The report was issued by Kamila Wykrota, out of DTZ's Warsaw office, and Doug Hardman, who works from Budapest, Hungary.
Russia was the only country to not experience a weakening in direct investments; instead seeing a rise in volume compared to the year before. Throughout 2008 Russia was the choice country for office, retail and industrial property investments in the Central and Eastern Europe market, according to a recent study by. The commercial real estate in Russia now accounts for 48% of the total CEE area investments.
As the global economy began to change, there was a shift in the types of investors looking at the CEE market. Local investors began to play a larger role, focusing most of their efforts on Russia, Ukraine and the Czech Republic. Local investors accounted for more than 22% of the total transactions in 2008, compared to 16% in 2007. German investors hold the largest stake in CEE. They are responsible for 31% of the investment capital in the region.
Still, the CEE market and Russia specifically was not an exception to the world-wide credit crunch and subsequent drop in prices and asset values. Some of the CEE markets saw prices return to 2004/2005 levels. "A further repricing of assets in 2009 is expected across all sectors," according to the report.
Throughout the the region, the industrial market was hit the worst. Since the industrial real estate here is reliant on external demand, the collapse of the car industry in the US took a serious toll. International firms postponed plans for expansion, others laid off local employees in an effort to reduce the size of their workforce and cut costs.
The report warns against the trouble the CEE region might be up against as the economy begins to correct. "The prospects for the CEE investment markets hinge heavily on vendors' willingness to accept higher yields and lover capital values. CEE is less advanced in its market correction and needs to demonstrate pricing levels which are more attractive to institutional investors on a risk-adjust basis vis-a-vis West Europe."
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