Commercial Property Investment Decline in Central Europe in 2008

Commercial Property Investment Decline in Central Europe in 2008

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Ice cream cow sculpture in Budapest Hungary (credits: Hettie)

As the global property market finds itself in a crippling recession, Central European countries are also feeling the sting of a declining market. Slovakia, Hungary, Poland and the Czech Republic all together experienced a 50% drop in total commercial real estate (office, retail and industrial) investment volume  in September 2008 as compared to the same period in 2007.

Cushman & Wakefield estimate the total investment volume to be about € 3 billion, which has cut a huge hole in their individual economies. Most of the investment deals that completed in September 2008 comprised of several German open-ended funds and the recently collapsed US investment bank, Lehman Brothers.

The Hungarian real estate investment market for instance collapsed to €407 million in 2008. C&W reported this to be in stark contrast to the record level achieved in 2007 of €1.9 billion. Slovakia experienced the biggest tumble down to €119 million, 60% less than the total in 2007.

In Poland, property investment fell by 42 Percent (€1.75 billion) and in the Czech Republic it fell by a whopping 63 percent (€850 million). However, the Czech Republic expects an influx of opportunistic buyers this year as they “claim their stakes in the more mature markets”.

Across the Central European region the office sector was more favoured by all investors. This resulted in an increase of the market share from 43% to 64%.

On the retail side, losses were seen from a relative strong 48% in 2007 down to 23% in 2008.

Property owners are starting to realise that they will have to reduce the price of their properties if are to sell them at all. This is creating strong opportunities for buyers with the right cash-flow.

Despite the demise, Central Europe’s market is actually expected to out-perform the West.