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Real Estate: Bucharest and Budapest on big retail investors’ lists in 2016. Investment profits will continue to drop
The essential factor influencing the real estate market in 2016 is consumption, Bucharest and Budapest being on the list on bug retail investors, according to a study of a real estate consulting company. Consumption increase determined a development wave - retail formulas and logistic deposits encouraged by the increase of online trade players’ demands, according to the CBRE report “CEE Market Outlook 2016” on this year’s provisions in Central and Eastern Europe.
Consumption craving has already led to the increase of business figures and has stabilized operational incomes of retail area owners. Besides traditional destinations such as Prague and regions in Poland, Bucharest and Budapest will be on the investors’ lists.
Since investments in quality properties do not show sings of slowing down, it is expected that yields should drop, beyond levels reached in 2007, but the compression rate will be slower than in 2015. Capital increase will be achieved by compressing yields and less by rent increases.
Even in the context of compressing yields, they will continue to be more attractive than state bonds, which will make real estate investments remain a solid alternative for investors.
Demand in office markets has reached record levels, encouraged by IT companies and those of externalised services, most of them being multinational companies. The office potential for the whole region is at relatively low levels with two exceptions _ Warsaw and Bucharest. Warsaw has over 670,000 sq.m of offices announced to be delivered in the next two years, which represent 15%of the overall office area. Bucharest has 21% of all available office areas, which might influence the level of net effective rents and the occupation rate.
The beginning of 2016 is marked by optimism of the retail market and the increase of the consumers’ confidence, CBRE analysts estimate. Due to agglomeration on certain retail markets, the area potential is limited in the central and east European area. New commercial centres will be inaugurated only in three capitals in 2016 - Bucharest, Kiev and Warsaw, with a new stock of 72,000 sq.m.
On the overall, 2015 was an exceptional year for the industrial sector, retail logistic operators benefiting from the increase of consumer demand, manifested both in traditional and online trade. All local markets registered growths in the last 10 years, at 65% in some sectors. In the developers’ market we anticipate a limitation of speculative constructions, markets being dominated by construction upon demand formulas. Poland where about 900,000 sq.m of logistic areas are in construction is the exception.