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CEE investment market slows down in Q2

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The latest CEE Investment Market Update from DTZ shows that total direct commercial real estate investment declined to 327 million Euro in the second quarter of 2012, a 60 per cent decline quarter-on-quarter.
Total investment in the first half of 2012 now stands at 1.2 billion Euro, markedly below the first half average (since 2001) of 1.6 billion Euro.
“After two years of steady growth between 2010 and 2011, investment volumes in CEE declined by 47 per cent in the first half of 2012. The decline was particularly marked in the second quarter.  However, there was some disparity between different markets in the region. The Czech Republic actually recorded an increase in investment volumes reaching 159 million Euro in the second quarter following a low level (20 million Euro) in the first quarter. In contrast, Poland, which usually dominates CEE market activity, registered a strong decline from 717 million Euro invested in the first quarter to only 122 million Euro in the second quarter. These two countries represent 90 per cent of market share in the first half of 2012,” said Magali Marton, Head of DTZ CEMEA Research.
Domestic investors came back in the second quarter of 2012 with 100 million Euro of sales in the Czech Republic and in Poland. Intra-regional investors - those located in Europe but investing outside their home markets – were less active in the second quarter with volumes declining from 587 million Euro in the first quarter to 156 million Euro in the second. 
Offices continue to be the preferred asset class among investors in CEE markets and accounted for 60 per cent of the investment volume in the second quarter. The lack of retail assets opportunities appeared to constrain second quarter market activity. Investment in retail accounted for 106 million Euro in the second quarter, far below the historical quarterly average of 471 million Euro since 2010. By contrast, investment in office appeared to be more resilient with 207 million Euro of acquisitions in the second quarter, below the historical average at 389 million Euro.
“Looking forward, uncertainty surrounding the European sovereign debt crisis and weak economic growth is likely to impact investor sentiment. Furthermore, the impact of banks deleveraging is yet to be seen in the CEE countries. For the time being, local banks have proven to be resilient. However, the impact of new regulations have prompted a withdrawal of funds by foreign banks and as a result, investment is expected to contract further,” added Magali Marton.
“In Romania, the retail sector continued to be attractive for potential investors sustained by the increase of retail consumption registered in the first half of 2012. Romania holds the third place in retail consumption growth across UE with a 5.9 per cent increase. Prime assets in Bucharest are expected to attract foreign investors in the near future. In this respect, we expect a moderate increase in the transaction volume for the rest of 2012. Investment volume for the whole year is expected to reach 250 - 300 million Euro, a decrease from our original 400 - 450 million Euro estimation for 2012. This estimation is based on the assumption that banks will bring to the market the assets of non-performing loans as part of their process to deleverage.” said Cristian Ustinescu, Investments Director, DTZ Echinox.

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