WHAT'S ALL YOU NEED TO KNOW ABOUT REAL ESTATE IN CEE - RESEARCH - act legal
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In cooperation with
UP CEE?
WHAT’S
ALL YOU NEED TO KNOW
ABOUT REAL ESTATE IN CEE
RESEARCH
Real Estate for a changing world
CONTENT
INTRODUCTION
3 MACROECONOMIC
SNAPSHOT 16 WAREHOUSE AND LOGISTICS
SECTOR IN CEE COUNTRIES
ERIK DRUKKER
Chief Executive Officer CEE
BNP Paribas Real Estate Poland
4 MARKETS IN THE CEE
INVESTMENT
18 5 YEARS CHALLENGE
CITIES: We are pleased to present our latest
BNP Paribas Real Estate “What’s up CEE?” report
showing the untapped potential of the region
6 KEYLASTDEALS:
12 MONTHS 30 HAYS:
LABOUR MARKET as an investment location.
In our study we provide a wide retail provision and
7 ECONOMY
CENTRAL EUROPE
36 LATEST TRENDS
act legal: range of crucial information nearly 32 million m²
and figures on the real estate of modern warehouse
sectors in key regional markets: stock. Moreover, yields
Poland, Czech Republic, higher than in Western
Hungary and Romania. Europe combined
13 IN THE CEE
OFFICE SECTOR
42 CONTACTS with the availability
Over the last five years the real of institutional quality
estate market in the region product create ample
has grown exponentially and opportunities for a wide
consolidated its positive perception range of investors. In
15 IN THE CEE
RETAIL SECTOR among investors. Local economies 2018 an all-time record
growing at a fast pace, profound volume of nearly €13
infrastructure improvements, billion was deployed
unemployment reaching historical across CEE, with
lows, a high inflow of FDIs, a particular surge
a steady growth of wages and in the logistics sector.
purchasing power; all these Strong results of H1 2019
factors form a solid pocket which confirm that investors
In cooperation
with supports bright prospects. still consider favourable
opportunities in the CEE
CEE offers a sizeable market region and their appetite
of over 16 million m² of modern for product remains high.
office space in the capitals
only, 24 million m² of modern
What’s up CEE? | 2019 2
MACROECONOMIC
1.7%
SNAPSHOT 2.3%
4.8%
4.8%
1.5%
REAL GDP 8.2%
3.5%
GROWTH 1.4%
IN THE EU 2.6% 5.1%
IN 2018 1.4%
2.6%
1.5%
3.0%
4.1%
5% 2.4%
1.7% 4.9%
4.1% 2.6% 4.1%
0.9%
2.5% 3.1%
2.1% 2.4%
MALTA: 6.8% 1.9%
1% CYPRUS: 3.9%
Source: Eurostat
What’s up CEE? | 2019 3
INVESTMENT
INVESTMENT MARKET INDICATORS & TRENDS IN SELECTED CEE COUNTRIES FOCUS ON REAL ESTATE
MARKETS IN CEE
CZECH REPUBLIC POLAND
4.25% 4.25%
€2.59bn 3.25% €7.33bn 4.25%
€1.7bn 5.50% €2.7bn 6.00%
4.25% 5.00% 4.50% 5.00%
The sustainable economic performance
The CEE real estate of the entire region and the good
Investment volume
investment will availability of product coupled with
high investor demand resulted
in 2018 probably maintain in the unprecedented level of €12.57
Investment volume
a healthy pace in 2019 billion traded in the CEE-41 in 2018.
The volume recorded a 12% increase
in H1 2019 over 2017, and set a new record for
a further consecutive year. In the course of the first half of 2019, the capital
Prime office yield & trend deployed in the region reached €5.45 billion, thus beating the half-year outcome
of the previous year, and bodes well for the full-year investment spend.
Prime shopping centre
Both in 2018 and even to a larger extent in the first half of the current year,
yield & trend
offices were the top performing sector in the region. Investor appetite for
product in the retail sector has curbed significantly, due to uncertainties
Prime high street yield & trend prevailing in the retail industry. Interest in industrial and logistics assets has
remained very strong and is expected to continue, boosted by the buoyant
Prime warehouse CEE economies and e-commerce growth. The hotel sector has its steady
(traditional) yield & trend slice of the investment volume, while new, alternative investment sectors,
such as residential-for-rent and student housing, have been attracting ever-
Prime warehouse
increasing investor demand, although the availability of product is meagre.
(e-commerce) yield & trend
In the Czech Republic and Hungary, domestic capital sources have been
Trend remarkably active, and this is expected to continue in 2019, although
on a smaller scale. The surge of new capital from Asia, in particular
to Poland and the Czech Republic, is widening the pool of investors.
HUNGARY
Warsaw, Prague, Budapest and Bucharest, the latter just joining the race,
ROMANIA have been benefitting as investors search for the higher yields they
€1.74bn 5.25% 7.00% struggle to achieve on more mature European markets. Consequently,
sharp competition for investment products in the CEE region is expected
€0.72bn 5.25% €0.96bn 6.75-7.00% to push the yields for prime as well as secondary assets further down,
in particular in the office and industrial & logistics sectors.
5.50% 7.00% €0.31bn 8.00%
1 Poland, Czech Republic, Hungary and Romania
What’s up CEE? | 2019 4
CEE INVESTMENT VOLUME Poland Czech Republic Hungary Romania HUNGARY ROMANIA
H1 2019 with €720 million traded was more The country offers investment products of good
H1 2019 silent when compared to the intense boom quality and still at affordable prices. The office
2018 experienced in the last few years. Weaker sector, both in Bucharest and in key regional
figures can result from the heated yield cities, has been the most active, although retail
2017 compression, which has pushed investors and industrial & logistics sectors have attracted
2016 to a more selective approach. Office assets attention as well. The largest office transaction
still take a substantial chunk of the share, took place in Cluj Napoca, the second
2015 while hotel assets are gaining an increasingly biggest real estate market in Romania.
2014 larger slice of the cake each quarter.
Another market characteristics is an increased
The majority of the big-ticket transactions are preference of both occupiers and investors
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000
still being carried out by the big local REIF’s, but to conclude sale & leaseback agreements.
we may see a slight slow-down due to newly These arrangements have become popular
issued government bonds with higher yields and for good quality industrial parks in top
other recently introduced measures which extend locations along the A1 motorway.
POLAND CZECH REPUBLIC REIF’s bond redemption notice to 180 days.
A number of top class assets are currently
The investment sector in Poland has been The Czech Republic continues to be considered In H1 2019, the inflow of capital from in an advanced stage of transaction, involving
strongly fuelled by a number of single as the most stable country in the region German speaking regions was the largest. office buildings and hotels, which upon
asset and portfolio mega deals, and with the lowest investment risk rating. The In addition, Asian investors have been completion will pinpoint a new prime yield
with €2.72 billion is the clear leader investment volume reached €1.7 billion searching for products more actively. in Bucharest as well as the entrance to Romania
holding more than a half of the volume in H1 2019, 59% up y-o-y. Investor appetite of a new breed of institutional investors.
transacted in the region in H1 2019. remains strong; however, the availability Prime yields across the sectors have Further yield compression for prime assets
of products on the market has been dwindling notably compressed in the last six months in top regional cities is also expected.
Offices, both in the capital and on key regional and may affect the full year result. and a further downward trend is expected,
markets, have attracted the bulk of capital in particular in the office sector. In addition, we see increasing interest from
(nearly €1.7 billion), and will continue driving Offices were the most traded asset class (41%), non-core investors in acquiring income producing
€12.62bn
the volume. The retail investment segment is on targeted in particular by purchasers from South assets, in central locations of Bucharest,
the slide; however, selected retail assets with Korea, and will continue driving the investment for investment volumes below €5 million.
solid fundamentals are still on the investors’ activity in the second half of the year too.
radar. Strong investor appetite for product The hotel and industrial & logistics sectors
in the industrial & logistics sector has continued,
most notably for prime assets occupied
have their chunks of the transactional
volume, while alternative products such
The best ever CEE INVESTMENT VOLUME
by exceptional e-commerce operators. The hotel as mixed-use schemes and residential-for-
total transacted – SPLIT PER SECTOR Office Retail Industrial other
sector has been having its slice of the cake for rent assets have started to emerge. in CEE-4
a couple of years, while residential-for-rent and H1 2019
student housing investment sectors have just Both German speaking and domestic buyers 2018
€5.45bn
been initiated. In Q2, the first student housing continue to search for product, while the Asian
transaction was concluded (Kajima & Griffin RE capital has significantly increased its footprint. 2017
in H1 2019
purchased Student Depot for approx. €60 million). 2016
Prime yields across the sectors have compressed In Q2 2019, prime yields in offices
significantly in the course of the last 12 compressed slightly and a further downturn 2015
months. We expect to see further soft yield is forecast as a result of strong investor
2014
compression for truly prime assets in the office demand. In the remaining segments, prime
and industrial & logistics segments. yields are expected to remain flat 8% higher on H1 2018 0% 20% 40% 60% 80% 100%
What’s up CEE? | 2019 5
KEY
DEALS:
Estimated
Country, sale price
city Sector Property Name (€ million) Vendor Purchaser
PL, Multi-city Industrial Encore Portfolio 320 Hillwood Mapletree
LAST 12
PL, Warsaw Retail/Office Wars Sawa Junior 301 CBRE GI Atrium European Real Estate
PL, Multi-city Industrial Prologis Portfolio 260 Prologis Mapletree
MONTHS
PL - Bytom,
Częstochowa, M1 Shopping Chariot
Radom, Poznań Retail Centres (4 locations) 222 Top Group EPP
Gdański Business
PL, Warsaw Office Center (C&D) 200 HB Reavis Savills IM
€320M HUN, Budapest
HUN, Budapest
Office
Retail
MILL Park
MOM
Shopping Centre
100
256
Skanska
Multinational
consortium
Erste Property Fund
OTP
Poland Corvin Office
(6 buildings
Encore Portfolio > Multi-city HUN, Budapest Office + 2 future projects) n/a Futureal OTP
CTP portfolio
€256M
(Prague North, Plzeň,
CZ, Multi-city Industrial Teplice) 460 CTP DEKA
GLL
Penta (Hanwha Investment
CZ, Prague Office Waltrovka 253.5 Investments & Securities)
Hungary Best Hotel
MOM Shopping Centre > Budapest CZ, Prague Hotel Hotel Intercontinental 225 Properties R2G
Forum Ostrava
CZ, Ostrava Retail Nova Karolina 209 Meyer Bergman REICO
€460M CZ, Prague Office Rustonka I-III 163.8 J&T Real Estate
Hana Financial
Group JV Whitestar
Czech Republic RO, Bucharest Office The Bridge 200 Forte Partners DEDEMAN
CTP portfolio > Prague, Plzeň, Teplice Old Mutual
Portland Life Assurance
RO, Bucharest Office Oregon Park C 170 Trust & ARES Company (SA) JV AG Capital
€200M RO, Cluj Napoca Office The Office 125 NEPI & Mulberry
Atrium
DEDEMAN
RO, Bucharest Retail Militari Shopping Park 95 European RE MAS Real Estate
Romania
The Bridge > Bucharest RO, Bucharest Retail ParkLake (50% shares) n/a Caelum Sonae Sierra
What’s up CEE? | 2019 6
across our region in the coming quarters, we do not expect this slowdown
to be very severe. Low labour costs coupled with strong productivity
in manufacturing industries allow Central European economies to retain
their competitive edge, even, we believe, in times of global turbulence.
The relative resilience of exports across the region also points to a still
benign outlook for investment spending. And while capacity expansion is not
MICHAŁ DYBUŁA
very likely, given the fall in demand, Central European corporates could well
Chief Economist BNP Paribas Bank Polska SA continue to replace older, or ageing, machinery with new equipment, which
Chief Economist Central allows for less labour-intensive production techniques. That would further
and Eastern Europe
strengthen their competitiveness when moving into the next economic
michal.dybula@pl.bnpparibas.com
cycle. A low interest rate environment should support such developments.
olid consumption demand, supported Given the weaker growth outlook, major global central banks have reversed
by strong labour markets and robust their monetary stance. Interest rates in the US have already been cut
investment spending, propelled and more reductions are expected over the next one to one-and-a-half
by the absorption of EU structural years. Meanwhile, the expected renewed expansion of ECB’s balance
funds remains the key driver for Central sheet should ease overall monetary conditions on our continent. This will
CENTRAL EUROPE:
Europe’s robust economic performance. allow Central European policymakers to keep an accommodative stance
as well, keeping both official and market-based interest rates low.
The regional outlook for the coming
quarters, however, is clouded by uncertainty Against the background of resilient exports and investments, labour markets
regarding the shape and direction across our region will probably remain tight, pointing to robust wage increases
of the global economy. The escalation and keeping the consumption momentum alive. Lower inflation, supporting
of tensions in trade policies between the US household purchasing power, should be an additional factor for solid spending
and China has not only reduced the pace dynamics moving forward. In that respect, the weaker pace of global and
of global exports and imports, but also domestic growth is actually welcome from Central Europe’s perspective.
MANAGING GROWTH
worsened investment sentiment, reducing Elevated price growth was the unwelcome side-effect of rapid GDP expansion
the scale of corporate capital spending in 2014-18. With global demand slowing and commodity prices edging
worldwide. The impact of tighter monetary down, we expect disinflation across Central Europe in 2020-21, at least.
IN TIMES OF GLOBAL
policies of the main global central banks
in 2017 and 2018 also had a negative The combination of robust income growth and low interest rates
impact on investments more recently. As is usually supportive for the real estate market. In light of rapid
TURBULENCE
a result of weaker exports and investments, property price increases in Central Europe over the past few years,
global GDP growth has already been the swift dynamics will probably not continue over the next year or
slowing down in some quarters. two. But, while prices growth on the regional real estate markets may
weaken, sharp price declines do not seem very likely at this stage.
The worsening external backdrop
is increasingly reflected by softer export Our base-line scenario for the region is that it will manage to keep growth
Central Europe passed its cyclical peak in late 2018 figures from Central Europe, which are afloat despite external headwinds. Moreover, we believe that Central Europe
a major reason for the somewhat weaker is relatively immune to additional outside risks materialising. The list of such
and growth has been continuing to slow down. Yet, despite overall GDP growth compared to last potential risks is long, comprising a further escalation of trade tensions
the more moderate pace of GDP expansion, regional year. This is not a surprise, as the share
of exports in Central Europe’s GDP has
globally; a no-deal Brexit and its economic consequences for the UK and EU;
and major stress on financial markets. No meaningful external and/or domestic
economies continue to outperform Western European been steadily increasing over the past imbalances in most Central European economies suggest that the region
few years. But, while foreign demand could cope better than most emerging markets and developed countries,
countries and that by huge margin. may continue to curb the pace of exports were the global environment worsen by more than it is currently seen.
What’s up CEE? | 2019 7
12.5 World GDP (% y/y, RHS) 4.5 Central banks’ policy interest rates 8
Global trade volume (% y/y) Poland Czech Republic Hungary Romania 7
10.0 4.0
6
7.5 3.5 5
4
5.0 3.0
3
2.5 2.5 2
1
0.0 2.0
0
-2.5 1.5 -1
2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2016 2017 2018 2019
World GDP (%, y/y, RHS) World CPI (%, y/y, RHS)
4.0 9.0 5.0 9.0
GPD range: Poland, Hungary, CPI range: Poland, Hungary,
Czech Republic and Romania (% y/y, RHS) 7.5 4.5 Czech Republic and Romania (% y/y, RHS) 7.5
3.5 4.0
6.0 6.0
3.5
4.5 4.5
3.0
3.0
3.0 3.0
2.5
2.5 1.5
1.5
2.0
0 0
2.0 1.5
-1.5 1.0 -1.5
1.5 -3.0 0.5 -3.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
30 Real estate prices (% y/y) 20
EC survey:
Consumer confidence vs. trend Poland Czech Republic Hungary Romania
20 15
10
10
5
0
0
-10
-5
-20 -10
Poland Czech Republic Hungary Romania Sources for charts: statistical offices, central banks, World Bank,
CPB, European Commission, BIS, Macrobond, BNP Paribas
-30 -15
2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2016 2017 2018 2019
What’s up CEE? | 2019 8
POLAND:
MICHAŁ DYBUŁA 2016 2017 2018 2019(1) 2020(1)
Chief Economist GDP 3.0 4.6 5.2 4.3 3.3
BNP Paribas Bank Polska S.A.
CPI -0.6 2.0 1.7 2.3 3.2
GROWTH SLOWING
WOJCIECH STĘPIEŃ Unemployment rate (%) 8.9 7.3 6.1 5.7 5.7
CFA, Economist Current account (% of GDP) -0.5 0.2 -0.7 -0.9 -2.3
BNP Paribas Bank Polska S.A.
General govt. budget (% of GDP) -2.2 -1.5 -0.4 -1.5 -1.3
TOWARDS THE TREND
Policy rate (%) 1.50 1.50 1.50 1.50 1.50
In 2020, economic growth is likely
to slow to 3-3.5%, as the impact Footnotes: (1) forecast; (2) end of period / Figures are year-on-year percentage changes unless otherwise indicated
Source: GUS, NBP, Macrobond, BNP Paribas (forecasts)
of higher social spending on
consumption will gradually
fade. Nevertheless, Poland CONTRIBUTION TO ANNUAL GDP GROWTH (PP):
will continue to outperform We forecast more than 4% GDP
Private consumption
the eurozone economy by a huge
margin. As a result, Poland’s
expansion this year, reflecting Gross fixed investments
7
6
a strong first half of the year and robust
Net exports
trade and current account GDP (% y/y) 5
deficits should rise moderately.
Meanwhile, fiscal balances, while fiscal measures, which will offset softer 4
deteriorating slightly, will remain
well within the comfort zone.
external demand. 3
2
1
We expect Poland’s headline period of above-trend economic growth, exerting upward 0
inflation to continue its gradual pressure on consumer prices through rising demand
-1
climb, after topping the NBP’s and wages. Strong consumer demand should also be
-2
2.5% target this summer, with supported by the government’s decision to increase fiscal
core inflation points reaching that spending both this year and next, as well as the recently -3
level around year-end. Higher announced hike of almost 9% in the minimum wage -4
inflation is driven by a long as of 2020. Apart from demand, Poland’s inflation is
2012 2013 2014 2015 2016 2017 2018 2019
likely to be fuelled by supply-side factors. The most
important are higher electricity prices in the not so
distant future and the retail tax being considered
Sources for charts: GUS, NBP,
by the government, which might lead to higher food prices. 22.5 5
Macrobond, BNP Paribas
20.0 4
In our view, CPI inflation will continue to increase early
next year, potentially hitting the 3.5% upper bound
17.5 3
of the tolerance range around the target in Q1 2020. In
the latter part of next year, headline inflation is likely to slow 15.0 2
down because of lower global prices and weaker growth.
12.5 1
Despite inflation being on a steady upward path, we expect
unchanged interest rates in Poland – at least for the next 10.0 0
18 months, largely due to external factors and the softer
monetary policy of the main global central banks. ECB 7.5 -1
CPI (% y/y, RHS)
decisions are likely to affect the stance of the Polish Unemployment rate, registered (%)
central bank in particular. The increasing likelihood 5.0 -2
of further ECB monetary easing, in our view, reduces
2004 2006 2008 2010 2012 2014 2016 2018
the prospects for policy tightening in Poland through 2020.
What’s up CEE? | 2019 9
CZECH
REPUBLIC:
MICHAŁ DYBUŁA 2016 2017 2018 2019(1) 2020(1)
Chief Economist GDP 2.4 4.6 2.9 2.7 2.4
BNP Paribas Bank Polska S.A.
CPI 0.7 2.5 2.1 2.7 2.1
WOJCIECH STĘPIEŃ Unemployment rate (%) 5.5 4.2 3.2 2.8 2.7
CFA, Economist Current account (% of GDP) 1.8 1.9 0.4 -0.3 -0.7
BNP Paribas Bank Polska S.A.
General govt. budget (% of GDP) 0.1 1.2 1.3 -0.2 -0.1
ECONOMY TO SLOW,
Policy rate (%) 0.05 0.50 1.75 2.00 2.00
Investment, the second engine
responsible for robust economic Footnotes: (1) forecast; (2) end of period / Figures are year-on-year percentage changes unless otherwise indicated
BUT ONLY MODERATELY
Source: CZSO, CNB, Macrobond, BNP Paribas (forecasts)
performance since early 2017,
sputtered somewhat more recently.
Despite weaker external demand, CONTRIBUTION TO ANNUAL GDP GROWTH (PP):
net exports have contributed
Private consumption 6
to economic growth in April-June.
The Czech Republic’s economy remained Gross fixed investments
Net exports 5
Headline inflation in the Czech
Republic has been hovering close robust in H1 2019 with GDP growth at 2.7% y/y GDP (% y/y)
4
to 3% y/y so far this year, driven
by elevated underlying pressure and
in both Q1 and Q2 2019. Growth has been 3
an increase in regulated prices. driven by consumption. 2
The recent data on compensation 1
growth still suggests inflationary
0
risks stemming from the tight mainly driven by higher pay in the public sector, with private-sector
labour market. Average nominal compensation growth remaining relatively steady in the last few -1
wages increased by 7.3% y/y quarters. Looking ahead, we expect some moderation in Czech
-2
in the first half of the year, wage growth, however. Recent business surveys suggest that
accelerating from 6.5% y/y in late the willingness of Czech companies to maintain compensation -3
2018. Faster wage growth was growth at the current levels is declining, due to the risk of eroding
competiveness. Moderated wage growth combined with the waning 2012 2013 2014 2015 2016 2017 2018 2019
effect of the 2019 hike of regulated prices should translate into
inflation slowing gradually towards 2.0% y/y by next year.
11 CPI (% y/y, RHS) Sources for charts: 8
Unemployment rate (%) CZSO, CNB, Macrobond,
Faced with supply constraints and slowing growth in Germany, 10 7
BNP Paribas
the Czech Republic’s main trading partner, the GDP, will probably
9 6
also moderate to around 2.5% next year. Nevertheless, the Czech
economy will continue to outperform its Western European peers. 8 5
7 4
Taking into consideration the outlook for inflation steadily slowing
towards the central bank’s 2% target, we expect the CNB to keep 6 3
interest rates on hold at the current 2.00% level in 2019–20. 5 2
Following a steep fall in market rates in the US and eurozone over
the summer, markets began to price in the possibility of a rate 4 1
cut in the Czech Republic. We think, however, that in the absence 3 0
of deepening deflationary risks – which would require a major
2 -1
global recession, in our view – monetary easing in the Czech
Republic is rather unlikely over the next coming year or so.
2004 2006 2008 2010 2012 2014 2016 2018
What’s up CEE? | 2019 10ROMANIA:
MICHAŁ DYBUŁA 2016 2017 2018 2019(1) 2020(1)
Chief Economist
GDP 4.8 6.8 4.2 4.2 2.4
BNP Paribas Bank Polska S.A.
CPI -1.5 1.3 4.6 3.9 3.4
WEAKER GROWTH
WOJCIECH STĘPIEŃ Unemployment rate (%) 4.8 4.3 3.6 4.0 4.6
CFA, Economist Current account (% of GDP) -2.1 -3.3 -4.4 -4.7 -5.4
BNP Paribas Bank Polska S.A.
General govt. budget (% of GDP) -2.6 -2.7 -3.1 -3.3 -3.3
WILL HELP TO EASE
This strong performance has been Policy rate (%) 1.75 1.75 2.50 2.50 2.50
entirely down to domestic demand,
with private consumption surging Footnotes: (1) forecast; (2) end of period / Figures are year-on-year percentage changes unless otherwise indicated
EXTERNAL IMBALANCES
Source: INS, NBR, Macrobond, BNP Paribas (forecasts)
by close to 7% y/y, propelled
by an acceleration of wage growth
to more than 15% y/y. Unsurprisingly, CONTRIBUTION TO ANNUAL GDP GROWTH (PP):
price pressures have been advancing
Private consumption
quickly so far in 2019, with headline
inflation rising to 4.0% y/y and core
GDP was a considerable surprise on the upside Gross fixed investments
12.5
Net exports
in the first half of the year, rising by more
10.0
inflation to 3.3% y/y by mid-year. GDP (% y/y)
7.5
However, stronger-than-expected than 4.5% y/y on average. 5.0
consumer prices growth does not seem
not to have worried Romanian a major deceleration in underlying price pressures, we nonetheless see 2.5
policymakers much for the time being. headline inflation moving down into the 3% handle next year. 0
They see a limited risk of inflation
-2.5
spiralling out of control, as long as Romania’s central bank seems more concerned about rising external
disinflation continues to be imported from imbalances such as the trade and current account deficits than inflation, -5.0
abroad, and the eurozone in particular. which also reflect excess demand. A widening current account deficit has
-7.5
The central bank assumes that after been putting the currency under pressure, although the central bank has
elevated inflation for most of this year, been able to stabilise the leu using liquidity controls. More recently, -10.0
the CPI will decline more visibly in 2020. the leu has also been supported by the external environment and policy
2012 2013 2014 2015 2016 2017 2018 2019
While we are slightly more sceptical easing in the US.
about the pace of Romania’s disinflation
over the next 12–18 months, We think that The National Bank of Romania will probably continue to rely
as robust wage pressure will prevent mainly on liquidity measures to ensure exchange rate stability. According 8.0 Sources for charts: INS, NBR, 10.0
to Governor Isarescu, the key NBR rate is high enough when the recent Macrobond, BNP Paribas
7.5
performance of the leu is taken into consideration. Moreover, the central 7.5
7.0
bank’s ambition isn’t bringing inflation into the target band, so below 3.5%,
at any cost. 6.5 5.0
6.0
We expect the NBR to keep its policy rate unchanged in the quarters ahead, 2.5
but Romania’s external position will remain an important risk factor for 5.5
markets and policy at the same time. A further deterioration of external 5.0 0
imbalances may still increase the probability of a rate hike by the NBR,
despite the low global interest rate environment. 4.5
CPI (% y/y, RHS)
-2.5
4.0
Unemployment rate, ILO-methodology (%)
In terms of the economy, we expect that after a period of well above-trend
3.5 -5.0
growth, the pace of GDP will decline in 2020. This should help to gradually
reduce Romania’s external imbalances and support more disinflation
2008 2010 2012 2014 2016 2018
in 2021 and beyond.
What’s up CEE? | 2019 11HUNGARY:
MICHAŁ DYBUŁA 2016 2017 2018 2019(1) 2020(1)
Chief Economist
GDP 2.3 4.1 4.9 4.4 2.5
BNP Paribas Bank Polska S.A.
CPI 0.4 2.3 2.9 3.5 3.3
DOMESTIC-DEMAND-
WOJCIECH STĘPIEŃ Unemployment rate (%) 5.1 4.2 3.7 3.2 3.1
CFA, Economist Current account (% of GDP) 6.3 2.8 0.5 -1.8 -3.4
BNP Paribas Bank Polska S.A.
General govt. budget (% of GDP) -1.4 -1.9 -2.1 -1.7 -2.5
DRIVEN GROWTH
Policy rate (%) 0.90 0.90 0.90 0.90 0.90
This good economic performance
has been driven by both robust Footnotes: (1) forecast; (2) end of period / Figures are year-on-year percentage changes unless otherwise indicated
CONTINUES
Source: KSH, NBH, Macrobond, BNP Paribas (forecasts)
consumption, fuelled by a strong
labour market, and accelerating
investment spending. As a result CONTRIBUTION TO ANNUAL GDP GROWTH (PP):
of domestic-demand driven
Private consumption
Hungary’s economy has maintained swift
expansion, economic growth has been 10.0
Gross fixed investments
accompanied by rising inflation. CPI
Net exports
inflation has been above the central growth so far this year with GDP rising by 5.3% GDP (% y/y) 7.5
bank target of 3.0% for most of 2018
and 2019. This has been largely driven y/y in Q1 and 4.9% y/y in Q2 respectively 5.0
by underlying pressure. Core inflation
increased from 2.3% y/y in August to compete to retain staff and fill vacancies, particularly in labour-
2.5
2018 to 4.0% in May 2019, marking intensive sectors of the economy. This has been fuelling strong wage
its highest reading in six years, before rises, which almost immediately translates into higher prices,
0
falling slightly in June and July. especially of services.
Beyond demand pressures, the rise On the monetary policy front, by hiking the overnight rate by 10bp -2.5
in core inflation reflects underlying to −0.05% from −0.15% in March, the National Bank of Hungary
supply constraints in the Hungarian effectively ended an eight-year period of monetary policy loosening. -5.0
economy. With the unemployment rate Following the March decision, Governor Gyorgy Matolcsy indicated,
falling sharply since 2013, firms have however, that the move should not be interpreted as the start 2012 2013 2014 2015 2016 2017 2018 2019
of a tightening cycle, but rather a policy adjustment justified
by the inflation outlook.
12 Sources for charts: KSH, NBH, 9
Macrobond, BNP Paribas
Consequently, the Hungarian central bank have not delivered further 11 8
hikes since, despite inflationary pressure remaining high. Hungary’s 7
10
policy-tightening outlook has been clouded by recent external 6
developments. Taking into consideration an approaching wave 9
5
of monetary policy easing globally, the NBH is likely to be hesitant
8 4
to tighten its own stance right now, especially as the growth backdrop
is deteriorating. 7 3
6 2
Given Hungary’s strong reliance on exports (exports-to-GDP ratio 1
is hovering around 90%), the ongoing slowdown in the global economy 5
0
is likely to feed into a weaker pace of GDP expansion next year. But 4 CPI (% y/y, RHS) -1
while we expect growth to slow to about 2.5% in 2020, it will merely Unemployment rate (%)
3 -2
be a correction to the trend. On a positive note, such correction should
help to ease inflationary pressures from the second half of next year
2004 2006 2008 2010 2012 2014 2016 2018
onwards.
What’s up CEE? | 2019 12OFFICE SECTOR
FOCUS ON REAL ESTATE POLAND
+37%
UNLIKE OTHER COUNTRIES IN THE REGION, POLAND,
BESIDES WARSAW, ALSO HAS STRONG REGIONAL
OFFICE MARKETS. WITH EXISTING OFFICE SPACE
IN CEE
OF 5.5 MILLION M² IN WARSAW AND ANOTHER
Warsaw 5.3 MILLION M² ON EIGHT REGIONAL MARKETS,
THE COUNTRY OFFERS A WIDE AND DIVERSE
Growth of the office sector
SELECTION OF OPPORTUNITIES.
in the last 5 years
In Warsaw, the subdued new supply of the past
three years coupled with buoyant occupational activity have led to a steep
drop in the average vacancy rate, which oscillate around 8.5% for the city and
around 5.5% in the Central zone, and is expected to remain stable. Noticeably,
office units bigger than 2,000 – 3,000 m² are hardly available. Companies from
the banking, finance and insurance sector, offshoring business centres and co-
working operators have been responsible for spectacular lease transactions.
Warsaw’s CBD has continued to move westwards, along the second metro line.
Over the course of the last few months, an uptick in prime rents for
best-in-class assets in the Warsaw City Centre cluster has been registered.
High demand The entire region’s net-take up peaking at approx. 1.9 million m² in 2018.
robust economic growth Although Q1 2019 showed some signs of slowing
drives new has been fuelling down, the office sector rebounded in Q2 2019 and
supply, the exponential growth is expected to keep on growing in the near future. CZECH REPUBLIC
of the office sector
vacancy rates
+16%
in the last few years. Following the improving infrastructure in the CEE OVER THE COURSE OF THE LAST FEW YEARS, THE LIMITED
Cranes have been capitals, new office clusters have been emerging NEW SUPPLY COUPLED WITH SOLID DEMAND HAS
at historical a dominant feature such as City Centre – West in Warsaw, Polytechnica RESULTED IN A STEADY REDUCTION IN VACANCY RATES,
lows of the landscape zone in Bucharest and Holešovice in Prague, WHICH TODAY STANDS AT A HISTORICAL LOW OF LESS
in CEE capitals. In thus re-shaping the picture in the sector. Prague THAN 5%. IN THE NEXT FEW MONTHS, THE VACANCY
the coming 36 months, RATE COULD INCREASE, BUT ONLY MARGINALLY, AS
Growth of the office sector
approx. 2 million m² of new office space is set to be Soaring development costs driven principally A RESULT OF THE EXPECTED SIGNIFICANT NEW SUPPLY.
completed in Warsaw, Prague, Bucharest and Budapest, by serious increases in prices of construction
in the last 5 years
raising the modern office stock in these CEE capitals materials and continuing labour cost rises remain With the limited volume of available space and the lack
to over 18 million m². Importantly, a vast portion a major industry concern and are reflected of available workforce, a minor slowdown in occupational activity is expected. With
of this new space has already been leased. Vacancy in the upward trend in rental levels for new the vacancy rate decreasing, pressure on rental increases in the most sought after
rates are, therefore, not expected to escalate to a high buildings. Hence, an uptick in prime headline locations is expected to continue, underpinned by growing construction costs.
degree, as the interest from tenants has been solid rents in the key markets was noticed in the course
for a couple of quarters. Tenant demand in the region of the last 12 months, and further moderate Approx. 335,000 m² of new developments will be delivered in the next
has been on the up for the last three years, with growth still looks likely in the coming quarters. three years, with a vast portion located in Prague 8.
What’s up CEE? | 2019 13OFFICE MARKET INDICATORS AND TRENDS IN SELECTED CEE COUNTRIES*
HUNGARY
PRAGUE WARSAW
+14%
FEEDBACK FROM THE BUDAPEST
OFFICE MARKET IS UNREMITTINGLY
POSITIVE. BUDAPEST HAS SET NEW
3,570,000 m² 120,800 m² 5,543,700 m²
RECORDS FOR OCCUPATIONAL ACTIVITY, 76,700 m² 4.6% 100,700 m²
Budapest VACANCY RATE AND SUPPLY IN 2018.
334,300 m² €21.00-23.00 774,600 m²
Growth of the office sector
in the last 5 years
Rental levels have not only outperformed 279,100 m²
the pre-crises level, but they are
showing an increasing trend. 8.5%
In 2019, demand is still high for office properties and occupational
€22.00-24.00
activity is dominated by pre-lease agreements. Approx. 300,000 m² Existing stock
(H1 2019)
of new office area is scheduled for 2019 and 2020, from which 62%
of the new office projects for 2019 are already pre-let, with half
of the new developments for 2020 also having pre-lease agreements. New supply (H1 2019)
Stock under construction
(H1 2019)
Net take–up (H1 2019)
ROMANIA
Vacancy rate (H1 2019)
+23%
TAKE-UP IN BUCHAREST IS STRONGLY DRIVEN
BY EXPANSIONS OF EXISTING OPERATIONS AND
Prime rent
RELOCATIONS FROM UNRATED STOCK
INTO NEW, CLASS A BUILDINGS.
Trend
Bucharest THE MOST ACTIVE OCCUPATIONAL INDUSTRIES
REMAIN IT&C, THE BANKING AND FINANCIAL
Growth of the office sector
SECTOR, AND BUSINESS SERVICES.
in the last 5 years BUDAPEST
Occupier demand follows construction activity
into emerging new office clusters such as the Polytechnica area on the western 3,654,200 m²
edge of the city centre and the Expozitiei area in the north of Bucharest.
31,700 m² BUCHAREST
In the last few months, prime office rents have remained stable, ranging 539,100 m²
between €18,5 and €19/m²/month; however, no further increase is expected
178,700 m² 3,530,200 m² 141,900 m²
in new developments.
6.3% 162,300 m² 10.2%
The vacancy rate in Bucharest has surged as a result of the substantial new
€25.00 418,000 m² €18.50-19.00
supply in the last couple of months. Interestingly, the gap between occupancy
level in new developments and old, class B stock is expected to widen.
* Poland, Czech Republic, Hungary and Romania
What’s up CEE? | 2019 14RETAIL SECTOR
FOCUS ON REAL ESTATE RETAIL MARKET INDICATORS AND TRENDS IN SELECTED CEE COUNTRIES*
CZECH REPUBLIC
24 milion POLAND
3,634,000 m² m² 14,835,000 m²
IN CEE
The retail industry in the CEE region benefits
44,100 m²
€140-€170/month
€210-€230/month
Existing retail stock
in CEE-4 (H1 2019)
360,000 m²
€110-€130/month
€75-€90/month
+27% +28%
from positive economic trends
Rise in employment, robust growth of wages and, as a consequence, solid
increase of purchasing power, are key catalysts of consumer confidence and
consumer spending. Over the last five years, retail sales across the examined
countries have soared by nearly 30%, with Romania being the frontrunner with Modern retail stock
a stellar increase of over 50%. Although retail sales growth has shown early existing (H1 2019)
signs of slowing down, it is expected to remain healthier than in the eurozone.
Under construction
Another important socio-economic factor which clearly contributes to the immense
potential of the retail sector in the CEE region is the rapid growth of the pool
of middle-class shoppers. Aspirations of consumers have been steadily growing and Shopping centre prime rent
they are now more demanding of products, services and brands than ever before.
As a result, although competition from e-commerce has been intensifying, turnover
in brick and mortar retail has been growing significantly in the last five years, High street prime rent
from approx. +15% in the Czech Republic to as much as over 40% in Romania.
Retail sales growth
New supply across the region is limited, most noticeably in Hungary and the Czech in the last five years
Republic, while the trend towards refurbishment, redevelopment and repositioning
+19%
will accelerate in years to come. Forced by growing competition from online retailing
Trend
and the unavoidable process of buildings ageing, many older properties have to be
adapted to imminent changes in the retail landscape. Extensions and the inclusion
of new offers, such as leisure components, a wider
789,000 selection of F&B facilities, innovative retail concepts
and new social functionalities, may help in retaining or
HUNGARY Modern retail supply increase ROMANIA
m² improving the market position. This trend, however, has
been causing sharp polarisation in rental values of prime
1,980,000 m²
in the last five years
3,640,000 m²
Retail stock under
and innovative assets and those of declining position.
Substantial opportunities in the CEE region
84,700 m²
€80-€95/month
+30% 300,000 m²
€55-€80/month
construction remain, although only those retail sector players €110-€135/month €35-€60/month
in CEE-4 (H1 2019) who are able to adapt quickly to rapid changes
+30% CEE retail sales +53%
and bring new features are likely to succeed
in this increasingly competitive market.
growth in the last
five years
* Poland, Czech Republic, Hungary and Romania
What’s up CEE? | 2019 15WAREHOUSE AND LOGISTICS SECTOR IN CEE
10.0
5.0
0.0
Euro area (19 countries) : : : Czechia : : : Slo
Poland : : : Hungary : : : Rom
The warehouse and logistics market in CEE countries is the fastest Poland which are among the largest and UNEMPLOYMENT RATE IN THE EU COUNTRIES (%)
the finest in Europe (e.g. Amazon Szczecin). Greece 17
developing real estate sector in Europe. The total existing stock Spain 13.9
almost doubled over the last five years alone, developers are Is the cost everything? Italy 9.9
building more and more and investors are increasingly willing to Nowadays, CEE countries also have an extremely France 8.5
low level of unemployment. According
invest in industrial assets located in Central Europe. What is behind to Eurostat, among all the EU members,
Euro area
Sweden
7.5
7.1
this boom in the warehouse and logistics sector there? the lowest unemployment rates in July 2019
were recorded in the Czech Republic (2.1 %), Croatia 7.1
Germany (3.0%) and Poland Cyprus 7.0
Some figures in operating in the region but
“The total existing stock (3.3%). Hungary and Romania Finland 6.7
also in covering neighbouring have hit an historical minimum
Just five years ago, the total modern industrial countries (Denmark, Germany, almost doubled over the as well. On the one hand, this
Portugal 6.5
stock on four main CEE markets (the Czech Austria). Consequently, CEE last five years alone.” puts pressure on wages and Latvia 6.5
Republic, Hungary, Poland and Romania) stood countries took over a large leads to rapid growth of labour Lithuania 6.4
at about 16 million m². At the end of 2018, part of production from Western Europe costs. On the other hand, rising salaries lead
EU28 6.3
the total supply exceeded 30 million m² and and have become an important industrial directly to growing purchasing power. An
the development pace was still very dynamic and logistics hub in the EU. Moreover, increasingly affluent society stimulates domestic Luxembourg 5.7
over the first half of 2019, especially on the e-commerce giants such as Amazon and consumption, which is one of the main economic Belgium 5.7
the Polish market. Despite the rapid growth Zalando also recognised the advantages of CEE drivers in the region. The rising prosperity Slovakia 5.3
of the sector, the vacancy rate remains very low, countries and started to expand in the region. of CEE citizens can be seen in the structure
Ireland 5.3
oscillating around 5% for the whole region. It Over the last few years, the e-retailers of warehouse demand. Retail and 3PL sectors
encourages developers to start further projects. have opened several modern logistics and have represented the largest share of the total Estonia 4.6
At the end of June 2019, an impressive volume fulfilment centres in the Czech Republic and logistics take-up in the CEE region. Moreover, Denmark 4.6
of 3,274,000 m² was under construction, the abovementioned sectors have
Slovenia 4.5
69% of which will be delivered in Poland.
TOTAL LABOUR COST PER HOUR (€) generated more and more interest
in modern warehouse. Consequently, Bulgaria 4.5
Why CEE? €35
the total volume of demand on CEE Austria 4.4
€30.6 Source: Eurostat, 2018 markets recorded an extremely high Romania 3.9
Beyond doubt, the biggest engine driving the CEE €30 volume over the last three years and
United Kingdom 3.8
market is manufacturing cost differentials Poland generated the 4th highest
€25 Hungary 3.5
between the so-called ‘old’ EU Member States net take-up (3.1m m²) in the entire
and those that joined in 2004 and later. The €20 EU in 2018, surpassed only Netherlands 3.4
average labour cost per employee in Central by Germany, France and the UK. Malta 3.4
€15 €12.6 €11.6
Europe is almost three times lower than
€10.1 €9.2 Poland 3.3
in the Eurozone. Meanwhile, the free movement €10
€6.8 Gate from the East to the West
of people, goods and capital, ensured by EU Germany 3.0
€5
policy, creates convenient conditions for The CEE region is also a crucial Czech Republic 2.1
companies located in the CEE. This is especially €0 element of one of the largest
0 5 10 15 20
true for entities that are not only interested EA19 CZ SK PL HU RO global investment projects – Belt
Source: Eurostat, July 2019 or last available data
What’s up CEE? | 2019 16and Road Initiative (BRI). The strategy aims to involve
infrastructure development in Asia and Europe, creating
MAP OF INDUSTRIAL & LOGISTICS HUBS AND TRANSPORTATION NETWORK IN THE CEE REGION
land transport corridors between China and the EU.
Although the BRI investments are still in the planning
phase and the final concept has not been confirmed yet,
the CEE region, because of its strategic location, will play
a key role in the initiative. The scale of the Belt & Road
Initiative seems huge and one single border crossing POLAND CZECH REPUBLIC
could not possibly handle all the freight anyway. Gdańsk
Olsztyn
Białystok
16,750,000 m² 8,182,000 m²
There is no need to be concerned about Szczecin
Bydgoszcz
2,245,000 m² 541,000 m²
competition between CEE countries. There Toruń
should be enough business to go around for everyone €3.5-€5.35 €3.90-€4.80
and different hubs in different CEE countries could Słubice
specialise in different services, thereby developing
POLAND Warsaw
Poznań
a more collaborative approach Łódź HUNGARY ROMANIA
– as stated specialists from the Poland & CEE:
Co-Building the Belt & Road conference. Zgorzelec Lublin
3,034,000 m² 4,000,000 m²
Wrocław
MAIN INDUSTRIAL DEVELOPERS IN CEE COUNTRIES Ústí nad
Częstochowa 257,000 m² 230,000 m²
Labem Liberec Hradec Katowice €5.0 €3.5-€4.25
Developer PL CZ SK HU RO Praha Kralove
Rzeszów
7R X Karlovy Ostrava Kraków
Amesbury X
Vary Plzeň CZECH
Concens X
REPUBLIC Olomouc
Brno
Contera X
CTP X X X X X
Goodman X X X X
Hillwood X Mosonmagyaróvár
Tatabánya Debrecen ROMANIA Iași
Hines X
ILD X X X X Gyor Budapest
inpark X Modern industrial Oradea Cluj-Napoca
Linkcity X X X market (H1 2019) HUNGARY
Logicor X X X X Segedyn Sebeș
Arad Brașov
MLP X X Stock under
Déva Sibiu
Mountpark X X X construction (H1 2019)
Timișoara
P3 X X X X Ploiești
Panattoni X X X Pitești
Prime rents (H1 2019) Constanţa
Prologis X X X X Craiova București
Segro X X Primary hubs
VGP X X X X
Secondary hubs
White Star X X X X X*
Major road routes
Source: BNP Paribas Real Estate
* In Romania White Star focuses on providing PM services for industrial parks
What’s up CEE? | 2019 17CITIES:
5 YEARS CHALLENGE
Source:
Real Estate Market Q2 2019, BNP Paribas Real Estate
Education 2018, local statistical offices
Demography 2018, local statistical offices
Labour market H1 2019, Local statistical offices
5 Years Challange aviation authorities, local statistical offices,
BNP Paribas Real Estate
What’s up CEE? | 2019 18REAL ESTATE MARKET
OFFICE
PRAGUE / CZECH REPUBLIC 5 years CHALLENGE
Prague, as the capital EDUCATION
2 0 1 3 v s. 2 0 1 8
city of the Czech Republic,
is the natural economic, cultural
3,502,000 m2 346,000 m2 and political centre of the country. 30 Number 127,729
Stock Under construction of higher education Number
rague ranks among as one
institutions of students NUMBER OF AIRPORT
of the most important and PASSENGERS
developed regions, even within DEMOGRAPHY
+53%
€21–23 4.25% the context of the entire EU.
Prime rents Prime yields The city benefits from its strategic position
in the heart of Europe, its business 1.3 m 2.6 m
RETAIL
infrastructure, skilled labour and high
quality of life. Numerous international
City
population
Agglomeration
population
10,974,200 16,797,000
corporates, financial institutions and 2013 2018
foreign enterprises are based here, thus
ensuring Prague is responsible for more LABOUR MARKET UNEMPLOYMENT RATE
than 25% of the country’s GDP. Since
-1.8 p.p.
the country’s accession to the EU in 2004,
1,126,000 m2 32,000 m2 GDP per capita in the city has soared €1607 1.3%
Stock Under construction by 75%, and today, expressed in Purchasing Average gross Unemployment
Power Standards, it exceeds the EU salary in enterprise rate
average by nearly 90%. sector
3.1% 1.3%
Prague offers excellent infrastructure,
€210–230 High
street 3.25–3.50% High
street including one of the best public SELECTED MAJOR INTERNATIONAL COMPANIES
2013 2018
€140–170 Shopping
centres 4.25-4.50% Shopping
centres
transport systems in Europe. The city
has a good rail-road and air transport Avast / IBM, Dell / Johnson & Johnson / Ernst & Young / Deloitte REAL ESTATE MARKET
Prime rents Prime yields system which connects it to other parts / PwC / Oracle / Amazon / Microsoft / Accenture / Bosch Group / CEZ
/ ČEPRO / Foxconn / Innogy / Moravia Steel / MOL ČR / Škoda Auto
+16% +12% +59%
of Europe. The property market in Prague
INDUSTRIAL is mature and stable with good provision
of high quality stock of modern office,
retail and warehouse space. It offers
prospects of rental growth to investors OFFICE RETAIL INDUSTRIAL
fuelled by strong occupier demand. market size market size market size
3,011,000 m 2
105,000 m 2
Prague is also home to numerous
Stock Under construction historical sights which makes
it one of the most popular tourist
destinations in the CEE region.
€3.90–4.80 5.50%
Prime rents Prime yields
What’s up CEE? | 2019 19REAL ESTATE MARKET
OFFICE
BUDAPEST/ HUNGARY 5 years CHALLENGE
Budapest is the heart EDUCATION
2 0 1 3 v s. 2 0 1 8
of the Hungarian economy,
one fifth of Hungary’s
3,654,000 m2 539,000 m2 population lives in the capital 36 Number 105,630
Stock Under construction of higher education Number
and its catchment area. institutions of students NUMBER OF AIRPORT
ll economic indicators for the capital PASSENGERS
city are above the country average. DEMOGRAPHY
+73%
€25 5.50% Excellent infrastructure, a well-
qualified labour force, well-established
Prime rents Prime yields
property market and stable financial
background make the city more and more 1.7 m 2.5 m
RETAIL
attractive for investors and for corporates.
Many international companies are present
City
population
Agglomeration
population
8,520,900 14,725,700
2013 2018
in Budapest and several new enterprises
have recently entered the market.
LABOUR MARKET UNEMPLOYMENT RATE
The capital of Hungary is one
-5.4 p.p.
977,000 m2 65,000 m2 of the most popular tourist
destinations in Europe, €1362 2.6%
Stock Under construction famous for its cultural and Average gross Unemployment
historical attractions. salary in enterprise rate
sector
8.5% 3.1%
€110–135 High
street 5.25% SELECTED MAJOR INTERNATIONAL COMPANIES 2013 2018
€80–100 Shopping
centres
Prime yields British Telecom / British Petrol / BlackRock / AVIS Group
/ Givaudan / HP / IBM / Microsoft / Morgan Stanley / Nokia REAL ESTATE MARKET
Prime rents / Roche / Emirates / MSCI / SAP / Vodafone / Thyssenkrupp
+14% +1% +19%
INDUSTRIAL
OFFICE RETAIL INDUSTRIAL
market size market size market size
2,200,000 m 2
237,000 m 2
Stock Under construction
€5 7%
Prime rents Prime yields
What’s up CEE? | 2019 20REAL ESTATE MARKET
OFFICE
BUCHAREST/ ROMANIA 5 years CHALLENGE
Bucharest remained EDUCATION
2 0 1 3 v s. 2 0 1 8
the preferred location
in Romania for developers,
3,513,000 m2 418,000 m2 investors and occupiers alike. 32 Number 176,199
Stock Under construction of higher education Number
he city has become an established
institutions of students NUMBER OF AIRPORT
destination for IT companies. PASSENGERS
Subsequently, an office cluster DEMOGRAPHY
+81%
€18,5–19 7% next to Polytechnic University in western
Bucharest has started to emerge. The
Prime rents Prime yields
2.1 m 2.5 m
area has been developing at a fast
pace, which is fuelled by the availability
RETAIL
of plots in the vicinity of Politehnica
metro station. Following the office
City
population
Agglomeration
population
7,643,500 13,824,800
developments, residential projects are 2013 2018
underway, while existing retail schemes
have been benefitting from the enlarging LABOUR MARKET UNEMPLOYMENT RATE
catchment area. In northern Bucharest,
-1.4 p.p.
1,224,000 m2 43,000 m2 Expozitiei Office Hub is shaping its future
with the first business park recently €1382 1.3%
Stock Under construction completed. The development of this area Average gross Unemployment
will depend crucially on the construction salary in enterprise rate
sector
of the M6 metro line which is planned
to connect the city centre and the airport. 3.5% 2.1%
€35–60 High
street 6.75–7% Bucharest is becoming a touristic hot
SELECTED MAJOR INTERNATIONAL COMPANIES 2013 2018
€55–80 Shopping
centres Prime yields spot; therefore, numerous 3 and 4-star
hotels of international brands have been
Amazon / Coca Cola / Danone / Kaufland / Microsoft / OMVPetrom
/ Oracle / HP / BCR Erste / Unicredit Bank / PwC / Renault Romania REAL ESTATE MARKET
Prime rents mushrooming. The Lithuanian Group / Ford Romania / Pepsico
+23% +24% +71%
Apex Alliance remains the largest hotel
INDUSTRIAL developer in Bucharest targeting several
hotel openings in the coming 18 months.
Over the last decade, GDP per capita OFFICE RETAIL INDUSTRIAL
in the city and its metropolitan area market size market size market size
1,800,000 m 2
300,000 m 2 increased by half, and today, expressed
in Purchasing Power Standards,
Stock Under construction exceeds the EU average by over 50%.
€3.50–4.25 8%
Prime rents Prime yields
What’s up CEE? | 2019 21REAL ESTATE MARKET
OFFICE
WARSAW / POLAND 5 years CHALLENGE
Over the past two decades, EDUCATION
2 0 1 3 v s. 2 0 1 8
Warsaw has evolved rapidly
into a bustling economic
5,544,000 m2 767,000 m2 centre of Central Europe region. 70 Number 230,268
Stock Under construction of higher education Number
umerous banks and financial institutions of students NUMBER OF AIRPORT
services, international business PASSENGERS
and management consultancies, DEMOGRAPHY
+89%
€22–24 4.50% insurance companies, media and
advertising agencies, research institutes,
Prime rents Prime yields law firms, and retail companies, among
others, have been attracted by its growing 1.8 m 2.6 m
RETAIL
economic strength, friendly business
environment and thriving property market,
City
population
Agglomeration
population
11,014,400 20,836,000
strongly fuelling the further economic 2013 2018
development of the city. Since Poland
joined the EU in 2004, GDP per capita LABOUR MARKET UNEMPLOYMENT RATE
in Warsaw has climbed by over 60% and
-3.3 p.p.
€1495
today, expressed in Purchasing Power
2,057,000 m2 62,000 m2 Standards, exceeds the EU average twofold. 1.4%
Stock Under construction Average gross Unemployment
The property market in Warsaw is the most salary in enterprise rate
established among the CEE Capitals sector
in all sectors. It offers the largest stock 4.8% 1.5%
of modern office, retail and warehouse /
€75–90 High
street 4.25% logistics space and provides SELECTED MAJOR INTERNATIONAL COMPANIES 2013 2018
€110–130 Shopping
centres
Prime yields
a solid occupier base
for all property types. Accenture / BNP Paribas / Citibank / Coca-Cola / Colgate-Palmolive
/ Electrolux / Goldman Sachs / Google / HSBC / JP Morgan
REAL ESTATE MARKET
Prime rents
/ Procter & Gamble / Siemens / UniCredit / Whirlpool
+37% +19% +49%
INDUSTRIAL
OFFICE RETAIL INDUSTRIAL
market size market size market size
4,112,000 m 2
399,000 m 2
Stock Under construction
€3.7–5.35 6.25%
Prime rents Prime yields
What’s up CEE? | 2019 22REAL ESTATE MARKET
OFFICE
KRAKÓW / POLAND 5 years CHALLENGE
Kraków benefits from a perfect EDUCATION
2 0 1 3 v s. 2 0 1 8
blend of historical heritage and
attractiveness for international
1,348,000 m2 197,000 m2 investors. 21 Number 143,613
Stock Under construction of higher education Number
strong academic base, convenient
institutions of students NUMBER OF AIRPORT
road and air connections to Western PASSENGERS
Europe and a booming office market DEMOGRAPHY
+86%
€13.5–15.5 5.50% all contributed to the city becoming
one of the leading destinations for
Prime rents Prime yields
0.8 m 1m
business services in the whole of Europe
(ranked 2nd) and the 8th best location
all over the world*, most pronounced City Agglomeration 3,636,800 6,769,000
RETAIL for modern technology companies. population population
2013 2018
Another advantage of the city and its
region, contributing to its investment LABOUR MARKET UNEMPLOYMENT RATE
attractiveness, is the presence
-3.4 p.p.
of the Kraków Special Economic Zone
783,000 m2 14,000 m2 which includes Brembo, Valeo, Motorola, €1324 2.3%
Stock Under construction Assa Abloy, Shell and Man, among others. Average gross Unemployment
salary in enterprise rate
In 2018, Kraków Balice International sector
Airport, the second most important 5.8% 2.4%
airport in Poland, achieved another 2013 2018
€45–60 5.25% record serving nearly 6.8 million
passengers, one million more than a year
SELECTED MAJOR INTERNATIONAL COMPANIES
Prime rents Prime yields
ago. The tourism sector strongly fuels ABB / Accenture / BP / Cisco / Comarch / Heineken / HSBC REAL ESTATE MARKET
the local economy and creates around / IBM / Lufthansa / Motorola / Shell / Philip Morris International
/ Pliva / Samsung
+124% +7% +387%
10% of the city’s GDP. Since Poland
INDUSTRIAL joined the EU in 2004, GDP per capita
in Kraków has increased by approx. 60%.
* 2017 Tholons’ Top 100
Outsourcing Destinations
OFFICE RETAIL INDUSTRIAL
market size market size market size
552,000 m 2
50,000 m 2
Stock Under construction
€3–4 6.50%
Prime rents Prime yields
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