Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting cushmanwakefield.com to read:%0A%0A {0} %0A%0A {1}

CEE MarketBeat

Marie Baláčová • 18/09/2023

Q2/2023 THE ECONOMIC GROWTH OUTLOOK BRIGHTENS ACROSS CEE

Despite the challenges, the economies of the CEE countries demonstrated more resilience than anticipated by leading think tanks in 2022, which can be attributed to relatively strong consumer demand in most CEE countries due to lifted pandemic restrictions and significant Ukrainian refugee spending. Additionally, CEE countries maintained tight labour markets with low unemployment rates compared to the rest of the EU.

Most CEE-6 countries are expected to show modest GDP growth in 2023, with improved expectations compared to the previous quarter. Steady economic growth is predicted for 2024-2025.

Across all CEE countries, except for Hungary, the HICP is projected to decrease annually in 2023. Starting in 2024, inflation is expected to recede to single digits, providing additional relief to economies.

The tightening of financing conditions will affect investment in CEE and the EU, but as economic activity gradually normalises, investment growth is predicted to regain momentum.

 

INDUSTRIAL MARKET

Strong occupier demand and nearshoring potential in CEE maintain low vacancy rates despite significant new supply

  • The fundamentals of the industrial property market in CEE remain strong. Nearshoring offers further opportunities for the region, particularly in the automotive, machinery and equipment, apparel, and consumer goods sectors.
  • The H1 2023 new supply of industrial space amounted to ca. 3.8 million sq m, with a total of over 7.6 million sq m added in the past 12 months, expanding the market by 16%. As of June 2023, CEE’s modern industrial and warehouse space exceeded 59 million sq m; Poland accounted for 52% of this, followed by the Czech Republic with a 19% share.
  • About 5 million sq m are currently under construction in the region, with Poland and Czechia making up 42% and 27%, respectively. At the aggregate level, the share of pre-leased space under construction has gradually decreased from 61% in Q2 2021 to 44% in Q2 2023, except in Czechia and Romania, where only 39% of space under construction was available for occupation.
  • Occupier demand diverged across CEE in Q2 2023. While regional gross take-up remained steady compared to the previous quarter, it dropped by 32% year-on-year. However, on the country level, industrial demand remained very robust in Czechia and Slovakia. Net absorption stayed positive for CEE as a whole and in each country except Hungary, but it was below the Q1 level and the 5-year quarterly average.
  • Despite slight upward corrections in Hungary, Poland, and the Czech Republic, vacancy rates stayed single-digit across all markets, notably remaining below 2% in Czechia and Bulgaria.
  • In Q2 2023, prime industrial rents increased in all CEE markets except Romania compared to Q2 2022. Poland saw the most significant rental growth at +35% year-on-year, despite a 5% quarterly decline in Q2. The highest regional prime rent for ambient warehousing space remains in Czechia at €7.75 per sq m per month.

OFFICE MARKET

Stable prime rents, a slowdown in development activity, and occupier demand largely driven by lease renewals

  • In Q2 2023, the CEE-6 aggregate gross take-up grew by 12% y/y and by 28% compared to Q1. The cumulative net absorption experienced, however, a downward trend.
  • Office development varied across the CEE capital cities, but an overall deceleration in new supply dynamics is evident, not only by the declining 12-month rolling indicator of new completions in the region but also by the decreasing delivery pipeline currently under construction. Still, around 1 million sq m of offices are currently under construction, with 73% of this on a speculative basis. Budapest and Warsaw collectively account for 50% of the stock under construction in CEE.
  • In Q2 2023, CEE capital cities saw a decline in vacancy rates compared to Q2 2022, except for Budapest, where availability surged by 27%. Since Q4 2018, Prague consistently boasts the lowest office vacancy rate, while Sofia and Bucharest record the highest.
  • In Q1 2023, prime office rent experienced a continued upward trend in all capital cities of CEE, except for Warsaw. Also, the rental gap within each market has widened between various office schemes, subject to location, efficiency, ESG compliance, and other attributes.
  • In Q2 2023, prime office rent in all CEE capital cities held steady from the previous quarter, except for Bucharest, which saw further increases. On an annual basis, rental growth was observed across all the cities in focus, ranging from 2% in Budapest and Warsaw to 16% in Bucharest. Prague commands the highest prime rent within the region, followed by Budapest, while Warsaw experienced a more moderate increase in prime office rent during 2022. Sofia maintains the lowest prime in CEE. Rental rates vary significantly between office schemes within each market based on their specific location and quality attributes.

RETAIL MARKET

Despite all the challenges, retail schemes across various formats performed well in CEE

  • Despite the challenges posed by surging inflation in 2022 and H1 2023, the highest in the EU, impacting purchasing power and costs for retailers and developers, a positive trend toward decreasing inflation and enhanced domestic spending emerged in Q2 2023 across CEE. Inflation will recede to single digits by 2024, providing further relief.
  • Retail schemes have performed well, with retail sales meeting or surpassing pre-pandemic levels. While shopping centre footfall is generally lower, visitors now tend to visit retail schemes with specific intentions to buy and spend more.
  • A slowdown in development activity is evident in the CEE retail property sector, particularly within shopping centres. As of Q2 2023, around 1.3 million sq m is under construction in CEE-6, with 63% in retail parks. Developers are prioritising the refurbishment and extension of existing shopping centres and the construction of new retail parks.
  • CEE countries consistently attract new brands, with at least 47 new market entries recorded in 2023 and more planned by year-end. Dynamic expansion is notable in discount non-food retailers, affordable clothing, sports stores, and F&B. Czechia and Poland remain the most attractive CEE markets for entry.
  • In Q2 2023, prime rents for high street retail space across CEE remained steady compared to the previous quarter, while they increased for retail parks and shopping centres in certain countries in the region.


INVESTMENT MARKET

CEE investment activity is expected to rebound in the second half of 2023 as the market adapts to the new normal

  • In the property market, during H1 2023, CEE saw the lowest H1 investment volumes in a decade, as the region adjusts to the higher interest rate environment.
  • However, pockets of activity persist across CEE despite a deteriorating sentiment for real estate, while local and regional capital remains engaged. The improving Czech economic outlook and banking sector sentiment may enhance pricing and activity. In Poland, investments are largely centred on the logistics and industrial property sector, while core retail is gaining relative attractiveness as the asset class. Slovakia, Hungary, and Romania are witnessing subdued transaction volumes, primarily driven by local investors who frequently acquire properties at a discount.
  • The occupational markets driving income for real estate begin to diverge. In Czechia, the hotel and retail sectors remain stronger than other sectors. Meanwhile, in Poland, office demand remains resilient in the CBD but weaker in the peripheral submarkets. The industrial and logistics property sector sustains healthy demand, focusing more on manufacturing than logistics. The recent rapid increase in rents is expected to level off now.
  • The second half of 2023 is expected to bring improved pricing stability as interest rates reach their peak and investors gain clearer insights into price discovery.

HOTEL MARKET

Robust ADRs drive the performance of hotels across CEE, although occupancy rates continue to lag behind pre-pandemic levels

  • In H1 2023, the CEE-6 region saw 8 hotel transactions worth around EUR 152 million, involving 917 rooms. Regarding the hotel investment volume, Hungary led with the sale of the Sofitel Budapest to local investor Equilor for EUR 87 million, while the Czech Republic and Romania contributed the remaining €47 million and €18 million, respectively.
  • Looking ahead, the CEE-6 region anticipates increased hotel investment volumes, with several transactions expected to close by late 2023 or early 2024. This recovery is driven by robust hotel performance, especially ADR, and the anti-inflationary nature of hotel assets.
  • The pricing gap between sellers and buyers is narrowing, with more motivated sellers seeking to deleverage and improve their credit lines, resulting in more assets offered to the market. Well-capitalized, cash-rich investors are showing interest in hotel assets due to the strong fundamentals of the hospitality industry.
  • An estimated €4.2bn of capital was raised by 11 significant funds targeting European hotels, with some funds allocated to the CEE region. Financing costs, a significant hurdle for hotel sales, are expected to improve alongside stabilising inflation rates.
  • In H1 2023, CEE-6 hotels experienced an upward trajectory, with a 20% ADR growth compared to the pre-crisis H1 2019. Occupancy remains 11% below 2019, but RevPAR increased by 6% to an average of €66.
  • The positive outlook for the CEE-6 region is bolstered by factors including a limited supply pipeline, proximity to major large source markets like Germany, strong leisure demand in Prague and Budapest, and robust domestic demand in Warsaw/Poland. This upward trend in the CEE-6 region is expected to continue, with ADR growth slowing but occupancy growth maintaining momentum, surpassing pre-pandemic levels, similar to most other European hotel markets.

CURRENT CEE MARKETBEATS

Office, building, skyscraper
CEE Office Data

CEE Office Marketbeat is a summary of CEE office property sector providing comment on recent trends as well as market data and analysis.

Download

Industrial, logistic, warehouse
CEE Industrial Data

CEE Industrial Marketbeat is a summary of CEE industrial property sector providing comment on recent trends as well as market data and analysis.

Download

Retail, street, people, shopping
CEE Retail Data

CEE Retail Marketbeat is a summary of CEE retail property sector providing comment on recent trends as well as market data and analysis.

Download

Hotel lobby women coffee
CEE Hospitality Data

CEE Hospitality Marketbeat is a summary of CEE hotel property sector providing comment on recent trends as well as market data and analysis.

Download

SÚVISIACE INTERNÉ VEDOMOSTI

Slovensko MarketBeat
MarketBeat

Slovakia MarketBeat

Cushman & Wakefield MarketBeats analyzujú kvartálne aktivity na Slovensku v oblasti komerčných nehnuteľností v sektoroch kancelárskych, maloobchodných a priemyselných nehnuteľností vrátane trendov, ponuky, dopytu a cien na trhu.
Lukáš Brath • 02/05/2024
retail radar
Research

European retail radar

Náš European Retail Radar ponúka podrobný prehľad o odvetví maloobchodných nehnuteľností v celej Európe, poskytnuté dáta vychádzajú z prieskumu uskutočneného na transakciách v 13 európskych krajinách a 231 mestách.
15/04/2024
Research, graph, table, data
MarketBeat

CEE MarketBeat

Cushman & Wakefield MarketBeat reports analyse quarterly commercial real estate activity in the CEE region (Czech Republic, Hungary, Poland, Romania, and Slovakia) across office, retail, industrial and hospitality real estate sectors including supply, demand and pricing trends at the market and submarket levels.
Marie Baláčová • 18/09/2023
Office Fit Out Cost Guide - Web card
Research • Workplace

Office Fit Out Cost Guide

Obnovte a dajte nový nádych vašim pracovným priestorom pomocou nášho nového Office Fit Out Cost Guide 2024. Zistite ako majú vyzerať nové, moderné a produktívnejšie kancelárie v Bratislave.
Veronika Špániková

NEMÔŽETE NÁJSŤ TO, ČO HĽADÁTE?

Spojte sa s jedným z našich profesionálov.

With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on Cookies.

MORE OPTIONS
Agree and Close
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All
SAVE SETTINGS