly at the core, or prime end of the market, a gap remains between buyers and sellers on pricing. Financing costs currently range between 5.00 – 5.75 percent, driven by continued higher interest rates, as well as interest rate swaps, which have softened recently. Compared to other markets in Western Europe, such as Germany, there has been a lower pricing correction recorded in CEE over the past 12-18 months, which along with the other factors may lead to a slower transactional activity through 2024.
CEE Investment volume growth rates
(H1 2024 vs. H1 2023 & H1 2022)
Volumes for H1 2024 across CEE were among the lowest levels on record, albeit trending on a positive trajectory when compared to activity in the past 12 months and to European and Global results. At almost 50 percent, Poland secured a majority share of regional volumes, with local activity picking up notably over the second quarter. Following the slow activity of last year, some markets recorded significant YoY growth. Across the region, recorded results varied widely, from a 55 percent y-o-y drop in activity in Slovakia to a 150 percent y-o-y growth in Romania. On average, volumes for the region increased by 29 percent y-o-y but declined by 41 percent against H1 2022.
The lack of transactional evidence in the local markets is dragging out the period of price discovery and a meaningful recovery continues to depend greatly on an improved, economic, inflationary and interest-rate environment. While we have still not yet seen any significant signs of distressed sales, refinancing, maturing bonds, ESG compliance and other specific sector or country-related themes continue to influence the decisions of both buyers and sellers.
CEE Flows by sector (%)
The share of Office transactions is on the decline, both globally and in CEE. In H1 2024, they represented 31 percent of total volumes, while retail transactions retained the largest share of volumes by sector with 32 percent. I&L claimed the third spot with a 24 percent share.
There were only three transactions in the region over €200 million so far this year. The largest concerned an Office portfolio and the next two were from the retail sector – a retail park portfolio and a shopping centre.
CEE Flows by the origin of the purchaser (%)
CEE-6 capital has been the most active in H1 2024, with an almost 50 percent share of total regional volumes. Czech capital secured the highest share of volumes with 36 percent.
UK capital picked up a further 19 percent and was followed by other European capital (18 percent) and other CEE regional capital (13 percent).
Rental growth YoY and Colliers 12-month forecasts
Taking a look at half-year data, we can see that a combination of slowing supply and steady demand, on top of inflation and stabilising costs, have led to more steady rental growth over the past 12 months, with only a few exceptions. However, in many cases, this is at a slower pace than the previous period (notably in the I&L sector).
Looking ahead, depending on the individual sector or market dynamics, the view is mixed and ranges between further rental growth or a more stable outlook. Slowing supply in many markets or sectors will gradually bring vacancy down, further supporting rental growth, especially for newly delivered products that offer the highest quality, in the most sought-after locations, and that demonstrate greater levels of ESG compliance.
