Real estate markets in Eastern Europe set to recover at different speeds

As parts of Europe enters economic recovery mode many real estate markets are also improving but at markedly different rates, according to a new report on trends in the investment, office, retail, industrial, hotels and residential sectors.

In Europe improving investor sentiment is driving activity forwards for a specific band of prime real estate but financing remains difficult to obtain, according to the Jones Lang LaSalle CEE City Report for the third quarter of 2009.

‘Occupier activity across all sectors has slowed compared to previous years as similar financing issues prevent or delay relocation and expansion plans.

Rental levels are beginning to bottom out in most of the core CEE markets and we expect stability to fully return throughout 2010 once the supply and demand levels rebalance,’ said John Duckworth, Managing Director of Jones Lang LaSalle in the CEE.

Poland is forecast to be one of the few, if not the only country in Europe, to have positive GDP growth during 2009, with the Czech Republic following in middle of 2010. Romania and Hungary are forecast to follow towards the end of 2010.
 
‘These green shoots of recovery in the economy will still take some time to filter into the real estate markets,’ added Duckworth.

However, forecasts also suggest that the core CEE4 countries will gather momentum in 2011 and register average year-on-year growth of over 3% which is somewhat higher than the overall Europe forecast of 1%.

‘We believe that the lack of liquidity and the fall in positive sentiment that has affected CEE over the past 12 months, does now appear to be slowly changing.

We have noticed a return of investors to CEE with several transactions taking place in the office, retail, logistics and hotels sector accounting for approximately €991 million to date in 2009,’ the report says.

Many occupiers have had to delay or cancel relocation or expansion plans as a result of the crisis.

‘Despite the recent positive news in the global economy, this will still take some period of time to work through into actual business confidence.

As the development pipeline continues to remain low again across all sectors, we expect a shift in balance from an occupiers market to a more balanced market in the second half of 2010 and then into a landlord’s market as we go through 2011,’ it concludes.