In the first half of 2024, the volume of investments in CEE increased by about 29% year-on-year. According to preliminary results, this is in contrast to what is happening in the European and global markets, where activity is still suppressed. Currently, volumes are expected to reach around 5.5 billion euros in 2024, which is about half of the average for the last 10 years, Colliers revealed in its latest report.
H1 2024 core yield (CIE)
There is still a wide gap between buyers' and sellers' price expectations. Funding costs currently range between 5.00% and 5.75% due to the continued rise in interest rates as well as interest rate swaps that have softened recently. Compared to other markets in Western Europe, such as Germany, CEE has seen lower price adjustment over the past 12-18 months, which together with other factors could lead to slower transaction activity in 2024.
Growth rates of investment volumes in CEE
(H1 2024 vs H1 2023 and H1 2022)
H1 2024 volumes in CEE were among the lowest on record, despite moving in a positive direction compared to activity over the past 12 months, and relative to European and global figures. At almost 50%, Poland secured a majority share of regional volumes, with local dynamics picking up significantly in the second quarter. After slow activity last year, some markets saw significant year-over-year increases. Across the region, the recorded results vary widely - from a 55% annual decline in activity in Slovakia to a 150% annual increase in Romania. On average for the region, volumes increased by 29% year-on-year, but decreased by 41% compared to the first half of 2022.
The lack of data on domestic market transactions is prolonging the period of price establishment, and a tangible recovery continues to depend heavily on improving economic, inflation and interest rate environments. While we have yet to see significant signs of distressed sales, refinancing, maturing bonds, ESG compliance and other sector- or country-specific topics continue to influence buyers' and sellers' decisions.
Investment flows by sector (%)
The share of transactions with offices is decreasing, both globally and in CEE. In the first half of 2024, they occupy 31% of the total volumes, while transactions with commercial space retain the largest share - 32%. Logistics and industrial properties occupy the third place - with 24%. So far this year, there have been only three deals worth more than 200 million euros in the region. The largest has a portfolio of offices, and the next two have commercial areas - a retail park and a shopping center.
Investment flows by buyer origin (%)
In the first half of 2024, capital from CEE-6 was the most active with almost 50% share of the total volumes in the region. In this direction, the Czech Republic is in the leading position with 36%, followed by the United Kingdom with 19%, other European countries (18%) and CEE (13%).
YoY Rent Growth and Colliers 12-Month Forecast
Analysis of the half-year data shows that a combination of slowing supply and robust demand, in addition to inflation and cost-balancing, has led to more robust rental growth over the past 12 months, with only a few exceptions . In many cases, however, the pace is slower than in the previous period (especially in the logistics and industrial real estate segment).
Looking forward, depending on the individual segments and the dynamics of the market, opinions are mixed and vary between continued rent growth and stabilization of the economy. The slowdown in supply in many markets or segments will gradually lead to a decrease in vacancies, which will further support rent increases, especially for new projects that offer high quality, excellent locations and have higher levels of compliance with ESG standards.< /span>
You can see detailed statistics on average property prices in Bulgaria by cities and neighborhoods HERE