• 820 million EUR transactional volume of 2018 in Slovakia
• Retail sector 85% above the average level
• Office sector with the highest investment volume ever achieved
• Increased exposure of local and regional (CEE based) capital (90% share in H2 compared to 68% in H1)
Following robust investment activity in 2016 and 2017, the Slovak investment market has experienced yet another strong year resulting in a 2018 transactional volume of ca. 820 mil. EUR. The total investment volume recorded in H2 was ca. 326 million EUR, complementing the ca. 492 million EUR achieved in H1.
The sector split of income producing assets comprised ca. 340 million EUR in retail, ca. 264 million EUR in office, ca. 170 million EUR in industrial and 9 million EUR in hotels. Compared to the 4-year averages, the retail sector performed 85% above the average level. The office sector had the highest investment volume ever achieved at 180% above average and the industrial sector recorded a 6% decline caused mainly by a lack of product and some deals remaining in the disposal process.
„Positive macro-economic and market conditions, such as low vacancy levels and stable occupier demand, pertaining to all market segments, remain robust. Economic and political stability and exceptional GDP growth, underpinned by a major CEE investment from Jaguar Land Rover commencing its production facility in Q4 is further strengthening the confidence of investors towards Slovakia in all asset classes,” says Rudolf Nemec from Capital Markets department at JLL Slovakia. „H2 witnessed increased exposure of local and regional (CEE based) capital, having a significant share of more than 90% compared to 68% in H1 2018. We expect this trend to continue throughout 2019,“ adds Nemec.
No sector left behind
The retail sector continues to attract strong investor interest for both prime shopping centres as well as smaller regional schemes across the country. The first retail transaction was the sale of Forum Poprad to ZFP Investments. Another transaction was the acquisition of a retail park portfolio spread across Slovak cities by TAM (Tatra Asset Management).
There were three transactions in the office sector, which all took place in Bratislava, however we are also recording interest for office product in Kosice. The most significant was the sale of BBC V (36,700 sq m) from Heitman to WOOD & Company. It was the third office transaction for WOOD & Company in Bratislava last year, after the purchase of Aupark Tower and Lakeside Park in H1 2018.
The second notable transaction was the acquisition of Steinerka Business Center (12,000 sq m) by a fund managed by IAD Investments. Increase interest from both, local/regional and international investors are likely to persist as key office fundamentals prevail and yields remain competitive.
The industrial sector recorded the most activity in the second half of the year. Four deals took place, with one new investor entry, compared to two deals in H1. The sale of Trencin Industrial Park to Redside, a fund management company, became the largest industrial transaction of the year, both by investment volume and leasable area (120,000 sq m). The second major transaction involved Palmira's acquisition of the 37,000 sq m warehouse facility Falcon Hall in Senec, a major warehouse hub in Western Slovakia.
Other notable transactions were the buyback of the DHL Logistics Facility, a modern build-to-suit facility developed and acquired by P3 and the acquisition of ZF TRW, a light industrial facility by CTP. Several deals slipped into 2019 and are expected to close in H1. We expect further activity in the industrial sector in 2019 as high liquidity and a healthy leasing market fosters readiness of investors to acquire industrial assets in Slovakia. This appetite is, however, offset by lack of available A-class products.
„We expect the investment market to remain buoyant in 2019, with a predicted investment volume reaching a level of ca. 750 million EUR, reflecting market liquidity, a rise in transparency and competitive yield levels. Depending on available product parameters, we could witness slight yield compression and new investor entries,“ adds Nemec.
Our views on prime yields are as follows: Offices at 6.00%, Retail warehouses at 7.00%, Shopping centers 5.50%, High Street at 7.00%, Industrial and logistics with a standard WAULT of 3-5 years at 6.85% and prime hotels (operations) in the capital at 7.25%.
CEE region smashes real estate investment record for third successive year
CEE's real estate investment transactional volume for 2018 was in excess of 13.2 billion EUR. Poland smashed its previous record volume set in 2006 with a spectacular 5.05 billion EUR, and secured a massive regional share of 54%. Poland was followed by the Czech Republic (2.51 billion EUR - 19% share) Hungary (1.85 billion EUR - 14%), Romania (900 million EUR - 7%) and Slovakia (820 million EUR - 6%).
“With 13.23 billion EUR in 2018, the CEE commercial real estate investment volume recorded an 11% increase over 2017, and for the third year running set a new record transaction volume for the region. We have seen the most significant volume increase in Poland in 2018 with €7.2 billion traded, a substantial uplift in volumes over previous years. For 2019, we expect continued, strong interest for product in CEE markets although perhaps not quite matching the spectacular levels seen last year. One of the most interesting aspects has been the growth of domestic capital in the Czech Republic and Hungary with 50% and 60% of volumes respectively coming from domestic capital sources. We expect this to continue in 2019. Our current forecast for the full year suggests that CEE regional volumes will total around 11.0 billion euro for 2019“, says Mike Atwell, Head of Capital Markets Czech Republic & CEE, JLL.