Top dogs in CEE
Real estate in the Czech Republic offers the most potent mix of growth potential and a stable environment in the 13 'emerging' European countries, according to a new study by Cushman & Wakefield Healey & Baker (CWHB).
The 'big three' in the region continue to dominate in the Emerging Europe report, with Hungary and Poland in second and third place respectively, but Slovakia is snapping at Poland's heels in fourth position.
The report uses 50 variables in three categories (macro background, market activity and structure) to compare 13 countries that CWHB classifies as emerging. Excluding the top four these are, in order of ranking, Estonia, Russia, Latvia, Lithuania, Romania, Bulgaria, Croatia, Slovenia and Turkey. The top five positions have not changed since last year's report, but some countries, most notably Slovakia and Romania, have made significant gains.
Performance prospects
The study was first launched in 2003, a year before EU enlargement. It also takes into account Bulgaria and Romania, as they are scheduled to join the EU in 2007-2008, as well as candidate country Turkey and prospective EU candidate Croatia. Russia is included in the ran king as earlier this year it signed an agreement with the EU to create a 'Common Economic Space' to promote trade and investment between the two economies.
"Central and Eastern Europe is increasingly seen as offering above-average performance prospects," says David Hutchings, CWHB's head of European research. The company predicts that the economic growth rate of the new member states this year will be double that of Western Europe.
According to CWHB: "Eastern Europe was one of the fastest growing regions in the world in 2004. The Central European countries all performed well, albeit seeing growth below the regional average. Of the four, Slovakia saw the strongest growth (5.5 percent), followed by Poland (5.4 percent). Economic growth is expected to ease throughout the region in 2005/6, although it will continue to outperform. The lack of a resurgence in investment growth has depressed forecasts in Poland to a certain extent. Slovakia, however, is expected to lead overall as it benefits from continued inward investment."
Closing the gap
On the retail front, CWHB says: "Yields in the Central European block overall are closing rapidly on levels seen in the West. Prime retail rental growth has been slowing recently, under-performing the West, but a return to better growth is expected next year. In Poland increased investment activity is adding to rapid yield compression in the shopping-centre market, which is the most active sub-sector of the Polish retail market."
In Poland demand for office space in the regions and at out-of-town locations is on the rise and "the capital's CBD market remains oversupplied. Investment demand has remained buoyant and yields have compressed down to the same levels seen in second-tier Western markets."
Slovakia was the star performer in the region for industrial space, particularly due to attracting large amounts of investment from car manufacturers. "Investment demand is increasing strongly, although a lack of suitable product is still inhibiting activity," the report concludes.
