Investment: Czechs Reap Benefits Of Poland’s Slowing Economy By Katka Krosnar In recent years Poland has attracted most of the commercial property investment in central Europe, accounting for more than 75 per cent of the total volume in some years. This is partly because of the size of the market compared with its counterparts and its success at avoiding recession. Poland has become a core investment market for some western European property funds. Over the past few months, however, there has been a shift, with the Czech Republic gaining popularity as Poland’s market becomes static and concerns grow that some sections of the Polish property market may have overheated, says James Chapman, a partner at Cushman & Wakefield in Prague. The total investment volume in the Czech market is expected to double this year compared with 2012 and will reach €1bn, according to Cushman & Wakefield’s statistics. While total investment in central Europe’s property is forecast to rise this year, Poland’s share is expected to fall slightly, from €2.8bn to €2.5bn. Hungary is expected to see about €300m of investment while Slovakia should receive some €140m, less than elsewhere but a big improvement on last year’s mere €17m. “The current development in Prague of four city centre projects that had not been pre-leased before the launch of construction is an important indication of current confidence in the market,” says Omar Sattar, managing director at property brokerage Colliers International in Prague. After a sluggish 2012, caused by lingering fears about the eurozone crisis and uncertainty after the closure of some German open-ended funds, commercial property is expected to pick up significantly in 2013, with several large office transactions set to close in the first half. The Czech Republic has always been popular with international investors, who consider it a stable market and a “nice place to do business”, adds Mr Chapman. One key to its popularity is a dynamic capital city, in which many wealthy people are making property investments, says Mr Chapman. According to Colliers, Prague accounted for almost half of the value of domestic transactions in 2012. For example, CPI, the Czech investor, acquired 18 retail properties in 2012, while CTP, a Czech Republic-based business park developer, bought Belgium company WDP’s Czech portfolio and the Honeywell facility in Brno. While western Europeans, particularly the Germans and UK-managed funds, continue to be core investors, the region has attracted money from Qatar, South Korea, the US and Canada. Investors have focused on prime assets since the crisis. At the 2007 peak, many were happy to buy new buildings in almost any location but now projects have to be in a good location or be top quality to attract investment. In recent months there has been a noticeable shift, with investors showing interest in higher-risk assets, such as those needing reconstruction, says Kinga Barchon, leader of the property team at PwC in Warsaw. Strong macroeconomic indicators and the availability of good-quality assets will still attract investors to Poland, says Ms Barchon. As in other markets, limited access to credit has narrowed the field of investors and developers. Often only those who can fund early stage construction themselves, and find credit later, can start projects that are not pre-leased, Mr Sattar of Colliers says. Office developments accounted for 61 per cent of the total value of investment transactions in the Czech Republic and almost 40 per cent in Poland. These have focused mainly on capital cities, accounting for 90 per cent or more of commercial property investment. In the first three months of this year, some €646m was invested in office developments, with significant transactions including the purchase of New City in Warsaw by Hines, which has its base in Texas. Ms Barchon says Polish cities Wroclaw, Krakow, Gdansk and Poznan are attracting a lot of developer interest. However, residential property investment in Poland is expected to decline following the end of government support for people buying smaller apartments. Taylor Scott International

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