Editorial
Regional Investment Investors exercising caution
Regional SEE Overview Serbia and SEE attracting domestic and institutional investors
Regional Hotel
The hotel sector could go through an investment resurgence
Regional Warehouse & Logistics Industrial sector thriving across Central Europe
Regional CRE Awards Shortlist for 4th annual CRE Awards announced
Regional ESG/Sustainability Sustainability integrated into the life span of projects
Regional Office Meet Blue Office
Poland Investment Poland remains an attractive investment destination
Poland Warehouse Unflagging interest stabilises Poland’s warehouse sector
Poland PRS Promising PRS growth prospects in Poland
Hungary Overview Wider geopolitical situation slows market activity
Czech Overview Cautious approach from investors despite the attractiveness of the market
Slovakia Overview Domestic capital remains active in Slovakia
Romania Overview Investment in Romania could break the €1 billion mark
Serbia Overview Strong delivery in the Belgrade office market
October 4-6, 2022 Expo Real, Munich www.exporeal.net
October 20, 2022
4th annual CRE Awards, Budapest www.creawards.net
October 27, 2022
12th annual CEE Investment Awards, Warsaw www.ceeinvestmentawards.com
November 29 - December 1, 2022 MAPIC, Cannes www.mapic.com
February 9, 2023
15th annual CEE Retail Awards Gala & Marketplace, Warsaw www.retailawards.eu
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London PropTech Show Business Design Centre, London www.proptechshow.com
March 14-17, 2023 MIPIM, Cannes www.mipim.com
April 6, 2023
18th annual SEE Real Estate Awards, Bucharest www.seerealestateawards.com
Serbia, Bulgaria, Croatia and the wider SEE region are continuing to attract local capital and a growing num ber of international developers and investors. From an investment perspective, well-conceived projects offer a yield premium on the established CEE and Western Euro pean markets, albeit with potentially more expensive fi nancing and a low supply of available investment-grade assets.
The industrial market in Central Europe is booming from a demand and development perspective and is considered the sector in the most positive position in a currently problematic economic and political environment. Continued low vacancy rates and rising rental levels are forecast throughout the region, due to the high demand. In Prague, for example, vacancy rates stand below 3 percent.
EuropaProperty is pleased to announce the shortlist for the 4th annual CRE Awards recognising the best buildings, companies, real estate deals and industry professionals across the international markets of Hungary, the Czech Republic, Slovakia and the Balkans region. The winners from 25 categories will be announced at the Gala Dinner on October 20th in Budapest.
This year has presented considerable challenges for Poland’s commercial real estate market. Rising business and construction costs, caused by increasing energy prices, restrictions in the supply of raw materials and supplies, and the uncertain economic situation, have all contributed to a slowdown in investment activity.
Hungary is seen as having a strong pipeline of asset-grade products to meet investor demand, particularly in the office and industrial sectors. The markets are regarded as an attractive investment destination with a significant yield premium on Western Europe, Poland and the Czech Republic, although the limited availability of suitable investment products continues to be an obstacle to market liquidity, despite these strong development pipelines.
Poland remains an attractive investment destination
Wider geopolitical situation slows market activity
Shortlist announced for the 4th annual CRE awards
Industrial sector thriving across Central Europe
Serbia and SEE attracting domestic and institutional investors
Warsaw | Cracow | Łódź | Poznań | Katowice | Tricity | Wrocław | Kyiv gleeds.com
Central and Eastern Europe’s investment markets have suffered from a common drawback of too much capital seeking a low supply of investment-grade assets with limited liquidity, resulting in fewer transactions and lower investment volumes. Further, due to the ongoing market disruptions, many international investors have adopted more cautious investment strategies, resulting in even more modest invest ment volumes.
However, this slowdown in activity from foreign investors could benefit domestic and CEE investors who have more intimate knowledge of their domestic markets and are not deterred by the political situation in Europe. Further, they can source and conclude investment deals with less competition from international investors. Local investors from the Czech Republic and Hungary are notably active in their domestic markets and increasingly elsewhere in the CEE region and Western Europe as inves tors and developers.
Regarding development, there has been a slowdown in delivery in several market sectors although there are strong pipelines and demand in, for example, the office and industrial markets and fewer certain pipelines in the hotel sector. This slowdown is due to construction, material and labour costs, wider-economic concerns and the cost of sourcing finance. Market players will therefore need to adapt to stricter financ ing conditions and negotiations could be more protracted.
Despite the perceived drawbacks, developers at the high end of the office mar kets are delivering higher quality and more sustainable developments that meet the increasingly sophisticated specifications and demands from tenants in what is perceived to be a new and changed working environment. Similar changes are also ongoing in the industrial sector, with changed expectations from staff regarding inte riors and amenities in the workplace. The consensus is that when the hotel and tour ism sector recovers, hotels will have to adapt to the new environment with improved offerings and sustainable services for guests and hospitality customers.
Developers face increasingly strict sustainability requirements, ESG issues and EU Taxonomy now extends from planning, design, permitting, financing, leasing, prop erty management and exit strategy with a sale to investors that requires benchmark ing transparency and accountability systems. Developers and investors are therefore accountable to tenants and increasingly stringent governmental and EU sustainabil ity regulations.
Despite the perceived difficulties and potentially more expensive development and investment processes, investors will still need a home for their finance, and there is a social and economic need for offices, logistics centres, retail centres and hotels. The ongoing market processes and sustainability regulations are producing higher quality and more imaginative, if more expensive products, across the commercial property sectors, albeit in a more challenging economic and political international environment.
Volume 43, Number 1, October 2022
Publishing House
Kitbridge Media Sp zo.o. Kaleńska 5, 04-367 Warsaw, Poland
Publisher Craig Smith craig@europaproperty.com +48 577 100 620
Publisher Serbia and SEE region Daryl Fidelak daryl@serbiamonthly.com +381 60 3440 167
Editorial Director Winston Norman winston@europaproperty.com +48 506 535 293
Editor Gary J. Morrell gary@europaproperty.com +36 703 199 068
Journalists Gary J. Morrell Winston Norman Elie Issa Alex Webber Ewan Jones Daryl Fidelak
Poland Country Manager Sylwia Gajda sales@europaproperty.com +48 501 091 751
Hungary Country Manager Gary J. Morrell gary@europaproperty.com +36 703 199 068
Romania Country Manager support@europaproperty.com
Administration admin@europaproperty.com
Art Director Daniel Zbroszczyk graphic@europaproperty.com
Current economic and political uncertainty, and for real estate in particular the high inflation and raising interest rates, impact the investment decision process. This is already affecting yields in most real estate sectors, though at this stage transactional valuation evidence is limited, and it may be Q4 before we have a clear picture of how asset prices have moved to accommodate the changing funding costs, to meet the required equity returns. Despite this, the attitude of most investors who understand the Central European markets has not changed, and like us, they want to continue their presence and increase their portfolios. New investors to the region are likely to be more cautious and choose the “wait-and-see” approach in the current environment. While we are conscious that slowing economic growth will weaken demand for some real estate sectors, we believe that certain areas will see tenant requirements remain robust. We, therefore, continue to focus on those real estate sectors where demand is supported by long-term secular growth drivers.
Martin Erbe Managing Director/Head of Real Estate Finance International Clients Germany, CEE & Benelux Helaba
The change in the interest rate landscape in combination with inflation in particular will have a lasting impact on the real estate sector and consequently on consumer behaviour. Although the countries in CEE have been more robust in their economies, they are at the same time unable to decouple themselves from the Western markets. At the moment, there is still a lot of money in circulation looking for attractive investment opportunities. But as interest rates continue to rise, other investment opportunities will become more interesting again compared to real estate, and at the same time, inflation-indexed leases will strengthen the attractiveness of the properties. With the slowdown in construction activity in the office sector, higher rents can be expected, provided demand for space remains high. At the same time, however, the trend toward working from home has increased, so companies need less space. Which effect will be stronger? One effect can already be observed today: the yields of properties will slowly increase. The times when everything went in one direction are over.
Nebil Senman Managing Partner Griffin Real EstateThe CEE real estate investment market has been on the radar of many investors over the past years. Yet we see that the pandemic, the war in Ukraine, inflation uncertainty, increasing construction costs, and fast-changing interest rates have all taken their toll on our region. Nevertheless, despite unfavourable factors, the market is still offering attractive investment opportunities but needs a dedicated focus on operational excellence which was less relevant in a booming market environment. We see that investors who have been active in Poland for many years are more cautious, and are more selective, but they continue to selectively invest. Potential new players have to a large extent suspended their plans for a few months. In the mid and long run, the Polish market will continue to be attractive with its above-average growth potential and positive migration in the region also fuelled as a result of the war. Given our experience and expert profile, Griffin emphasizes its investment in renewable energy, in the booming PRS and PBSA segments as well as in logistic developments.
In terms of investment trends, it seems like we are looking at a steady-paced development rhythm with the residential and logistics sector, while investors have been focusing on building to rent and building to suit, rather than building speculatively, approaches embraced in attempting to mitigate uncertainty and fluctuating demands. Construction prices have stabilized and even slightly decreased may have granted investors an increased level of confidence in developing new projects in the second quarter of 2022. I believe another main trend we currently face in real estate is the responsibility, in terms of green footprint, digital transformation and the creation of smarter urban environments. Green buildings are an increasingly significant driver of real estate investments. The property sector is the largest contributor to greenhouse gas emissions, so its players can have a major contribution to reducing the climate’s worst impacts. With foreign investors being attracted to the region, qualified local workforce and developing infrastructure, I believe the region will continue to develop and adapt quickly to market changes.
Arvi Luoma Co-Founder and CEO, BlackbrookGeopolitical uncertainty and energy cost rises, supply-chain disruption and post-Covid recovery has led to substantial inflation acceleration across Europe and a significant increase in the cost of capital. For almost 15 years we have been in a zero-interest rate environment and the real estate sector has boomed. Now it’s in reverse and nominal yield-rate spreads continue to narrow. Generally investing in sectors with strong tailwinds irrespective of the near-term economic climate is key. A focus on fundamentals – acquiring assets which stand the test of time at a conservative basis – core locations, investment grade assets and credit-worthy tenants. As companies look to near-shore production and build supply-chain resilience in light of the geopolitical situations sprung upon us, we’d expect the industrial sector to remain robust. Similarly, e-commerce development still has some way to go before it stabilises. This should support the industrial sector across Europe including CEE even if we don’t see the rampant activity witnessed in 2020-2021.
Dieter V. Knittel Managing Director, Head of CEE Deutsche Pfandbriefbank
The markets are being influenced by many geopolitical events. However, despite this uncertainty, it has been a reasonably good year for the real estate investment market in CEE so far. Poland has once again been the dominant market with around 50 percent of transaction volume, followed by the Czech Republic, Slovakia, Hungary and Romania. Although market fundamentals in CEE are still quite strong, high inflation and rising interest rates pose a threat to the upturn which was expected following the pandemic. Many investors continue to follow a wait-and-see strategy during this period of increased uncertainty, but others see opportunities. In particular, local investor numbers are increasing and have already become strong in the Czech Republic and Hungary and are now starting to buy in Poland as well. This brings welcome stability to the CEE market at a time when some international investors are cautious of the region. The long-term investment trend remains positive and CEE countries are robust, especially core countries such as Poland and the Czech Republic.
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The CEE region is continuing to be seen as an attractive investment destination as the region offers quality-standing assets in addition to a strong pipeline of asset-grade products to meet investor demand, particularly in the office and industrial sectors. Investors are also increasingly concluding deals in the hotel and residential sectors. Although investment volumes have been rising towards pre-pandemic levels, investors are exercising caution in the uncertain economic and geopolitical environment.
“At around €5.3 billion for the first half of 2022 CEE volumes were up 8.5 percent yearon-year,” commented Kevin Turpin, regional director of capital markets at CEE Colliers. “Q1 recorded quite strong activity, only to slow down again in Q2. We estimate that year-
end volumes will reach between €9 and €10 billion in 2022. There is always something to buy, but, investors with core strategies can feel a bit unsatisfied. Much depends on the availability of investment products.”
Poland dominated CEE investment market activity amounting to 58 percent of the to tal volume. This was followed by the Czech Republic with 17 percent, Romania with 9 percent and Hungary and Slovakia both with 8 percent, according to Cushman & Wakefield. A low supply of available prod ucts is a key factor in limiting investment activity in many sectors and countries, no tably the Czech Republic. With the scarcity
of products combined with strong demand, there was yield compression in all sectors.
JLL put the CEE (Poland, the Czech Repub lic, Slovakia, Hungary and Romania) 2021 investment total at €11 billion. Poland has maintained its dominant position among CEE countries, investment volumes for Po land amounted to €6.4 billion for 2021, according to the consultancy. Retail invest ment with almost €1 billion committed in 2021 saw a record number of transactions recorded. The Czech Republic followed Po land with a total of €1.64 billion in volume recorded.
Office assets in regional locations are now one of the main targets for investors in Po land in the view of Avison Young. “The Polish investment market, despite the geopolitical turmoil, is doing well. It is noteworthy that it is the office sector leading now, in terms of investment volume – its result of almost €1.3 billion translates to a 44 percent share in the total investment volume in the first half of 2022. Investor activity in the office sector in creased by 60 percent compared to last year,” commented Marcin Purgal, senior director for investment at Avison Young Poland.
“The resistance of the Polish investment market to turbulences in the global econo my, which we could have observed during the pandemic, allows us to be optimistic about the next six months,” he added. “Nev ertheless, further investment activity will de pend on the geopolitical situation, the level of inflation or the availability of financing in the environment of changing interest rates.”
Investor appetite for assets located in Po land is not weakening, which is proved by the ongoing negotiations and new prod ucts that are currently being presented on the market. At the moment, Avison Young has several sale mandates, including office properties and office portfolios whose sale process has already commenced.
In the current environment, yield move ments are difficult to predict, although they have been strengthening for core assets. The Czech Republic continues to record the low est yields in the region, closely followed by Poland, providing yield premiums for Hun gary and Romania.
The dominance of domestic capital is seen as a possible challenge to the role of foreign investors while at the same time enhancing the security of the investment markets by making them less reliant on positive senti ment from international investors. In both Hungary and the Czech Republic, domestic capital has constituted more than 50 per
cent of investment volume at times. Further, domestic investors are looking at the possi bilities in other parts of the region with the lack of opportunities in their domestic mar kets and in effect becoming CEE investors.
“Throughout Central and Eastern Europe, locally managed or originated capital re mains very active in retail and core plus of fices, as evidenced by large portfolio deals such as the acquisition of the Tesco portfolio by the Adventum Group,” commented Jeff Alson, international partner for the Poland & CEE capital markets at Cushman & Wakefield.
As evidenced by recent CEE commercial office transactions, ESG investing (the inte gration of environmental, social and gov ernance factors into the acquisition and exit process) is increasingly a concept and code of practice that has been adopted by investors as a central part of their investment strategies in both the top end and value-add sectors of the office market. Investors have yields and return on investment as a central priority, although commercially successful investment standard buildings need to have attained sustainability accreditation and this is now an integral part of the leasing process and asset management.
Further, investors need to look to a longerterm rise in the value of an asset and the prospect of new national and international sustainability regulations. ESG investment strategies in all areas of investment are seen as necessary to combat climate change and
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pandemic issues. In this way, building own ers need to adopt a longer-term strategy concerning the sustainability of an asset and ESG issues.
“ESG is increasingly higher up the list for investors and developers. This is partially driven by changing attitudes on responsi bility towards the impact of real estate on
the environment, but also by increasing re quirements on the financing and reporting side of things that will ultimately impact the feasibility of business models going forward. But we also see sustainability and green rat ings moving from a “nice to have” to a “must have” for various players active on the market – in particular from tenants and banks. This means that investors and developers will need to react and adapt if they want their buildings to continue to be competitive and attractive in future,” commented Kevin Turpin.
“The results observed in 2021 prove that the market seems to be recovering after be ing exposed to the uncertainty of the pan demic in 2020, While the outlook for 2022 is promising, the market is still depending on the changing economic scene,” concluded JLL.
JEFF ALSON PartnerThe high investment volumes mask the downturn in investor sentiment since the start of Russia’s war in Ukraine and its associated weak economic outlook of rising interest rates and high inflation. As a result, we expect to see lower investment volumes in the second half of the year as buyers and sellers have adopted a wait-and-see strategy dur ing this period of increased uncertainty Despite this, we expect capital allocations to gather pace towards the end of this year, driven by the shortage of supply in the Czech Republic, strong fundamentals such as low prices per sqm across the CEE region com pared to other European markets, as well as rental growth. Yields are likely to soften in many cases, but growth will be compensated by higher rents.
MICHAEL POLZLER CEO, RE/MAX Europe
A rise in inflation and slowing growth are being reported across Europe. Interest rates are back to their traditional level. Thankfully, employment continues to be very high and unemployment low. People will continue to search for properties. In many industries, although there is inflation, we’ve also seen related wage rises. It’s important to keep in mind that everybody needs a place to live. A slightly slower market will create greater opportunities for buyers. It stresses the importance that both buyer and seller should have their professional representative. This would lead to fewer failed transactions, hap pier customers, and a healthier industry. It’s not only the right thing to do for customers, but also good business sense for the real estate industry. Change always happens. Em brace it. At times like this, leaders in the marketplace must provide stability, trust, and confidence.
Serbia, Bulgaria, Croatia and the wider SEE region are continuing to attract local capital and a growing number of international developers and investors. From an investment perspective, well-conceived projects offer a yield premium on the established CEE and Western European markets, albeit with potentially more expensive financing and a low supply of available investment-grade assets compared to the more established CEE markets. However, the investment market over recent years has been negatively impacted by the coronavirus and subsequently the economic and political uncertainty caused by the war in Ukraine.
“All commercial sectors have been quite active, with the largest share attributed to the office sector, especially in emerging mar kets such as Serbia and Bulgaria. The invest ment markets are expected to level up simi larly to 2021, which is still below the volumes achieved in 2016-2018. The major drivers for investment will be the four core markets,
drawing most of the attention, especially Serbia, Croatia and Bulgaria,” said CBRE on prospects for the investment market.
As with other European and CEE invest ment markets, Serbia and SEE investment volumes are impacted by the caution being exercised by investors due to the problemat ic economic and geopolitical environment.
CBRE has estimated that total SEE invest ment volumes will be below the €1 billion level. The SEE markets peaked in 2018 when total investment volume approached €1.4 billion.
CBRE see all commercial sectors in SEE (Serbia, Croatia, Bulgaria and Slovenia) as quite active with the largest share attributed
to the office sector for 2021. This was large ly due to the acquisition of the GTC office portfolio by the Hungarian investor Indotek Group. Investment volumes are expected to be similar to 2021 at around €950 million, which is still below the volumes achieved in 2016-2018.
Indotek Group made a decision to pur chase the GTC Belgrade office portfolio for €267.6 million. The agreement covered the sale of 11 buildings within five business parks with a total of 122,000 sqm GLA, located in the New Belgrade business district, effective ly the CBD of the city. On completion, the deal will become one of the largest real es tate transactions in the last five years on the SEE market, according to analysts. Demand for easy-to-lease office products is expected to rise further. The key criteria with regard to office acquisition are seen as location, tenant mix and ESG according to analysts.
The deal is part of a wider trend for do mestic investors to conclude acquisitions in other markets, in part due to limited possi bilities in their own. Indotek Group has been present in its domestic market for almost 25 years. In the last decade, the company start ed to expand outside of Hungary, resulting in the group being active in 10 countries today.
“We have been looking for the opportu nity to enter the Serbian market for a long time, and with the current transaction, we are able to significantly strengthen our po sition in the region. I am particularly proud that our first transaction in Serbia makes us one of the most dominant participants in the Belgrade office market,” commented Dániel Jellinek, founder and CEO of Indotek Group, on the transaction.
CBRE has traced investors currently active in Serbia to be split between local investors
which have become more active in the past 24 months, and investors which are also present across CEE such as AFI Europe, GTC, BIG CEE, Indotek, and Immofinanz. Institu tional investors such as Generali, Grawe, and VIG are also becoming more active.
“We have seen increased interest from in stitutional investors, mostly insurance com panies who have acquired office products all across SEE. We expect this trend to continue going forward as all SEE markets are show ing stable real estate market dynamics in the years to come,” said Zoran Danilovic, associ ate director of SEE Capital Markets at CBRE. “Investors are still looking at developing in the retail and office sectors across the coun try, while the focus will also be more directed toward the speculative industrial sector.”
The office development cycle is seen as quite strong with 220,000 sqm currently un der construction or refurbishment, but the increase in demand will overcome the risk of any significant changes or oversupply as the office market lies on strong fundamentals, according to CBS International, part of the Cushman & Wakefield Group.
In addition to the office, the logistics mar ket has been attracting investors as is the case elsewhere in the CEE region. Due to the lack of modern industrial space and growing demand, the sector could become the main driver of investment activity, particularly in Serbia and Bulgaria.
CBRE has traced a 100 basis point reduc tion in yield in the industrial sector over the past year as the sector has seen intense ac tivity. Regional industrial park developers and operators such as CTP are now under taking projects across Serbia and Bulgaria after a period when such companies were reluctant to enter the market.
Investors are also showing an interest in retail portfolios with a high demand remain ing for shopping centres and retail parks in the capitals and the regions.
A significant attraction of Serbia and SEE investment markets is the yield premium they provide for increasingly higher-quality assets. CBS international put office yields for Belgrade at 7.5-8.5 percent and industrial at 8.5-9.5 percent. CBRE estimate that prime Belgrade office yields are at 8 percent and prime industrial yields at 7.75 percent.
In the current environment, the availabil ity and cost of finance remain an issue for investment in SEE, as is the case across the CEE region. In the past investors have been concerned over whether the price of prod ucts and finance justifies the greater risks in the markets.
“There is definitely a turbulent time ahead of us given the increasing finance costs as well as supply chain disruption which is still in the process of stabilisation. That be ing said, the market is ready to absorb new products, however, it still remains to see how the financial markets will behave in the next 6-12 months. An increase in financing costs is one of the issues investors are facing in the short to midterm. This is not specific for SEE, but rather on a European and global level,” concluded Zoran Danilovic.
ZORAN DANILOVIC Associate Director SEE Capital Markets, CBRESo far volumes recorded during 2022 have noted a downtrend when compared to the corresponding period in the previous year. With new challenges rising across Eu rope, investors have increased their caution, which caused the postponing of deals in the pipeline. Therefore, investment volumes for 2022 are not expected to surpass the previous year. Looking at the market conditions across SEE and the returns investors are generating, we believe SEE markets will continue their expansion across all segments. We also believe that this will attract new investors, especially the ones who are in search of higher yields, in order to align with their cost of capital.
Developers, investors and hotel operators saw strong potential for the hotel sector against the background of rising tourism and occupancy rates above 80 percent and the resulting investment boom up to 2020. However, the hotel and hospitality sectors were subsequently hit hard by the coronavirus crisis. Follow ing signs of recovery in the industry, there are now further geo-political issues concerning the impact of the Ukraine war on tourism and international travel in the CEE region, rising inflation, the prospect of rising interest rates and ESG expectations for hotel owners and operators.
These sentiments were expressed by dele gates at this year’s HOTCO conference, which attracted over 300 delegates from over 30 countries to the Kempinski Hotel Budapest after a two-year break due to the coronavi
rus. “The conference aims to foster invest ment into the hotel and hospitality sectors in the region and to attract investors who do not traditionally regard the sector as an investment option,” commented Marius Go
mola, managing director of the hospitality consultancy, Horwath HTL Hungary, organ isers of the annual event.
“In 2020, as with the rest of the hospitali ty market globally, hotels in the CEE region were hit hard by the pandemic, which un surprisingly led to a sharp fall in hotel in vestment activity. Many deals were put on hold or withdrawn, which resulted in a 74.2 percent fall in transaction volume to €370
million, compared to 2019’s record-breaking €1.4 billion,” commented Lukas Hindu, head of real estate & hotels CEE at CMS, on the ho tel investment market.
Even in pre-pandemic times, activity in the region was typically hindered by a lack of assets on the market – but in 2020, this phenomenon was exacerbated by the wid ened gap in buyer and seller expectations, which was caused by factors on both sides, the consultancy further argues.
From a demand perspective, Budapest, for example, could return to pre-pandemic levels at around 12 million annual visitors by next year, according to figures presented at HOTCO by the hospitality consultants, STR. A walk around the historic centre of Budapest reveals individual tourists have returned, no tably from Europe.
However, a recovery in business travel has not occurred with growing concerns over the environmental impact of air travel and the ability to conduct business online, as was enhanced in the lockdown. Major questions remain as to whether business travel will return to pre-pandemic levels.
The MICE (Meetings, Incentives, Conferenc es, Exhibitions) sector will recover slowly as large events once postponed take a long to re-arrange.
Despite the perceived complexities of hotel projects in comparison with the more established market sectors, the CEE region has successfully attracted developers and investors from the more traditional com mercial property sectors seeking long-term partnerships with experienced hotel opera tors who can provide the expertise needed for the day-to-day operation of the projects.
In this way, a large number of hotel pro jects are at various stages in the preparation and construction process in CEE, although pipelines are difficult to estimate and sched ules are slipping in the current uncertain market environment. The hotel pipeline re alistically needs to be revised downwards, with a significant proportion slipping back, according to analysts. Indeed, several pro jects have been put on hold with no new delivery dates announced. However, the pipeline remains strong and hotel invest ment discussions are expected to restart.
According to Horwath HTL Hungary, there is an estimated 2022 pipeline for Budapest of six hotels totalling 490 rooms. While for next year this stands at 10 hotels constitut ing 1,470 rooms. The total pipeline for 20222026 is put at 32 hotels with a total of 4,418 rooms according to the consultancy.
Péter Takács, the partner at Newmark VLK Hungary, argues that the pipeline for 2022 stands at 500 rooms for Budapest, mainly in city centre hotels with a further pipeline of 7-800 rooms countrywide, the majority of which are wellness or thermal hotels. He sees Budapest as a very good hotel location and there are good opportunities for devel opers and investors for projects with strong covenants. However, several development projects are stalled.
“When Covid started two years ago we were among those that predicted that the recovery will take three to four years. With out the war in Ukraine, this would likely be (would have been) possible but now everything is uncertain again. I do not think anyone can tell when the recovery is finally going to happen. Hotels have learnt to op erate in the leanest possible way during the last two years so I am sure they will be able to adapt again,” Péter Takács commented.
CEE hotel yields are difficult to estimate in the current environment with a limited number of transactions concluded. Further, the hotel market is less liquid than for exam ple the office market as hotel investors tends to be more specific in their requirements and deals can be protracted.
Hotel yields for Prague and Budapest are put at around 5.5 percent for trophy assets
and 6-7 percent for other assets, for example, outside the Central European capitals in the view of many analysts. The hotel sector is seen as the most difficult sector of real estate and higher yields reflect the fact that hotel cash flows can be more volatile and less stable than the office markets. Péter Takács argues that it is difficult to justify an invest ment of €180,000 sqm per key in the current environment.
Noah Steinberg, chairman & CEO of Wing, argues that investors need a stable cash flow and there need to hold on to their assets in the long term to achieve good returns on their investments.
Despite the perceived drawbacks in in vesting in hotels, deals are being concluded for both standing assets and development projects. In Prague, Austria’s FJ Investment purchased the 165-key W Hotel project. In Budapest, the investor forward purchased the 150-key Grand Hotel Europe for a report ed €61 million. Further south in Sibenik, Cro atia, Erste Bank acquired the 72-room D-Re sort for a reported €25 million.
As with other real estate and service sec tors, ESG and EU Taxonomy rules are setting new financial standards and a shift in the en tire economy according to Mary Gostelow, hotel and travel journalist and commentator. She argues that adherence to ESG standards
is no longer an option and is central to hotel investment.
“This will transform the economy includ ing, for example, land-use and the sourcing of food and therefore directly impact the hotel industry,” she said. “The current envi ronment offers distinct opportunities for ho tels in the CEE region by attracting custom through the quality of service.”
Despite concerns with ESG issues, there is still no common measurement of sustain ability in the hotel industry, even though banks have no choice as to whether to invest in a sustainable product, according to Attila Radvánski, director of Horwath HTL Hungary.
“Very strict transaction reporting and ob ligations are coming into force and the so cial and governance element of ESG needs to be incorporated into the reporting strata,” commented Barbara Koncz, partner at KPMG Hungary.
Despite the perceived difficulties con fronting hotel investors the fundamentals in the hotel and hospitality sectors are seen as favourable for investors in the longer term.
CEE hotel yields are difficult to estimate in the current environment
The industrial market in Central Europe is booming from a demand and devel opment perspective and is considered the sector in the most positive position in a currently problematic economic and political environment. Continued low vacancy rates and rising rental levels are forecast throughout the region, due to the high demand. In Prague, for example, vacancy rates stand below 3 percent.
Positive indicators for the industrial sector are attracting a growing number of investors with the resulting yield compression. How ever, industrial park owners tend to hold onto their assets and therefore the sector suffers from a low supply of available invest ment-grade products.
Although, there have been several indus trial portfolio transactions concluded over the past year. The industrial sector represent ed only 13 percent of CEE (Czech Republic, Hungary, Poland, Romania and Slovakia) in vestment volume in the first quarter of the year, according to Cushman & Wakefield.
This lower amount of activity is due to a lack of available assets despite strong inter est in the industrial sector from investors. The availability of assets is therefore a chal lenge to the market growth with yield com pression recorded in all countries over the past 12 months.
Central European industrial stock stands at over 40 million sqm, according to Cushman & Wakefield. Despite significant develop ment, the overall vacancy rate in all markets
stands below 6 percent for the first quarter of the year. The Czech Republic has the low est vacancy rate at 1.8 percent, Poland at 3.3 percent, Romania at 3.8 percent, Hungary at 4.2 percent and Slovakia at 5.6 percent. More than 7.8 million sqm was under con struction, with 60 percent of this in Poland. Of the pipeline, 40 percent was speculative, reflecting confidence in the Central Europe an industrial markets.
The Czech Republic has around 10 million sqm of industrial space across several differ ent logistics hubs. The country is easily the largest Central European logistics market in terms of sqm of space per 1,000 inhabitants, followed by Poland and Slovakia, according to Cushman & Wakefield figures. Budapest and Prague have the lowest vacancy rates in the CEE region.
Poland, the Czech Republic and Slovakia continue to be the dominant Central Eu ropean markets as they benefit from their geographic locations in major logistics and industrial networks, notably within proximi ty to Germany and the industrial heartland of Europe. Therefore the countries have fully developed industrial hubs operating outside the capitals.
Poland is by the far the biggest industrial market in CEE with a total stock of over 21 million sqm in different logistics hubs across the country and a vacancy rate of 6 percent, according to JLL. In the first quarter devel opers commenced the construction of 1.5 million industrial spaces, bringing the total pipeline to 4.8 million sqm says, Cushman & Wakefield.
According to Avison Young, the industrial market in Poland is breaking all records. “The Industrial sector’s growth continued in 2021, resulting in almost €3 billion in transaction volume - the highest result in history,” said the consultancy.
Industrial stock in the Czech Republic is close to reaching the 10 million sqm bench mark. Demand remains high with a vacancy rate of 1.6 percent. For 2022 1.5 million sqm of space is planned with 1.1 million sqm cur rently under construction, over 70 percent of which is pre-let, according to Cushman & Wakefield figures. Despite the significant delivery vacancy has remained below 2 per cent leading to rental growth in all industrial hubs.
Hungary does offer the possibility for mar ket growth towards the markets in SEE in the view of analysts. Panattoni recently started construction of its first speculative logis tics development in the country – a 17,300
sqm last-mile logistics warehouse about 12 kilometres from Budapest’s city centre.
The launch of Panattoni Park Budapest City West follows the company’s market debut in Hungary at end-2021 with the acquisition of two land sites totalling 100,000 sqm near the capital.
“We entered the Hungarian market be cause we see a huge opportunity to tap into the rising demand for modern, sustain able distribution centres,” commented László Kemenes, Head of Panattoni Hungary. “The local logistics real estate market is far less developed than in neighbouring countries and the last-mile segment in and around Bu dapest is particularly underserved. With this development, we are focusing on occupiers seeking high-quality space in smaller-sized lots, located very close to the city. Panatto ni Park Budapest City West’s superior green credentials and exceptionally good location for transport connections will attract urban logistics operators targeting the large catch ment area of this part of Central Europe.”
Hungary’s distribution centre market is still underdeveloped, with average logistics
warehousing space just 250 sqm per 1,000 inhabitants, compared to 900 sqm in the Czech Republic and 550 sqm in Poland, or
Germany’s 920 sqm per 1,000 inhabitants. Budapest’s logistics market catchment area contains around 3.3 million people, roughly similar in size to the other regional centres of Vienna, Bratislava and Zagreb combined.
Romania is emerging as a major industrial and logistics market with over 4 million sqm of stock. Major developments are also ongo ing in the different areas of the country, an indication that a regional industrial network has emerged in the country outside of the capital, Bucharest. CTP is planning a €300 million regional network of parks that will bring its total space in the country to 2.5 mil lion sqm according to the company.
In Serbia, CTP delivered a 25,000 sqm fa cility for BMTS Technology at CTPark Novi Sad and the construction of CTPark Bel grade North is ongoing, although the stock remains at a low level. Industrial demand in Serbia is high with a developer-led industri al market now emerging. CTP has also ac quired development sites in Bulgaria.
Industrial developers and park operators are developing more highly specified and sustainability-accredited and highly spec
ified projects in response to changing ten ant demands and sustainability regulations about climate and environmental concerns. Further, the leading national and regional industrial park developers and operators are seeking third-party sustainability accredita tion such as BREEAM and LEED throughout their portfolios.
Tenants are looking to save on utility costs, and the need to reduce the carbon footprint of their projects. In this sense, similarities can be seen with office development and the need to adhere to environmental require ments and to produce sustainable, well-de signed and highly specified products in re sponse to tenant and staff demands.
CTP is developing by BREEAM in-use Ex cellent for buildings across its Central Euro pean portfolio. Further, the company is em phasising energy efficiency and the use of solar panels in its portfolio.
Panattoni has achieved BREEAM Out standing accreditation for its park in Cheb in the Czech Republic. The company aims to achieve emission neutrality for all its build ings across Europe by 2025 and is aiming for
at least BREEAM accreditation for its port folio. In Hungary Helloparks, part of the Fu tureal Group, has developed 45,000 sqm of BREEAM accredited space under construc tion at HelloParks Maglód. The industrial and logistics centre has the capacity for a total area of 193,000 sqm of space.
“We want to develop buildings that are unique in terms of sustainability, services, look and design. In each location we are developing projects with several buildings and the number of people working there will be several thousand, essentially creating a village. We delivered the first warehouse in the Central European region to be award ed BREEAM “Excellent” accreditation. All the remaining buildings we are developing are planned to be BREEAM Outstanding New Construction,” commented Rudolf Nemes, managing director of HelloParks, on their sustainability policy.
Developers across the region face chal lenges in the development and construction process in increasingly competitive markets. For example, labour availability and costs, rising material costs and the increasing dif ficulties in sourcing development plots with direct road and public transport links.
EuropaProperty is pleased to announce the shortlist for the 4th annual CRE Awards recognising the best build ings, companies, real estate deals and industry professionals across the international markets of Hungary, the Czech Republic, Slovakia and the Balkans region. The winners from 25 categories will be announced at the Gala Dinner on October 20th in Budapest. The CRE Awards will be held at the InterContinental Hotel in Budapest. This high-impact one-day event starts with the CEO Breakfast Forum including high-speed investor networking, presentations on Hungary’s economy and government, discussion panels on investment, finance & banking, and development – covering the office, retail, and industrial sectors, wrapping up with a Q&A session, and a light lunch with networking. The evening awards (considered the ultimate networking event) begins with opening cocktails, a 5-star sit-down dinner and an awards presentation, closing with late-night networking and entertainment in the now traditional EuropaProperty fashion. The awards ceremony is a unique opportunity to meet with colleagues, clients, and new and old contacts, and meet new entrants to the market. This makes for an excellent opportunity to promote your company or project in a professional and social atmosphere. The CRE Awards is the only awards ceremony to recognize and honour excellence in the Balkans region and Hungary. The awards will be presented to companies and individuals who have demonstrated the best overall performance during the past year and produced consistent results.
Professional of the Year awards will honour the top men and women operating in the CEE region with a compre hensive award that fully recognizes the value and input of the individual to the real estate sector. Company of the Year awards will be presented to the leading developer, consultant/letting agent, professional service provider, law firm, property management firm, and architectural firm. Criteria; companies are judged on their overall market contribution, quality of customer services, market innovation, commercial success, leader ship and market penetration.
Project of the Year awards will be presented to the best developments. Projects are primarily rated on com mercial success, environmental development principles and
AVICO - Hungary
Best BTS Project
INPARK Gyula Industrial Park
INPARK - Hungary
Polgári Industrial Park - Infogroup - Hungary
VGP Park Kladno - VGP - Czech Republic
Warehouse Project
GLP Sziget - GLP - Hungary
INPARK Páty Industrial Park Building E-F - INPARK - Hungary
Polgári Industrial Park - Infogroup - Hungary
Squarebizz Bory - Karimpol Group - Slovakia
VGP Park Kladno - VGP - Czech Republic
Refurbishment/Extension Project
Avico Park - Avico Group
Hungary
Belgrade Waterfront - Eagle Hills
Hyde Park City - PSP Farman Holding - Serbia
Arena Business Campus A
Atenor - Hungary
Dock In Five - Crestyl Real Estate
Green Court Office - CODIC
Major Udvar - Budapesti Ingatla
Nyrt - Hungary
Millennium Gardens - TriGranit
Pillar - GTC - Hungary
Váci Greens E&F - Atenor - Hungary Future Project
ACADEMIA - Europa Capital, ConvergenCE - Hungary
Bory Nový Dvor (phase 2)
Penta Real Estate - Slovakia
BudaPart CORSO - Property Market - Hungary
100YARDS - LaSalle Investment Management - Czech Republic
BakerStreet - Atenor - Hungary
GTC X - GTC - Serbia
Hyde Park City - PSP Farman Holding - Serbia
Liberty Offices and Hotel - WING - Hungary
Palac Dunaj - Zeitgeist Asset Management - Czech Republic
Panattoni Park Budapest City West - Panattoni - Hungary
ParkSide Offices - Horizon Development - Hungary
The H2Offices complex - Skanska - Hungary
Awards Company of the Year Project of the Year Professional of the Year
Concerns with sustainability accreditation from an independent, third-party sustainability organisation such as the UKbased BREEAM and the US-based LEED, and increasingly WELL, are now the norm for the entire development cycle of a project. This is evident in the office logistics market and increasingly in other sectors too. Concerns have now been extended to ESG issues and EU Taxonomy that extend from planning, design, permitting, financing, leasing, property management and an exit strategy.
“Sustainability, environmental and social adequacy are more and more important for developers, tenants, investors, banks,
and individuals. ESG reports and the related advisory services are starting to become a growing business, but what matters, in my
opinion, is not necessarily the report itself, but the adaptation and implementation of those progressive ideas,” commented, Tamás
“I would say that sustainability aspects must become the norm in all built envi ronments. Without the active promotion, integration and application of the holistic and systematic sustainability approach, our ambitious targets related to CO2 emission reductions and mitigation of climate change effects cannot be realised,” argued Zsombor Barta, president of the Hungarian Green Building Council (HuGBC).
“However, I do not think that green build ing accreditations will be the new norm in all built environment-related projects, as the third-party certification or accreditation is targeting specific market segments, like mainly the commercial developers. Howev er, it is still highly important, that sustainabil ity framework and holistic guidelines are im plemented for all built environment projects Overall, third-party accreditations are a very useful tool for systematic thinking and the active integration of holistic sustainability aspects,” he said.
BREEAM is the most used sustainability system in Central Europe by office develop ers, although for example, Skanska has the policy of using LEED throughout its inter national portfolio including Central Europe. The prolific developer and one of the first to utilise the WELL system that deals with inte riors, has received WELL Core & Shell pre-cer tification for the first phase of the H2Offic es complex in the Váci corridor, designed by the Danish Arrow Architects studio. The project is on course to be awarded LEED
Platinum and WELL platinum accreditation, the highest achievable level of the standard according to Skanska. The 26,000 sqm first phase of H2Offices, consisting of three inter connected buildings has topped out and is due to be completed by the end of 2022.
“The air quality within the building will be ensured with increased fresh air supply, monitoring and demand-controlled ven tilation. A healthy level of humidity will be maintained in the rooms, which impede the spread of viruses and bacteria. H2Offices is designed to maximise daylight access and glare while LED fixtures provide efficient and high-quality light for building users. The
multifunctional garden and the green ter races will help people to relax and recharge during the day. Bicycle storage, changing rooms and showers, as well as a rooftop run ning track will encourage recreation and a healthy lifestyle. The office complex will pro mote good hygiene practices, and touchless technologies will play a significant role in increasing user safety when moving around in the building. Future users can be sure that their needs, their physical and mental health were considered during the design of the project,” said Skanska on its prime Budapest project.
Regarding interiors, Unilever has rede signed its Warsaw office in Eurocentrum in line with new trends and needs of staff. The renovation has been undertaken by the in terior designers, Massive Design and the fitout implemented by Tétris. Such renovation of interiors is a trend across the region in es tablished offices to bring them up to a simi lar interior standard as a new product.
“Worker expectations will transform the approach to managing office buildings with a growing focus on hospitality as pects. Therefore, we are heading towards high-quality spaces with maximum flexibil ity as only the most outstanding buildings will be able to attract companies and fulfil their needs,” commented Arkadiusz Rudzki, executive vice president for leasing & sales at the Skanska commercial development busi ness unit in CEE
A similar trend to the office sector is hap pening in the industrial sector as leading national and regional industrial park devel opers and operators are seeking third-party sustainability accreditation such as BREEAM and LEED, which is becoming the norm at the top end of the market. Prologis is de veloping by at least BREEAM “Very Good” accreditation for its entire regional portfolio. Tenants are looking to save on utility costs, recognize the importance of staff wellbe ing, the provision of green areas, locational demand with the provision of cycle-chang ing families and electric charging units and observe precautions about the coronavirus and the need to reduce the carbon footprint of their projects, according to the regional company.
As evidenced by recent CEE commercial office transactions, ESG investing (the inte gration of environmental, social and gov
ernance factors into the acquisition and exit process) is increasingly a concept and code of practice that has been adopted by investors as a central part of their investment strategies. In this way, building owners need to adopt a longer-term strategy about the sustainability of an asset and ESG issues to have the option of an exit strategy. About ESG, the priority has been on the environ ment, for example using green energy.
“I think that social and governance are more indirect but investors are putting in place a program to make an asset compliant with SG regulations. This is still quite early in the Hungarian and Central European mar kets. ESG and EU taxonomy reports are now expected to be part of the information pack by some investors presented with an acqui sition opportunity,” said Benjamin Perez-Ellis chewitz. principal at Avison Young Hungary.
The EU is further introducing a common Taxonomy for the European region. “We are very proud and happy as the HuGBC collab orated with the Hungarian National Bank (MNB) on the adaptation of the EU Taxon omy for the real estate sector in Hungary, further the HuGBC can also verify Taxonomy compliances in this sector, which is again an important milestone related to the third-par ty verification of EU Taxonomy compliances,” commented Zsombor Barta.
Hungary is ranked 13th in the KPMG Net Zero Readiness Index, and in the Central European region, Poland, for example, ranks 19th. “Hungary has a Net Zero target in place and its financial sector is working to stimu late the flow of capital to decarbonization efforts. Much of its electricity is generated by nuclear power and it is developing solar ca pacity, energy efficiency and use of electric vehicles,” said István Szabo, senior manager
at KPMG Hungary. Buildings represent 17 percent of emissions, industry 21 percent, transport 23 percent and electricity and heating 23 percent according to KPMG.
“The Net Zero Readiness Index (NZRI) is a tool that compares the progress of 32 coun tries in reducing the greenhouse gas emis sions that cause climate change and assess es the preparedness and ability to achieve Net Zero Emissions of these gases by 2050. I am optimistic about real estate due to the number of offices achieving BREEAM and LEED accreditation,” commented Pál Dános, head of real estate advisory at KPMG Hun gary.
In comparison, Poland stands 19th on the Net Zero Readiness Index. The country is currently the lowest placed EU nation in the NZRI. This is partly because of the heavy use of coal used to generate 52 percent of elec tricity. “The country has not committed to a Net Zero target and faces a huge challenge to shift away from coal, including softening the impact on mining area. Although it has adopted an energy strategy to escalate the shift to renewables including wind power,” said KPMG.
Discover future market trends, deal pipelines, and state strategies and plans from the most relevant names in the SEE non-performing loans market.
The event will be attended by delegates from key international financial institutions (IFIs), international organisations, public authorities, private banks, potential investors, advisory services, workout professionals, commercial banks, legal experts, local regulators.
For more information & registration visit www.seenplforum.com
Warsaw’s office market is going through some changes that have seen the sup ply of modern office-space trail off over the last couple of years creating a rather sizable gap between supply and demand. According to market analysts, finding a new office has now become more challenging. Today, tenants are interested in buildings with green certificates and offer the best technological solutions and a range of amenities to office users.
One such project set to benefit is Blue Office, a B+ class office space located in the Blue City Shopping Centre complex at Aleje Jerozolimskie 179 in the capital. The facility offers over 32,000 sqm of office space for rent, in modules from 500 sqm to 4,500 sqm, split over five floors.
Due to its proximity to the shopping cen tre, tenants of the office complex have access to numerous facilities, such as shops, restau rants, coffee shops, a medical centre and a
fitness club. Additionally, Blue Office offers several innovative facilities which enhance employee well-being and comfort at work, such as a green relaxation zone and chillout room, two leisure zones, natural greenery in common areas, access to the terrace, and space for corporate events.
The location of Blue Office guarantees fast and convenient commute times for employ ees to and from the city centre, convenient public transport, good access to the railway
and bus station (10 bus lines), proximity to the international airport, entrance to the S2 ring road and the A2 highway, facilities for cyclists, a free car park for employees and visitors and a planned tram line.
Blue Office offers large office spaces (up to 4,500 sqm on one floor) that allows the distribution of employees at safe distances from each other. A large number of lifts and three entrances (from the street, through the shopping centre and from the car park) pro
vide easy access in the office centre. In addi tion, the space is much higher than in other office buildings (up to 4.6 m), which, com bined with a very high ventilation capacity of 30 cubic metres per person at a density of 10 sqm per person, enables optimal air circulation.
Amenities close at hand in the Blue City shopping centre include, 25 cafes and res taurants offering cuisine from all over the world, a Helios multi-screen cinema and the children’s play area Inca Play. Also available is an innovative entertainment concept for in tegration events and meetings with clients. Employees also have access to two modern shared spaces: a leisure space with a games room, and green space on the terrace of the shopping centre.
A fitness club is located on the 3rd floor of the complex. There are also many sports and recreation facilities near the Blue Office building: two big parks with leisure infra structure, swimming pools, tennis courts, bowling alleys and a trampoline park. These give excellent opportunities to spend af ter-work time with your colleagues, rare in other business quarters of the city.
Another benefit is Project Neighbour 2.0 is an exceptional loyalty program created for and targeted at the staff of companies based in the Blue City office complex. The program
offers special discounts at the shops and ca tering facilities of Blue City Shopping Centre and allows employees to take part in various special events, use free parking and special employee zones.
To keep up with the latest trends Blue City underwent many changes, which not only strengthened its position as one of Warsaw’s top work and leisure destinations but also led to it becoming a truly unique location in the city.
Blue City has been honoured many times for its comfort and convenience as well as its friendly approach to its tenants and cus tomers. Blue City also cares about the envi ronment; the project holds the international ecological certificate BREEAM in use.
Blue City is the investor and developer of the project.
This year has presented considerable challenges for Poland’s commercial real estate market. Rising business and construction costs, caused by increasing energy prices, restrictions in the supply of raw materials and supplies, and the uncertain economic situation, have all contributed to a slowdown in investment activity.
“Investors currently have a complicated playing field, considering the relative geo graphical vicinity of the war in Ukraine and its wider implications on fuels, energies and further disruption to supply chains, plus the less than positive macroeconomic and ge opolitical trends that are developing,” com
mented Kevin Turpin, Regional Director of Capital Markets, CEE at Colliers.
Although investors remain cautious con sidering the geopolitical and economic sentiment, increased financing costs and anticipated shifts in pricing that are likely to play out during the second half of 2022, the
dynamically changing and testing economic environment is not reflected in the invest ment market results so far.
“The Polish commercial real estate market entered 2022 with great momentum. Many large and low-yield transactions were closed in the first half of 2022, with more to follow
till the year-end. Poland’s investment volume reached €2.88 billion in the year to date, 15 percent above the five-year average,” com mented Paweł Partyka, Partner, Capital Mar kets, Cushman & Wakefield Polska.
CEE investors became more active in the Polish market, focusing mainly on value add and opportunistic transactions. The first half of the year was dominated by office trans actions, after the previous leading position of warehouse deals, which have stopped breaking records due to a pricing mismatch. The majority of retail transactions were due to small convenience schemes.
With almost €1.3 billion transacted, offices accounted for 44 percent of the total invest ment volume, most of which was the result of The Warsaw Hub acquisition by Google at the beginning of the year.
The Warsaw HUB is a multifunctional sky scraper complex, developed and construct ed by Ghelamco, and is heralded as one of Europe’s most technologically advanced buildings. Google Poland became the owner of the office, the retail and service passage as well as the underground part of the com plex. The transaction value amounted to around €583 million.
Google Poland is at the same time one of the main tenants of the complex and occu pies over 20,000 sqm of office space. “Our
goal is to create buildings that are sustain able, accessible to all, and that fit into the urban environment. This is exactly what The Warsaw HUB is. We are proud that Google decided to have its headquarters there and at the same time bought this property”, said Jeroen van der Toolen, Managing Director for CEE at Ghelamco.
“The sale of the Warsaw HUB, the largest single office transaction in the history of the Polish and CEE markets, is further affirmation of the strength of the Polish office invest ment market. CBRE is hugely proud to have led such a landmark transaction between two of our most important clients, which firmly cements Warsaw’s position among the core investment markets globally,” add ed Sean Doyle, Head of Property Investment at CBRE.
In Q2 the office investment market was again the undisputed leader, accounting for 43 percent of the total Q2 investment volume in Poland. 11 out of 14 transactions concerned offices located in regional cities, with the predominance of core and core+ assets. Unsurprisingly, investor appetite for regional offices refers to direct purchases from the primary market.
One of the biggest deals was the sale of Nowy Rynek D in Poznań to Eastnine AB, a newcomer from Sweden, for €121 million.
Nowy Rynek D is part of a mix-used complex located in the heart of Poznan, which will ultimately consist of five buildings and offer over 100,000 sqm of modern office and retail space.
“It feels very exciting to be able to acquire such a prestigious property located in one of Poland’s larger regional cities. We are enter ing a new market with great opportunities,” said Kestutis Sasnauskas, CEO of Eastnine AB.
“The acquisition of Nowy Rynek D proves that investors are ready to diversify their portfolios with new assets located in ma jor Polish cities and that Poland has a lot to offer in this respect. In turbulent times, well leased, core assets built in line with ESG prin ciples are what investors look for across our region,” added Adrian Karczewicz, Head of Divestment at Skanska’s commercial devel opment business unit in CEE.
Another newcomer to the market Solida Capital, an investment and development company, acquired Echo Investment’s West 4 Business Hub I. The project was sold for nearly €40 million.
“This acquisition is in line with Solida Cap ital’s portfolio strategy in the CEE region. We are targeting sustainable A-class buildings that meet high environmental and quality standards located in Warsaw and region al cities across Poland. West 4 building in
Wrocław together with Echo Investment’s experience as a developer was, therefore, an excellent combination for our first step,” commented Jean Aboumrad, President of the Management Board at Solida Capital Europe.
Despite the ongoing events and devel opments investors still view Poland’s invest ment market as an attractive destination for capital.
According to Cushman & Wakefield, key market fundamentals are improving grad ually, with industrial vacancy rates hitting all-time lows and the Warsaw office market likely to experience an undersupply in the coming 18-24 months that will put upward pressure on office rents. The rental growth
prospects are already encouraging investors to increase activity, which is likely to lead to investment volume normalization.
“Banks’ appetite for financing acquisitions of stable and long-term income-producing assets remains steady – so are bank margins. In the case of prime properties with high oc cupancy rates and long WAULTs, bank mar gins are likely to be lower than a few months ago,” said Mira Kantor-Pikus, Partner, Capital Markets, Cushman & Wakefield Polska.
High inflation in Poland and other EU countries has led to higher key interest rates and higher costs of loan securities. Interest rates are likely to remain high for longer, im pacting property yields shortly. In these chal lenging times, investors are closely following
the turmoil in Europe, the economy and its long lasting consequences.
Retail investment volume in Q2 2022 amounted to nearly €69 million, which is the second lowest quarterly result since 2016. However, due to extraordinary results re corded at the beginning of the year, H1 2022 with €797 million transacted looks fairly well. “The continuous downtrend in retail invest ment volume is not surprising, as investors keep their strong confidence in small retail parks,” said Avison Young.
“Retail parks are one of the hottest invest ment products on the commercial real es tate market in Poland. Therefore, the process of obtaining refinancing for the portfolio ran very smoothly, also thanks to the exemplary cooperation between the investor and the bank,” comments Michał Ćwikliński, Princi pal, Managing Director at Avison Young in Poland.
BIG entered the Polish market for the first time by purchasing two commercial centres with a total value of €65 million. Hay Galis, CEO of BIG, noted, “These purchases reflect the company’s plans to locate strategic as sets in Eastern Europe. Entering the Polish market is essential to becoming a prominent player in the market and Poland is full of po tential for development.”
The macroeconomic environment is cur rently very volatile due to the war in Ukraine, the shape of international interest rate policy in connection with how inflation continues to develop and further developments re garding the pandemic and the global supply bottlenecks, which makes it difficult to pro vide an outlook on this time. Nevertheless, the solid H1 2022 results, are cause for op timism. Not only deals that started in 2021 are closing now, but the investment pipeline also looks promising.
“In Western Europe, cap rates keep the decreasing trend yet. In Poland, rents have started to grow, while yields remain steady. Having lessons learned from the COVID-19 pandemic, we believe that the strong foun dations of the Polish market will let it stay resilient,” concluded Avison Young.
Although the warehouse investment sector performed 25 percent lower than last year, logistics and industrial assets continue to attract investors. The de mand in the rental market remains high, driven mainly by the e-commerce in dustry. Also, in the coming quarters, there will be an increasing share of produc tion related to changes in supply chains and the relocation of companies from war-stricken Ukraine.
“Although the economic outlook is not so shiny anymore, industrial is still one of the real estate asset classes continuing to attract strong interest from investors,” comment ed Robert Dobrzycki, Panattoni CEO and Co-Owner Europe. “The recent sharp rise in construction costs and the inflation indexa
tion of rents make standing income-produc ing properties a very attractive proposition for investors because they can invest in ful ly-let real estate at below replacement cost.”
The value of completed warehouse in vestment transactions in Poland in the first quarter of 2022 stood at around €1.7 billion.
While lower than the previous three-month period, this was the third-highest start to a year since 2016, according to research from agent CBRE. Although the war in neigh bouring Ukraine and rising inflation have unsettled investors, demand from occupiers remains robust, and the dip in deal volumes
since the end of last year was more the re sult of the lack of appropriate products than a waning interest in industrial and logistics assets.
CBRE also predicted that the average Pol ish industrial and logistics transaction yield of 4.35 percent at the end of the first quarter would remain stable in the coming months, buoyed by the market’s resilient underlying fundamentals.
For several years Poland has been dealing with a rapidly changing economic situation, caused firstly by the covid pandemic, and now by the war in Ukraine. Although one might think that the demand for warehous es would slow down, quite the opposite has happened. Demand remains huge, and the market has shown that it has strong foun dations and constantly develops, taking an increasingly important role in the overall economy.
“The decrease of investment volume is more the consequence of the limited prod uct availability accompanied by rising fi nancing costs, rather than limited investors’ appetite for warehouses in Poland,” com
Senior Research Consultant, Industrial & Logistics Agency, Cushman & Wakefield
Robust demand for warehouse and industrial space in Poland is largely being driv en by the need to diversify logistics chains covering both key conurbations and smaller regional markets as well as borderland areas, and to maintain seamless and cost-effec tive distribution in response to the strong momentum experienced by e-commerce and manufacturing. These trends are expected to carry into the months ahead but occupier activity is rather unlikely to match last year’s record-breaking figure of 7.5 million sqm due to the complicated and uncertain macroeconomic and geopolitical environment, high inflation and the very low availability of warehouse space.
mented Bartłomiej Krzyżak, Senior Director, Investment at Avison Young. “In coming months, we expect the growing interest in sale-and-leaseback transactions, which al low the company to extract the property’s value and to convert an otherwise illiquid asset into working capital while maintaining operational control.”
At the beginning of the year, Macquarie Asset Management, on behalf of its Euro pean Logistics Real Estate Fund, acquired a logistics and warehousing facility near Warsaw from Logistic Property Investment, owned by Żabka Group and managed by Żabka Property Fund.
The 60,000 sqm state-of-the-art, technical ly advanced distribution centre is strategical ly located in the Radzymin logistics hub on the S8 expressway, a key gateway to central and northeastern Poland. It is 100 percent leased to Poland’s largest convenience store operator Żabka and will service more than 3,500 of its 8,200 stores from the warehouse.
Christian Goebel, Co-Head of Macquarie Asset Management’s Core/Core-Plus Real Es tate strategy, said: “Poland’s growing stand
ard of life and favourable location in central Europe support strong logistics demand from domestic and international companies. We are delighted to expand our real estate logistics footprint in this important market and to partner with Żabka as a high-quality, long-term tenant.”
Andrzej Potyra, Head of Żabka Property Fund, said: “This forward funding deal is an example of cooperation at its best between investor, tenant and developer. In Macquarie, we have found a highly experienced manag er to take this project forward, and we look forward to continuing our partnership to gether as a tenant.”
Developers continue to broaden their portfolios in and around the capital. In the first quarter of 2022, the Warsaw region saw the second highest demand for industri al space in Poland. This is one of the most rapidly developing markets in Europe and it benefits from an excellent location at the crossroads of many European transport routes as well as from easy access to labour since over 5 million people live in Warsaw and its surrounding area.
“The strength of the Warsaw market are the numerous towns not far from the city that when combined with the possibilities provided by Warsaw itself give the region massive potential,” commented Marek Do brzycki, Managing Director of Panattoni. “Not long ago, we announced the lease of space to a global e-commerce giant in the first park built in this area and now, in the second park to be developed, a logistics operator is to lease almost 30 percent. It appears Na darzyn is to become a key logistics centre in the region and its importance will only grow.”
According to Newmark Polska, at the end of the second quarter of 2022, Poland’s to tal warehouse and industrial stock amount ed to over 26.1 million sqm, representing a 19.5 percent increase in the same period in 2021. New supply in the first half of the year surpassed 2.4 million sqm, of which close to 53 percent was delivered in the first three months, marking the best quarterly result in the history of the Polish market.
“The second quarter of 2022 saw anoth er quarterly increase in occupier activity in the Polish industrial and warehouse market along with the initial signs of developer’s construction activity slowing down and fewer new warehouse projects breaking ground. Poland’s vacancy rate remained al most unchanged compared to the previous quarter,” said Jakub Kurek, Head of Industrial and Warehouse, Newmark Polska.
At the end of June 2022, the volume of warehouse and industrial space under con struction amounted to over 4.35 million sqm, down by 8 percent over the quarter but up
by close to 30 percent in the second quarter of 2021. The largest downward movements in stock under construction were observed in Central Poland.
“It is worth noting that the subdued de velopment activity is a reflection of the shortages of building materials whose prices have recently reached relatively stable but persistently high levels. Meanwhile, occupier demand for warehouse space continues to pick up. Total leasing activity in the first half of 2022 amounted to over 3.8 million sqm, up by 12.7 percent year on year,” commented Agnieszka Giermakowska, Research & Advi sory Director, Newmark Polska.
Despite the turbulent economic situation, banks are readily lending money to the com mercial real estate segment, with warehous es being their top choice. The industrial in vestor Accolade is one of the most willingly financed warehouse portfolio holders in Po land. The company benefits from over €500 million in bank loans, 40 percent of which have been acquired since February 2020.
“Accolade can secure satisfying financing conditions from the banks that share our view on the importance of environmental awareness and appreciate the attractiveness and stability of the warehouse segment. The financial institutions value our ESG ap proach and the high standards confirmed by BREEAM certificates,” says Michał Białas, Country Head of Accolade in Poland.
Panattoni recently sold to Trigea Nemovi tostní Fund, the real estate investment vehi cle of the Czech-based Partners Group, for the acquisition of its fully-leased Panattoni
Tricity North logistics park. The 46,000 sqm Grade A property is Panattoni’s fifth logistics park in Tricity, and the first in the vicinity of Gdynia, the port city on the northern Baltic coast of Poland.
Tomáš Trčka, Chairman of the board of Trigea Nemovitostní Fund, said: “This is our second investment in Poland and demon strates our conviction in the strength of the country’s logistics market and Tricity’s attrac tiveness as a destination for international in stitutional investors.”
Fairly high construction and operations costs of warehouse and industrial facilities have gradually pushed rental rates up in most locations across Poland. It is estimated that rental growth has reached around 1520 percent in the year to date and varied by location. At the end of the second quarter of 2022, the highest warehouse rents were in Warsaw (zone 1).
According to market sources, rental rates have been upward for at least the past two quarters, especially for new projects, which must consider higher construction costs. Financing costs are also rising, and as a re sult, yields have stopped falling. Capitaliza tion rates for the best warehouse products ranged between 4.7 percent and 5 percent.
Market experts remain very confident in the long-term prospects for Poland’s indus trial and logistics real estate market. “There are many reasons to be upbeat including the continuing strong trend towards ‘near shoring’ following the disruptions to global supply chains, the low penetration of e-com merce relative to Western European markets and the ongoing appetite of international companies to set up manufacturing facilities here due to Poland’s low-cost, skilled labour force and large domestic market,” Robert Do brzycki concluded.
PRS (Private Rented Sector) investments, which have been popular in Western Europe for years, are increasingly developing in Poland. In 2021, residential rental investments accounted for around €0.6 billion of the capital invested in the country. Although the institutional real estate sector for rent is still relatively small and primarily concentrated in large cities, it is getting bigger every year.
“The institutional rental market in Poland is developing very dynamically and is attract ing more and more interest from large play ers,” commented Michał Witkowski, Head of Living Services at Colliers. “Commerciali zation of new projects has accelerated and rental rates are rising, so after a short period
of stagnation caused by the outbreak of the war, we expect to see more transactions. This is especially important as rising credit costs have excluded a large group of clients from the purchase market.”
Poland is one of the largest residential markets in Europe, with roughly 14 million
residential units. However, three out of four homes were built before 1989, and there is a need for new quality housing. Poland is also home to five of the 20 fastest-growing cities in the EU, and the country has seen an an nual growth twice the average of the EU (3.6 percent vs. 1.6 percent) in the past decade.
NREP, a real estate investor from the Nor dics, is extending its presence to Poland to leverage opportunities in customer-centric rental housing and announced its market entry into Poland with the purchase of more than 1,000 new build units acquired from YIT.
“The private rental offering in Poland is growing, but still in its infancy compared to Denmark, Sweden or Finland, where 3040 percent of the population rents their dwelling. Only 16 percent of Poles rent their homes, and we see demand for modern, customer-friendly rental options of high quality, much like what we provide success fully to the Nordic capitals,” commented Jani Nokkanen, CIO at NREP.
Peter Noack, CEO of Zeitgeist Asset Man agement, a developer and asset manage ment company for private and institutional investors, added: “Institutional rental, very popular in the West, are only just starting to appear in Poland. Apartments are quickly gaining clients because a good price goes hand in hand with a high standard of prem ises, clear contract and the owner’s care over the whole building or estate.”
Zeitgeist AM has created its first stan dalone development in Gdańsk, The “Gór skiego” housing estate which is intended for long-term rental. “Gdansk is one of Poland’s most beautiful cities, but also an impor tant business centre, so we decided that it would be an ideal place to create our first standalone development investment,” Peter Noack explained.
Home by Zeitgeist “Górskiego” housing estate was built for Zeitgeist AM by the de
veloper BMC, which in its portfolio has 30 buildings, including 15 other buildings in the Tri-City area.
“For BMC, cooperation with a fund of apartments for rent is an interesting expe rience. Until now we offered apartments in developer standard, and the “Górskiego” in vestment was built as a turn-key project. So we had an opportunity to test ourselves in finishing the flats and our team showed that it is also very good in this field. I think we can safely say that we are a pioneer in the Tri-City market when it comes to package sales of apartments for institutional rental. We start ed talks with the fund in 2017, and at that time sales to individual clients were leading and few developers were considering selling apartments to funds,” commented Martyna Musiał Vice President of BMC.
Currently, in a similar scheme, combining institutional lease, Zeitgeist is preparing two other investments located in revitalized, his torical tenements in Warsaw: “Wrzesińska” in the Praga district and “Św. Barbary” in the very centre of the city.
With around 2.6 million inhabitants, the Warsaw agglomeration is a vibrant city with more than 225,000 domestic and interna tional students across 76 higher education institutions. In the last years, Warsaw has experienced strong immigration and GDP growth, while the housing supply has strug gled to keep up with the population increase and demand for rental housing.
“The Polish economy and housing market present strong investment fundamentals for our residential product and we believe it will continue in the years to come. We are
JACEK WESOŁOWSKI Managing Director, Trei Real Estate PolandThere is one growing opinion in Western Europe, that expensive capital and high in flation, will lower the prices of apartments. This is, as I understand it, visible in Germany. Raising capital in Poland is not easy, and bank loans are difficult to access. This saved Po land in the 2008 crisis and it will save Poland now. In a situation where obtaining credit in Poland is difficult and interest rates are very high, the reaction of Polish developers is not to start new investments. This results in even fewer people wanting to buy apartments, and there is even less on offer in the market. So where is the environment for lower housing prices? And imagine a time when interest rates will drop and mortgages will be come affordable. There will be no apartments on offer because the construction period for such projects is 2-3 years. Thus, in effect, we will have a rapid increase in apartment prices. This is a straight way, to this what we observe in Western Europe and cities like Prague. Apartments are not affordable for buying for most of the society. Then, owning apartments will be exchanged for renting them. That’s why PRS will have a promising future in Poland – some will say, unfortunately.
pleased to announce the purchase of these quality homes in a very attractive part of War saw, which will further strengthen our pres ence in the capital,” said Stanislav Kubáček, Managing Director of Heimstaden’s Invest ment Team for Eastern Europe.
Heimstaden Bostad’s footprint consists of around 2,600 apartments in Warsaw and a total of 4,400 apartments in Poland, current ly being developed by local developers for Heimstaden on a turnkey basis.
Trei Real Estate Poland has started the im plementation of its first investment in Poland in the PRS. The estate located in Poznań is set to be ready in 2025. The developer plans to build 450 apartments, which will be avail able in the institutional lease formula. The investor’s plans include further projects in the residential sector in Wrocław, Łódź and Warsaw.
Commenting on where the institutional rental housing market is now Jacek We sołowski, Managing Director of Trei Real Es tate Poland. said: “If we’re talking about rental housing in general, this market is no longer in its early stages. It’s probably already in its first phase of development, but if we’re talk ing about buildings that are entirely for rent, we’re right at the beginning, in my opinion.”
He continued, “This product of buildings for rent is well-known in such countries as Sweden, Norway, Germany, Austria. There are big companies that have a great deal of money already invested in this type of pro ject, where there is a constant income and profit margin. In these countries, there is of ten no longer the need or even the opportu
nity to invest in these projects. The land has become very expensive, which unfortunate ly will probably also happen here. As a result, apartments are also expensive and even on paper, such a project may not be successful. Today, at least on paper, this type of project is still feasible for Poland. Poland, as a geo graphically close neighbour of these already saturated markets, has become a logical place for this type of investment.”
By 2025, NREP plans to deliver 10,000 modern homes in major Polish cities, most of them designed to meet the increasing demand for 1-2 person households, such as young urban professionals, singles, or young couples, looking for modern living solutions with a community vibe.
“The market entry of NREP is a sign of growing maturity of the Polish market. The country’s living sector offers not only high returns and stable demand – but, due to its specificity, also allows the creation of port folios for modern state-of-the-art assets. This factor is attractive for long-term investors who value and prioritize sustainability in real estates, such as NREP,” commented Krystyna Pietruszyńska, Senior Consultant, Living In vestment, JLL.
“Poland is sometimes described as Eu rope’s tiger economy, with low unemploy ment and rising wages. However, real estate quality and supply are generally lagging the impressive growth rates, and we see an opportunity to bring NREP’s approach and create value for all stakeholders,” said Claus Mathisen, CEO of NREP.
“The build-to-rent sector share many chal lenges with build-to-sell – limited supply of land, raising interest rates, inflation of con struction costs. In addition, international in vestors need to take into account the volatil ity of exchange rates, especially since, unlike many other real estate asset classes, PRS as sets provide cash flows in local currency. At NREP we believe that rental market growth in Poland has strong macro foundations, and in addition, raising interest rates and recently risen purchase prices can give an extra boost to the rental demand,” commented Maciej Piotrowicz, Head of Living Investment, NREP.
“For an investor, the business model seems pretty robust. Institutional capital (almost unlimited capital) is effectively now competing with individuals and families to buy apartments. The result is that there will be even fewer apartments developed for sale – putting upward pressure on pricing for those apartments that are built for sale. Demand for renting will increase as people will not be able to find sufficient capital for a deposit on their mortgage for ever more expensive apartments. Ultimately, rental growth, driven by the forces of less supply and increased demand will help make BTR/ PRS one of the most interesting asset classes to buy for investors,” concluded Colliers.
Hungary is seen as having a strong pipeline of asset-grade products to meet investor demand, particularly in the office and industrial sectors. The markets are regarded as an attractive investment destination with a significant yield pre mium on Western Europe, Poland and the Czech Republic, although the limited availability of suitable investment products continues to be an obstacle to mar ket liquidity, despite these strong development pipelines. While both interna tional and regional investors continue to show an interest in the Hungarian and Central European investment markets, the current investor hesitancy reflects the geopolitical uncertainty in the region.
Gary J. Morrell
A significant yield gap between Hungary and the Czech Republic and Poland remains. However, prime offices in Budapest’s CBD can command lower yields. For example, the high-end, LEED Platinum certified, Szervita Square by Horizon Development is reported to have transacted at a sub-5 percent yield. CBRE put current prime office yields in Buda pest at 5.25 percent.
There is little risk of oversupply in the Bu dapest office market with restrained delivery in recent years by a relatively small pool of established developers according to many analysts. The current Budapest office pipe line is put at 240,000 sqm of space due to be delivered by the year-end and if delivered this will result in a record high annual office delivery, according to Cushman & Wakefield. Of this pipeline 49 percent is pre-let.
Total modern office stock in Budapest has surpassed 4 million sqm, according to the Budapest Research Forum, BRF (consisting of CBRE, Cushman & Wakefield, JLL, Colliers International, Eston International and Rob ertson Hungary). The overall vacancy rate has increased to almost 10 percent, accord ing to the BRF.
In a major logistics transaction the de veloper and investor, Wing purchased the Airport City Logistics Park from CPI, located in the neighbourhood of Budapest Liszt Fer enc International Airport. The business park contains almost 44,000 sqm of warehouse buildings and 8,000 sqm of offices in six buildings, already functioning and one un der construction.
“In line with its premium quality the trans action was carried out at a 5.6 percent yield, which is the lowest ever rate in the Hungar ian industrial and logistics property market,” said Wing on the deal.
The boom in the industrial and logistics sector is continuing unabated, as demand remains high and vacancy stands at record a record low. Analysts see the industrial and logistics market in Hungary, as elsewhere in Central Europe, as a sector in a positive po sition in the post-coronavirus period to the background of growth in e-commerce and light industrial production in major regional hubs, albeit there are significant geopolitical and economic concerns.
Cushman & Wakefield has traced 290,000 sqm of warehouse and industrial space planned to be delivered in 2022 in the Great er Budapest area with a further 88,000 sqm for 2023. “Both the significant amount of new supply arriving to the market and the high proportion of pre-lease transactions
in the take-up demonstrate the continued developer and tenant appeal to the market,” said Cushman & Wakefield. Total supply in the greater Budapest area is to reach 3 mil lion sqm in the coming months with stock in the regions standing at 1.3 million sqm. Overall vacancy stands at 6.3 percent.
The hotel sector has also been severely hit by the lockdown and restrictions on travel following a boom period for the CEE hotel markets. Although tourist traffic is returning, hotel operators and owners will need to pro vide accommodation that enables guests to relax in a safe and attractive environment. Developers, investors and hotel operators had seen the strong potential for hotel de velopment against the background of rising tourism indicators and demand indicators in the pre-pandemic environment.
A pick-up in the hotel market is not ex pected until at least spring 2023 which would again make the sector an attractive sector for investors. In addition to attracting non-traditional hotel developers, the hotel market is attracting investors who are new to the hotel sector. In this way the Hungarian, American-owned investment manager, In dotek purchased the Art Nouveau, 230-room Gellért Hotel overlooking the Danube. The fund plans to refurbish the landmark build ing and upgrade the hotel to five-star status.
A large number of hotel projects are at various stages in the preparation and con struction process in Budapest and the wid er country, although pipelines are difficult to estimate and schedules are slipping in the current uncertain market environment. The hotel pipeline realistically needs to be revised downwards, with a significant pro
portion slipping back according to analysts. Indeed, several projects have been put on hold with no new delivery dates announced. However, the pipeline remains strong and more hotel investment discussions are ex pected to restart.
Horwath HTL has traced an estimated 2022 pipeline for Budapest in six hotels total ling 490 rooms for 2022, while for next year this is 10 hotels constituting 1,474 rooms. The total pipeline for 2022-2026 is put at 32 hotels with a total of 4,418 rooms. “The hotel pipeline is a very fluid number and it is very difficult to judge how many of the projects will materialise,” explained Attila Radvánszki, director at the hotel and hospitality consult ants, Horwath HTL.
The retail sector is seen as lacking in liquid ity with prime shopping centres not coming onto the market. Although Gábor Borbély, Head of Business Development & Research at CBRE Hungary, sees added-value invest ment opportunities in regional retail centres where footfall is increasing and projects are not exposed to the tourism market, as is the case in leading Budapest shopping centres. He puts retail yields at 6-6.25 percent. The CEE investment manager, Adventum pur chased a portfolio of Tesco assets consisting of 15 in Hungary and four in the Czech Re public totalling 270,000 sqm for a reported €290 million.
The conventional wisdom is that despite issues relating to the war in Ukraine and oth er economic issues that are impacting the commercial property market, there is still a large amount of capital that needs to be in vested. Hungary is an attractive investment destination that offers a yield spread and
type of assets that are appropriate to specific investor preferences.
The office market continues to be the dominant and most sought-after investment sector in Hungary constituting 73 percent of total investment activity for the second half
of 2021, according to Cushman & Wakefield. The Union Investment purchase of Szervita Square and S-Immo’s acquisition of BudaPart Gate indicate a strong performance for prod ucts at the top end of the market from for eign investors. However, domestic investors
continue to dominate despite increasing competition from international investors.
GÁBOR BORBÉLY Head of Research & Business Development, CBRE Hungary
We have traced €580 million in investment volume for the first half of the year and we are hoping for a stronger second half with a more promising environment. Taking into consideration the investment pipeline we could expect to approach €1.2 billion. Much depends on whether the geopolitical situation improves and in this case invest ment activity should be higher. Industrial investors are showing an interest in the few available developments and there are hopes for deals in the second half of the year. The transaction process is slower in the office sector and there are possibilities for both new products and refurbishments, although there are not many available products.
BENJAMIN PEREZ
Principal, Avison Young Hungary
We expect a total investment volume of around 1.3 billion for the year to the back ground of uncertainty caused by the war in Ukraine, potentially high-interest rates and price inflation on building costs. Large assets of €100 million-plus are not currently liquid in Hungary and all the Central European markets are moving slowly. Markets are unpre dictable and the investment volume for 2021 ended significantly higher than initially expected at €1.4 billion.
The Czech Republic continues to be the leading CEE investment destination and could be considered the most stable CEE country with the lowest risk profile and the lowest yields. However, investment activity is limited by a low supply of asset-grade products that meets strong investor demand, and investment activity has slowed down due to caution being exercised and uncertainty over pricing.
Consultants have recorded around €1.1 billion in investment volume for the first half of 2022. This represents almost double the total reached in the previous year as several deals have slipped into this year. This places the country second in the region in terms of investment volume. The total investment
volume for 2021 reached 1.64 billion, repre senting an 11 percent increase over the pre vious year, according to JLL.
In a recent transaction, Wood & Company Office Sub-Fund completed the acquisition of the 7,500 sqm Green Point, BREEAM Ex cellent office building located in Prague 5.
The Wood & Company Office Sub-Fund is heralded as one of the leading local funds of qualified investors focusing on commer cial office properties in the Czech Republic, Poland and Slovakia with more than 200,000 sqm of leasable area.
“This transaction demonstrates that in the face of limited office product availabili ty in Prague, investors that can adapt their strategy to embrace alternative solutions will be able to further fulfil their investment criteria and achieve their investment goals,” said Konstantin Cordery, senior associate at Colliers, who advised Wood & Company on the deal.
Domestic investors have been dominant in the Czech investment market in recent years and represented 49 percent of activity over the past 12 months, according to Cush man & Wakefield. Czech capital represented 62 percent of total investment volume for 2021, according to JLL.
In the sector, retail developers have been focused on the development of smaller re gional retail parks, although renovation and redevelopment of shopping centres are planned.
In a retail transaction, the Bohemia-based ZDR Investments purchased the 9,500 sqm KPD retail park portfolio, located in multiple sites. As elsewhere regional retail outlets are seen as a secure investment option.
In a significant deal for the year, Adventum purchased a portfolio of Tesco assets consist ing of 15 assets in Hungary and four in the Czech Republic totalling 270,000 sqm. The regional deal was concluded for a reported €290 million.
In the office sector, Generali, on behalf of the Generali Real Estate Fund (GREF), pur chased the Poiistovna Ceska headquarter from CPI Group for a reported €100 million. The building constitutes 37,000 sqm in the Pankrác district, Prague 4. The assets will un
dergo an extensive renovation in line with ESG standards, according to the investor.
The Prague office market has recorded some of the lowest delivery levels in the history of the market. Total modern office stock in Prague stands at circa 3.7 million sqm and has a vacancy rate of over 8 per cent, the highest level since 2017. Currently, there is around 200,000 sqm of space under construction and expected to be completed in 2022-2042, according to the Prague Re search Forum (PRF).
Supply in the office market is considered to be low as developers have postponed projects due to economic and geo-political concerns
“Construction of at least 170,000 sqm will begin in the second half of 2022, rep resenting a healthy, but still restrained de velopment, on the Prague office market,” commented Cushman & Wakefield. There is currently 215,700 sqm of office space under construction. If this data is compared with the same period last year, construction has increased by 63 percent year-on-year, ac cording to JLL.
The 2023 pipeline stands at 140,000 sqm according to developer schedules. The Czech developer, Crestyl completed the 20,000 sqm final stage of the Dock in Five development in Karlin Prague 8 which now consists of 85,000 sqm of riverfront office space and 8,700 sqm of retail. Kapran deliv ered the 25,000 sqm Harfa Business Center B in Prague 9.
Further down the line, the Czech compa ny Penta started construction of the longplanned Masarycka A & B, a 23,000 sqm of
fice component of the development on a brownfield site in central Prague adjacent to the Masaryk railway station. The office, retail and hotel project includes the renovation of the railway station in conjunction with Czech Railways. The mixed-use development is due for completion in mid-2023.
Skanska, a long-term developer in the Czech Republic and the wider region has undertaken construction of the first 28,000 sqm phase of the 35,000 sqm Port7 on a brownfield site in the Holesvice district of Prague. The company also sold the 16,000 sqm Parkview office complex in Prague 4 to Deka Immobilien for €77 million.
Reflecting the appetite for the low level of investment grade assets from investors, the Czech Republic has the lowest yields in the Central European region at sub-4 percent for a prime product. Cushman & Wakefield put current prime office yields at 4.5 percent, industrial at 3.75 percent and retail at 4.5 percent.
Modern industrial stock in the Czech Re public has surpassed 10 million sqm, accord ing to the PRF. A new record annual volume of 1.5 million sqm of space is expected to be delivered to the market in 2022. The overall vacancy rate stands at a record low of 1.5 percent. Over 1.2 million sqm of space is un der construction and new supply is failing to keep up with demand, according to Cush man & Wakefield. Of the pipeline, 33 percent is being constructed on a speculative basis.
“Considering that more than 900,000 sqm are planned to be delivered by the end of 2022, we expect a new record of industrial space to be completed in one calendar year to be reached,” said the consultancy.
VGP delivered a 26,000 sqm facility at the VGP park Olomouc. CTP developed the CT Park Bor, located close to the German bor der, to full capacity, which at around 600,000 sqm of GLA, is the largest CTP logistics park in the Czech Republic and the second larg est in the CTP portfolio.
“Investor appetite for industrial assets con tinues to be strong, although activity in the sector is restricted by low availability of asset
grade product despite the strong pipelines across the country. The total stock exceeds 10 million sqm and there has been record demand recorded virtually every quarter recently. The office market in Prague, after a brief pause during the pandemic, has re gained stronger demand and has one of the lowest vacancy rates in the region and solid construction activity. The increase in construction costs caused some difficulties,
but those were quickly dealt with,” conclud ed Kevin Turpin, regional director of Capital Markets CEE Colliers.
Due to the constant flux in all price-creating parameters such as interest rates, operat ing costs, and construction costs we expect activity on the market to slow down signifi cantly in the second half of the year, and only the deals done in 2023 will be indicative of the new pricing environment.
KEVIN TURPIN Regional Director of Capital Markets CEE, Colliers
The total volume for the first half of 2022 reached approximately €1.2 billion. There are several promising transactions in the pipeline and, we expect the year-end total to reach somewhere between €1.5 and €2 billion. As prime assets are practically unavailable, we expect the pricing pressure will cease in most of the markets and the prime yields will remain relatively stable. However, with the increasing cost of financing, we can expect some outward movement in yields. Our current estimation, based on what we are seeing elsewhere in Europe, suggests somewhere between 25 and 50 bps.
The investment market in Slovakia is dominated by local investors in addition to attracting European capital to Bratislava and regional cities, the country offers quality assets in the office, industrial and retail markets, however, further develop ment of the investment market is limited by the small size of the country and in common with other countries in the region, a low supply and availability of investment-grade assets.
Domestic, CEE regional and foreign in vestors are active in the market and would conclude more prime and value-add acqui sitions if suitable products were available. In the current environment, the investment
process tends to be more protracted. The av erage deal size stands at a relatively low €32 million reflecting the size and limited availa bility of products in the market.
The total investment volume for Slovakia for 2021 exceeded €750 million, according to Cushman & Wakefield; this surpassed the volume of annual investments in the pre-pandemic era. Investment deals were
concluded in the office, industrial and retail sectors in both Bratislava and regional cen tres outside the capital.
Colliers have traced a €603 million invest ment volume in Slovakia for the first half of this year. The highest volume was recorded in the retail sector with around 50 percent of this total. Although with discussions in process, the year is likely to see office and in dustrial in first and second place respectively as has been the case in recent years. JLL sees a “flight to quality” across the market, an im portant part of investment volumes will be driven by the supply of high-quality prod ucts rather than the demand.
Avison Young recorded €630 million in investment volume for the first half of 2022. This “record-breaking” number is the result of a significant transfer of ownership in part of Penta’s office portfolio to the newly estab lished developer Alto Real Estate, said the consultancy. The sale included Sky Park Of fices and Digital Park.
Corwin sold the 21,000 sqm, LEED Gold sustainability accredited Blumental office centre in Bratislava to the Czech ZFP Real Estate fund. “With the acquisition, we have continued to expand our class A portfo lio and meet the requirement to diversi fy the portfolio,” commented Peter Lukac, vice-chairman of ZFP on the transaction. Czech funds have traditionally played a sig nificant role in the Slovak investment market as Czech capital recorded 20 percent of the total CEE €5.3 billion investment activity for the first half of 2022, according to Colliers.
The Bratislava Research Forum (consist ing of CBRE, Colliers, Cushman & Wakefield
and JLL) puts total office stock in Bratislava at almost 2 million sqm. The overall vacancy rate stands at close to 12 percent. There is an estimated 130,000 sqm of office space under construction in six buildings, most of which have completion dates for next year. Lake side 11 by Erste Group is the next scheduled completion in the third quarter. With the strong pipeline for next year, there is pres sure on developers to lease up their projects, says Cushman & Wakefield.
Colliers put prime office yields at 5 per cent, industrial at 5.5 percent and falling and shopping centres at 5 percent and expected to remain constant in the current investment climate. JLL put prime office yields at 5-5.5 percent, logistics at 5.2-5.5 percent, shop ping centres at 6.25-6.5 percent and retail parks at 6.75-7 percent. Avison Young put of fice yields at 5 percent, representing a histor ic minimum, shopping centres at 6 percent and industrial at 6.25 percent.
Domestic investors have continued to dominate the investment market with Czech and Slovakian capital representing 60 per cent and 10 percent of market activity in the first half year respectively, according to Avi son Young. Austrian investors represented 30 percent of the total. “The record-breaking numbers in investment volume in the first half testify that despite the Ukrainian conflict and soaring inflation, the market has been active with domestic investors capitalising on the current climate to secure opportuni ties in the office and retail sector,” comment ed Avison Young.
A major recent retail deal was the pur chase of the 56,600 sqm Aupark Bratislava
Asset Management (TAM), who ac quired an initial 60 percent of the complex for €270 million. According to the agree ment, the remaining 40 percent will be pur chased over 2022, 2023 and 2024 and the total stake will constitute €450 million.
In another retail deal involving a region al prime shopping centre, Atrium Optima Kosice was sold by Atrium to the Slovakian investor HNWI, a consortium of two private investors for €118 million. Another retail transaction also reflects the demand for re gional retail complexes as Blackstone Group sold a 54,000 sqm portfolio of four shopping centres in regional cities to the Austrian in vestor Supernova. Regional retail complexes have attracted several investors in recent years.
Prime shopping centre stock in Slovakia totals 1.3 million sqm. A further 160,000 sqm is under construction including the 70,000 sqm Nivy Mall and 25,000 sqm Eurovea ex tension in Bratislava, according to Cushman & Wakefield.
In another deal, the Nove Lido develop ment site with office and residential func tions on the south side of the Danube in central Bratislava was sold by HB Reavis to the Czech investor Penta Real Estate. Anoth er notable deal was the acquisition of a de velopment site adjacent to the airport from a Slovak seller by the industrial developer, GLP. The Czech investor, Arete Group continues to be active in Slovakia with the acquisition of a production facility on a sale and lease-
back basis from the German Booster Group
JLL puts total industrial stock in Slovakia at around 3.2 million sqm with a low overall vacancy rate of slightly above 5 percent. A further 320,000 sqm is under construction across the country. Most of the stock is lo cated in Bratislava and the western region of the country, although eastern Slovakia has become more popular.
Developer CTP has further expanded its presence in Slovakia with the purchase of
Immorent Zilina, a combination of standing assets and development land. The purchase consists of existing buildings in addition to the possibility of the development of 145,000 sqm of space on completion. CTP plans to expand its portfolio in Slovakia to one million sqm.
“Although recent events and turbulent geographical and economic environment have not taken much heat out of the real estate market yet, higher caution is notice
able. As a result, decision-making processes take longer and transactions are prolonged,” concluded Rudolf Nemec, Head of Capital Markets at JLL Slovakia.
Head of Capital Markets, JLL Slovakia
Concluding proof of the remaining investment activity on the Slovak market is the number and variety of deals closed in the first half year – thirteen deals across all major classes, including land and residential. There are some office deals in discussion and should a few of them close in the first half of the year office volumes could be doubled or tripled. Volumes in industrial and logistics will also depend on the successful closure of higher-volume deals within this year. Even if some investors, especially high debt reli ant, might be temporarily less active, demand for real estate assets should remain stable. The market is well positioned, with a diverse pool of active investors from various ge ographies.
Romania has arguably some of the most attractive yields in the region regarding the quality of assets, while yield compres sion is expected for premium assets, which are attracting increasing interest from investors. Strong office and industrial development pipelines are evident in both Bucharest and the regional cities. Traditionally the country has provided invest ment opportunities for more opportunistic investors, however, more institutional investors are now making acquisitions for assets in addition to investors seeking value-add opportunities.
The investment volume for 2021 was around €900 million, marginally higher than the amount recorded the previous year. “Investors have registered their appetite for commercial properties, especially for offices
and logistics. Encouraged by the swift mac ro-economic recovery and the appealing re turns they are offering,” said JLL.
The largest recent office investment transaction was the sale of the 75,000 sqm
Hermes Business Campus in Bucharest by Atenor to CEE investor, Adventum for a re ported €150 million. In another major deal the 38,000 sqm Campus 6.2 & 6.3 buildings were purchased by another regional player,
S-Immo from Skanska for a reported €97 mil lion. Both deals involved major developers and investors from the CEE region, indicating the attractiveness of the Romanian market.
In another deal, Atenor sold the Dacia one office complex to Dedeman. Hill Properties purchased a 75 percent stake in the 23,000 sqm Micro office building in Bucharest. This is described as a long-term, solid investment by George Kakouras, investment director at Hill Properties.
S-Immo also acquired the Expo Business Park from Portland Trust for a reported €120 million. “Big ticket transactions highlight the attractiveness and growing depth of the lo cal investment market,” commented Anca Merdescu, director of investment & debt ad visory at Colliers Romania.
A recent deal outside the capital saw the 15,000 sqm mixed-use office and retail Re cord Park in Cluj-Napoca sold by Speedwell to AYA Properties Fund for €35 million. The BREEAM Excellent accredited development is seen as an urban regeneration project that also consists of 236 apartments. The investor was attracted to the development due to the quality of the location, tenants and sus tainability accreditation, according to Simon Synaeg, investment manager at AYA Proper ties.
Colliers note that while the big investors are the driving force of the market, there is an increasing role for value-add investors. “We see a balance between new and recur rent investors,” commented Robert Mikló, director of investment services at Colliers Romania.
Total office stock in the Bucharest office market stands at 3.3 million sqm with an
overall vacancy rate that has risen to 16.5 percent. There is a large project pipeline with 130,000 sqm expected to be delivered this year, according to Colliers.
The major additions so far are River Devel opment’s Oslo and London buildings as part of the Sema Parc project, the 21,000 sqm Tandem by Forte Partners and the first phase of @Expo by Atenor. Overall, the Bucharest office market is seen as being in good shape and has weathered the storm better than anticipated. Although concerns remain as to the possibility of a global recession that could impact the Romanian market.
Cushman & Wakefield Echinox has record ed a total Bucharest office vacancy rate of 15 percent with the major recent delivery of the 25,000 sqm AFI Tech Park by AFI Europe. “The existing pipeline of under construction office projects at 134,000 sqm is quite low, mainly as a result of the present bureaucrat ic issues in Bucharest, as very few real estate projects received their building permits dur ing the last 12 months. One Cotroceni Park 11, U-Center or Equilibrium 11 are some of the most important projects that are expect ed to be delivered by the end of 2023,” com mented the consultancy.
JLL put prime office yields at 6.75 percent, industrial at 7.75 percent and shopping centres at 7.25 percent. Traditionally Roma nia has provided a yields premium on the more established CEE markets after Poland, the Czech Republic and Hungary. Colliers estimate prime office yields at 6.75 percent for office, 7.75 percent for industrial and 6.75 percent for shopping centres. “Roma nia is still well positioned from a yield per spective, as the current values are still well
above those registered in the peak (2007) and those currently quoted in the rest of the region,” commented JLL.
Romania is emerging as a major industrial and logistics market with close to 6 million sqm of stock. Major developments are also ongoing in different hubs across the coun try, an indication that a regional industrial network has emerged in the country outside Bucharest. As much as 300,000 sqm of indus trial space was delivered to the market in the first half of the year.
A large industrial transaction was the ac quisition of the Olympian industrial portfo lio consisting of three assets in Bucharest, Timisoara and Brasov by CTP from Helios Properties. CTP is now the biggest industrial operator in the Romanian market.
The overall vacancy rate has fallen to 3.6 percent, the lowest since 2019; essentially this is due to strong take-up and a recent development activity slowdown. There are currently 26 industrial buildings under con struction in Romania, 16 of which are in the Bucharest area. “The total leasable space under construction surpassed 580,000 sqm thus confirming the confidence of devel opers in the local market while the demand in the industrial market keeps on growing,” commented Cushman & Wakefield Echinox.
CTP has completed a 36,000 sqm facility for A&G Pharma at CTPark Bucharest Mog osoaia, The major regional developer has also completed a 16,000 sqm logistics hall at CTPark Timisoara and a 16,000 sqm pro ject at CTPark Bucharest West. The company is committed to developing and operating parks in Bucharest and in logistics centres
across Romania with, for example, a 60,000 sqm pipeline project at CTPark Oradea.
Local capital accounted for around 12 percent of the total investment volume for 2021. Austria was the main source of invest ment with 40 percent of the total followed by Czech and Hungarian investors, accord ing to JLL.
“We expect that investment volumes in 2022 will be close to the total registered in 2021, although in the period marked by un certainty accurate predictions continue to be difficult to make. Prime yields may come
under pressure for logistics and potential ly office, but this will also depend on debt availability and terms,” concluded JLL.
ANCA MERDESCU Director of Investment & Debt Advisory, Colliers RomaniaAll in all 2022 looks to be an exciting year for the local investment market in terms of overall activity, but the outlook for 2023 is challenging and largely depends on what happens in global financial markets in the coming quarters. With a handful of large deals at various stages still ongoing despite the somewhat uncertain backdrop in the global economy, the year could end with a total volume closer to or even higher than €1 billion.
An increasing number of office projects are being delivered in Belgrade bringing class A and B office stock to over 1 million sqm, according to CBS International, part of the Cushman & Wakefield Group. Although office development activity is gaining momentum this is from a low base as Belgrade has one of the lowest densities of office space for its population in Europe.
Daryl Fidelak
Previously the overall vacancy rate in the city stood at close to zero percent with qual ity office space very difficult to source with Belgrade not having experienced an office development boom with the arrival of com panies looking to establish SCCs, as occurred in other Central European capitals.
“After two years of living under aggravat ing circumstances due to the pandemic, the Belgrade office market experienced a total recovery by the end of 2021 in terms of both supply and demand, while a large number of companies returned to offices and even expanded their requirements,” said Tamera Kostadinovic, head of research at CBS Inter national, part of the Cushman & Wakefield Group.
In the largest recent opening, the highrise Beogradjanka building has been re developed into the 23,000 sqm Palata Be ograd by the established Serbian developer, Marea Properties. A further 215,000 sqm of office space is under construction or refur bishment out of which 51 percent is being developed in the CBD on the New Belgrade side of the river while 44 percent is being de veloped in the historic Old Belgrade area of the city, according to CBS International.
This confirms the ongoing demand for of fice space in the city centre where there was previously high demand but a very low sup ply of quality space. Due to the very urban nature of this side of the city and the lack of suitable development sites, the majority of office development was undertaken on the New Belgrade side of the city, and the CBD was established there.
Vacancy in the Belgrade office market stands at 5.5 percent. However, the real fig ure is lower as a significant proportion of va cant space is under reservation. This figure is expected to rise with the substantial amount of space due to be delivered in the coming quarters according to CBS International. The consultancy has recorded an ongoing trend for the rise in demand for office space in the city centre.
On the demand side, a take-up of over 35,000 sqm was recorded in the first quarter of the year representing an impressive 90 percent year-on-year growth. There was also a 44 percent rise in preleases which stood at 44 percent of the total leased space in the first quarter. The highest leasing activity at 70 percent of take-up was in the CBD in New Belgrade.
Delivery remains strong as in the second quarter of the year four new office projects were delivered to the market represent ing around 30,000 sqm of space according to CBRE. “The office market in Belgrade is looking strong with a significant number of projects under construction. Aside from ongoing projects, there have been several announcements including projects due to be completed in 2024. Yet, most projects are situated in the CBD area, where a significant number of companies are located,” said Jana Jovanovic, head of research at CBRE SEE.
One of the largest projects currently un der construction is by the prolific Israeli de veloper and investor, AFI Europe, the 30,000 sqm phase 1 of AFI City Zmaj is scheduled to be delivered in the third quarter of 2023.
Another project by the company is the latest phase of the 30,000 sqm AFI Skyline tower in Old Belgrade, and set to open by the end of the year. The complex also includes retail and around 130 apartments.
Close by Marera Properties is developing the BIGZ building, the former building of the BIGZ printing works into a modern office complex. The protected building and classic example of modern Serbian architecture will deliver 40,000 sqm of office space in addi tion to a revitalised facade and the interior will consist of industrial-style high ceilings, while at the same time accommodating the requirements of tenants for modern office space.
The €40 million project has been under taken in partnership with Aleksandar Grad nja, an experienced residential developer. “This is our first joint venture and expands our commercial portfolio,” said Milana Sreck ov, CEO of Marera Real Estate Partners.
In the CBD GTC is constructing the 17,000 sqm, LEED Gold accredited GTC X office pro ject that is incorporated into the existing buildings on Milutina Milankovica Boulevard. GTC is continuing to develop in Belgrade after having sold a portfolio of its Belgrade office buildings to the Hungarian investor In dotek Group. The CEE regional developer has been operating in Serbia since 2004 and has developed 120,000 sqm of office space and 35,000 sqm of retail in Belgrade.
In the same boulevard in New Belgrade work on the 16,000 sqm, Bridge Plaza com plex is ongoing, Also in the CBD, the Ser bia-based Alco Group is developing the 13,500 sqm Alco Plaza.
In Old Belgrade the Serbian developer and investor, MPC Properties delivered the long-awaited 8,000 sqm Tri Lista Duvana with nine levels of office space. In anoth er major project, the Serbian Emel group completed the 14,000 sqm phase 1 of Green Escape and is waiting for its first tenants to move into the complex. Overall the complex will consist of 66,000 sqm of space in three buildings in a green environment, close to an urban area with direct access to the city centre. Construction of a second phase will commence after the completion of phase 1.
In the centre of Old Belgrade the experi enced developer, Grant Invest is developing the 10,000 sqm Revolucija office complex that is due to be completed at the begin ning of 2023. The complex designed by the Belgrade-based Zabriskie is designed to con nect with the local urban environment with restaurants and retail on the ground floor and an internal atrium.
Concerning demand, the most favoured area is the CBD in New Belgrade, although the urban city centre, the largest residential area of the city is a growing office destina tion. The CBD has traditionally been the most favoured office destination due to the availa bility of space and recent demand has been driven by companies from the IT sector.
The office market in Belgrade is looking strong with a significant number of projects under construction. All commercial sectors have been quite active, with the largest share attributed to the expansion of the office sector. Activity in the investment market was largely due to the acquisition of the GTC portfolio by the Indotek Group. The office mar ket is set to continue its recovery as more companies begin to encourage a return to the office. The vacancy rate stands at 4.7 percent supported by robust demand. Strong occupancy has been noted in the recently delivered projects.
