Local investors will stay as a key participant in the CEE investment arena

Mark Robinson, CEE research specialist, Colliers International

The growth of purchases by domestic and cross-border investors in the CEE-6 markets accelerated 32 pct in 2017. The CEE cross-border flow more than tripled to 7 pct of the record overall volume of EUR 13.1bn - says Colliers International in its latest CEE Investment Outlook report.

Mark Robinson, CEE research specialist, Colliers International, comments: The faster march of domestic money helped mitigate the fall in 2017 from 2016’s record volumes from South Africa and Asia. South African funds may step back a little further in 2018; Asian money may become more active again, perhaps through portfolio deals or corporate M&A. 

Further growth of domestically-sourced investment depends on the relative attraction of the asset class locally and the availability to investors of access routes. We see capital city prime real estate yields as attractive, especially relative to sovereign bonds and also relative, with the exceptions of Prague and Bucharest, to the dividend yield of equities. The baskets of listed real estate stocks we assessed have dividend yields in the range of 4 pct presently. 

Asian and South African volumes fell last year versus 2016’s breakthrough year but remained healthy at EUR 1.4bn and EUR 1.8bn respectively. It was 2016’s third new source, CEE money that performed most impressively in 2017, rising 32 pct to a combined (domestic and cross-border) total of EUR 3.3bn. 

Momentum in cross-border flow hit an all-time high of 7 pct of 2017’s rising investment total for the CEE-6 of EUR 13.1bn, which itself overhauled (just) 2007’s previous record high of EUR 13.0bn. 

The CEE’s net flows almost tipped positive in 2017 at just –EUR 220mn, due to that 32 pct jump in buying activity by regional players and an EUR 1.2bn shrinkage of sales by investors and developers. These net flow data we present for the first time show the recent leap in (net) buying by the Asian and South African funds. The USA flipped from a large net buyer of CEE-6 commercial real estate in 2014-15 to a large EUR 2bn net seller in 2017. Europe and the UK were net sellers last year, continuing recently established patterns. 

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