Competition intensified significantly in the real estate sector in 2006: worldwide, investors placed some € 490 bn in commercial properties, equivalent to a more than 30% rise compared to the previous year. This growth was driven by crossborder transactions, which accounted for no less than 29% of the total volume.
Europe is one of the leading international investment regions, with an overall transaction volume of € 223 bn and a cross-border share of around 50%. The German property market has proved to be the most dynamic, and has seen a tripling of the investment amount. Eastern Europe‘s share of the European volume has gone up by a factor of five in the space of a year.
This international trend is set to continue in 2007: investors are placing large-scale, readily available liquid funds globally in order to spread
the regional risk and obtain higher returns. Consequently, competition on the property markets is likely to intensify still further.
This development was accompanied by major capital increases by listed companies, along with a large number of company flotations. In total, property companies investing in Eastern Europe raised equity of some
€ 10 bn on the capital market in 2006.
In Eastern Europe around € 7 bn were invested in property in 2006 (+21%). Of this amount, some € 4.5 bn were accounted for by Western European investors (2005: € 3.5 bn) and € 2.5 bn by investment companies from other countries (including the USA, Canada and Australia). The capital flow into Eastern European property has thus clearly exceeded all expert forecasts.
Active Investors in Eastern Europe
Source: GB Richard Ellis, Noble Gibbson
The gross returns for property in all market segments and all regions of CEE, SEE and the CIS have fallen substantially in recent years. This yield compression is attributable to a combination of factors:
- Non-domestic capital influx because of a surplus of liquid funds in the investor countries
- Domestic investments, notably in the CIS
- Improved infrastructure
- Improved legal and tax conditions, as well as alignment with EU standards
- Rising domestic demand, based on growing domestic purchasing power
- Integration of the main metropolises in the international transport network
- Streamlining of planning permission procedures when land is acquired
Current and planned Markets of CA Immo International
The bulk of investments went to the CEE region, with 43% in the office property segment, followed by retail projects (75% of which were shopping centres), with 40%. The remainder comprised buildings in the industry and hotel segments, as well as mixed-use properties. These types of use continue to harbour tremendous potential for the future. Many of the most attractive properties are still owned by the developers and users. The capital cities accounted for around 75% of the total volume. The deals in other major metropolises mainly related to shopping centres. Romania and Russia in particular offer exceptional opportunities.
This vindicates CA Immo International‘s strategy of focusing on securing new developments in the SEE and CIS regions. In the first half of 2006 more than 30% of the investment total came from Austrian investors.