Home International Company Investment volumes in the CEE markets hit EUR 13.8bn in 2018. | 2019 will bring selective compression in capital city prime office yields
Investment volumes in the CEE markets hit EUR 13.8bn in 2018. | 2019 will bring selective compression in capital city prime office yields

Investment volumes in the CEE markets hit EUR 13.8bn in 2018. | 2019 will bring selective compression in capital city prime office yields


Bucharest, February 8, 2019 – The real estate consultancy company Colliers International reveals in its latest CEE report, Outlook 2019: Climbing at the altitude, that we ascended to record volumes of EUR 13.8bn in the CEE region, up 5% year-on-year in 2018. For 2019, Colliers experts expect the Eurozone interest rates to be flat-lining at zero, thus keeping liquidity high, buyers interested and helping pricing to plateau. We foresee selective compression in capital city prime office yields.

A continuation of the pattern of pay hikes well above inflation should support consumption and rents in 2019. It is that recent pattern of wage rises that should see the service sector grow within CEE economies in the coming years, sheltering the region somewhat from any blizzards appearing in the global economy”, Mark Robinson, CEE Research Specialist at Colliers International, commented.

Romanian investment volumes stood at a bit under EUR 950mn[1], a meagre dip compared to 2017. For 2019, we are moderately optimistic. The economy is set to continue expanding around its potential growth rate, which is double the EU’s average. Normally, this, alongside a juicy yield gap between Romanian products and those in other CEE countries, would be enough, especially given that office pipeline suggests over half a billion euros. Still, the bigger risks (both economic- and political noise-related) are a source of concern”, Silviu Pop, Head of Research at Colliers International Romania, said.

A global growth precipice

Several leading indicators we follow suggest that a slowdown is unfolding in the world economy. Chinese growth surveys, the oil price, Chinese imports, South Korean exports, the German IFO Expectations subcomponent all point the same way: down. More worrying for CEE and Germany is the recent drop in Chinese auto demand, which presaged China’s trade “stand-off” with the US. Europe’s largest economy may be in a “technical recession” right now.

Rocks to stumble over?

We believe investors in real estate in the CEE-6 must be increasingly wary of other risks in this thinner air. These include an overheating development cycle, labour shortages, progress in the ease of doing business of competitor peers around the world, Brexit and related EU funding cuts, “populist” CEE politics and asset taxation risk. E-commerce and “flex-working” are longer term disrupters.

The consumption driver plateaus

Eurozone money supply growth has shrunk persistently since the end of 2016. This is a harbinger of slowdown in Europe. We are seeing signs of this already in Western Europe. It implies that, at best, consumption sentiment and therefore growth dynamics plateau at best in the CEE-6.

Consumers climbing hard

Consumer sentiment appears to drive fund flow momentum in CEE real estate. The link to investors’ business models, with nearly half of flows in the region via the retail, logistics and hotel sectors and indirectly via employment to the office and the industrial markets, is clear. Consumer sentiment peaked in most of the CEE-6 between 6-12 months ago, before that in Romania. Applying an 18-month lead timing to that points to mid-late 2019 as the summit.
Towards a plateau, not a precipice

Is it a precipice or a plateau that lies beyond? A plateau, we think. Research we conducted 12 months ago suggested that wage growth in European countries in four-year periods leads to faster trend GDP growth in the succeeding four-year period. As most employers in the CEE region by now know, wage growth in CEE is a major feature of this economic cycle. We see a likely continuation in 2019 (5%-10% in the CEE-6), though at lower rates than last year due to the beginning of a weakening of demand in the industrial sector. This growth is commonly faster than that seen in the EU, so even in recession phases, the region is “converging” gradually to EU levels.


The UK’s Brexit will most likely see cuts to the EU’s Structural Funds program and a recalibration of eligibility of regions within the CEE-6. If local politics allows, the relatively balanced budgets of the CEE-6 countries should in general help to plug any reduction in EU Structural Funds flow. Brexit’s other likely effects include a small reduction in remittances and a shift in the migration balance of workers, which could help CEE’s labor shortages at the margin.

About Colliers

Colliers International Group Inc. (NASDAQ: CIGI) (TSX: CIGI) is a top tier global real estate services and investment management company operating in 69 countries with a workforce of more than 13,000 professionals. Colliers is the fastest-growing publicly listed global real estate services and investment management company, with 2017 corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide, and through its investment management services platform, has more than $25 billion of assets under management from the world’s most respected institutional real estate investors.

Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services firm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row.

Colliers is led by an experienced leadership team with significant equity ownership and a proven record of delivering more than 20% annualized returns for shareholders, over more than 20 years.

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[1] The figure in the report was recently revised upwardly to include several transactions previously unaccounted for.