Central Europe’s CRE Investment Plummets by 55%

According to a report by commercial real estate agency Cushman & Wakefield, the market is unlikely to see a quick recovery in pricing

Commercial real estate investment in Central Europe dropped by 55% year-on-year in 2023 to  €5.02 billion because of the continuing economic uncertainty, according to a report by commercial real estate agency Cushman & Wakefield.

The real estate agency said that the market in Central Europe (Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia) is unlikely to see a quick recovery in pricing that satisfies both sellers and buyers. Additionally, potential de-leveraging requirements could lead to a scarcity of new equity for existing deals or reinvestments, resulting in more forced sales, adding to the market's challenges. Nevertheless, Cushman & Wakefield predicts investment volumes over the next few years to gradually increase by 10% to 15% annually.

“Evidently, prices have not bounced back enough to satisfy sellers, and buyers have not adjusted to the new pricing. Hence, the low investment activity.”

Jeff Alson, Head of Capital Markets CEE at Cushman & Wakefield

Poland experienced the most significant investment downturn of 68%, leading its share of overall volume to fall from around half or more in preceding years to roughly a third. The Czech Republic was in second place, with around a quarter.

The highest proportion of the capital went into the office sector, although its share dropped from 41% in 2022 to 32% in 2023 because of the increasing trend towards remote work.  The industrial and retail sectors remained at nearly equal levels, both slightly exceeding 27%, and basically the same as the year before (26%).

Bottom Line

• Poland emerged on top with significant investment of 68%
• Investment volumes may increase by 10-15% in future
• Despite a drop in share, the highest proportion of the capital went into the office sector

The logistics and industrial sectors performed well, though despite an e-commerce surge, demand from its tenants decreased. The retail sector also demonstrated resilience, showing robust sales across CEE and also attracting significant investment volumes. Prime yields exhibited a mixed pattern: while some markets saw a slight increase, reflecting investor demand for premium, risk-averse assets, others remained stable, underscoring the underlying resilience and on-going appeal of prime commercial real estate in Central Europe.

Sector-wise, prime yields have been increasing since the beginning of 2022 across all asset classes. The sharpest outward movement has been recorded in offices, while yields of industrial properties grow with the lowest speed in CEE.