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Ex Soviet Bloc Property Investment Sees 300 Per Cent Jump

News Posted On: 22 January 2010

A report released on Thursday by broker CB Richard Ellis (CBRE) showed that property market turnover in Central and Eastern Europe (CEE) jumped 300% from the first to the second half of 2009.

The rise happened as shrew investors saw a bottom forming, due to home prices and economic activity stabilising. The surge brought total commercial property sales volume for 2009 up to 2.5 billion euros ($3.55 billion) according to CBRE, who also said strategic investors were going for "defensive properties in core locations".

Although activity accelerated dramatically in the last 6 months the market taken for the year as a whole was described as comparatively "quiet" by CBRE with turnover down 75 per cent from 2008. Nevertheless next year could see 2010 levels back up to recent norms if the accelerating trend continues, and the economic recovery sustains.

Central Europe grabbed a higher share of the market, up to 56 per cent from 37 per cent last year and surpassing Eastern Europe in volume. Popular areas for investment were the 'safe' cities of Prague, Warsaw and Budapest, accounting for 34 per cent of total investment, substantially up from last year's 21 per cent.

Other regions lost ground. Southeastern Europe more than halved to 12 per cent, while Eastern Europe dropped to 32 per cent from 37 per cent. CEE property players' preferences were first for offices (44 per cent) followed by retail (31) and industrial (12). Hotels, as in the West, are a Cinderella investment right now on the CEE, with only 8 per cent being allocated to this sector.

The second half of 2009 saw capital values and prime yields stabilise, with transactions closing at or near quoted values.

"The fact that prime yields fell in certain Western European markets in H2 2009 has bolstered belief that prime yields have reached highs in most CEE markets," said Pavel Schanka, Director of CEE Capital Markets.

Anyone with an interest in the CEE commercial property sector would be wise to remember that the old adage holds with commercial property as it does with housing – location location location. While the quality commercial real estate market in the CEE is showing signs of having already bottomed, Shanka noted that non-prime commercial properties could still see further value declines in 2010.

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