cee real estate covid-19 - f.datasrvr.com · covid-19 & real estate impact cee travel &...

Colliers International 20201

CEE REAL ESTATE COVID-19

Special Insights Series – Opportunities and Challenges in Extraordinary Times

Q1/Q2 2020


COVID-19 HeadlinesOpportunities & Challenges

…Economies…

…Retail / F&B...

…Labour / Wages…

…Negotiations of Leases…

…Construction…

…Unlocking / Lockdown…

…€ Rents & FX rates…

…Automotive & Production…

…Space Optimisation/Density…

…Online Sales & Supply Chain…

…Travel & Tourism…

…Environment…

…Home Office…

… Central Banks / Government Aid…

…Nationalisation…

…Technologies…

…Corporate Values/Debt…

…RE Pricing/Values…


COVID-19 & Real Estate ImpactCEE Travel & Visitor GuideWith COVID-19 cases appearing to be peaking and tailing-off, many countries have announced phased plans to ‘exit from lockdown’. As a result, businesses are cautiously keen to get back to business, and while it may not be possible to return to ‘normal’, a return will happen. Whether they are Investors, Occupiers, Banks or Developers, many of our Clients are also keen to get back to business, to continue with ongoing projects and look at new opportunities. However, much of this requires some level of physical inspection before they are willing to put in a bid or sign on the dotted line. So, what is the status and are the CEE countries open for business? Well, unfortunately it is no longer a simple case of booking travel and accommodation and heading for the airport, or jumping in the car so, we at Colliers thought we would provide you with a simplified guide to the current travel and visitor status around the region, looking at the following key criteria:

• Entry to Country Permitted? A key criteria based on whether or not a country’s borders are open or not. Potential visitors are often restricted based on their source country and in the case of CEE, this may be limited to EU countries in some cases or much tighter restrictions in terms of only allowing citizens or those holding residence permits (incl. family members).

• Quarantine and health requirements on entry? Although borders are slowly opening up, many countries are maintaining measures to limit the growth of new cases from international travelers by imposing quarantine/self-isolation of up to 2 weeks. (Depending on your home country, you must also check the return conditions from the countries you intend to visit.) In some markets, a valid (negative) test certificate is sufficient for presentation at the border control and although it may have just a few days of validity, this may be sufficient to carry out the necessary property viewings for example.

• Methods of entry: The most common entry method for many clients would be by plane but, routes in and out of the region vary between countries and remain fairly limited at present. This is a similar case for train and bus routes as they all try to solve the issues around capacity and health requirements. On top of that, it also needs to make financial sense to run the service and be reliable for the return journey.

• Purpose of visit required? Many markets still remain quite strict on who they allow in, but some have a process to support business continuity which requires both parties in a trade to provide some relatively simple admin on top of any other health requirements.

• Accommodation and getting around: The ability to have somewhere to sleep and the means to safely travel around the city or country by taxi or hire car is also important. Many of these services are operating with additional measures implemented to protect people, for example plexi-glass screens in taxis between the driver and passengers.

• Access to properties (viewings): The ability to view a property does vary but, in general there are not that many official restrictions in place. In almost all cases, you would most likely be organizing a property viewing through the owner, their agent or, the property manager who should be able to advise you of any specific requirements. Be prepared that some occupiers may refuse any non-employees to visit their space in order to limit the chances of transmission. In addition, be prepared to follow local measures implemented in regard to hygiene, such as temperature checks, disinfection and the wearing of facemasks and gloves. These may often go over and above any official requirements but, will be important to provide the level of confidence required for users of the property to return to some level of normality.

In summary, the following statistics and summaries are based on publicly available information at the date of update (11-18th May) and are subject to regular change. Whilst we would very much like to welcome you to the region to do business, we also regard all of our health interests with the highest of priorities. Checking with your country’s consular service and relevant destination airports on a regular basis will also keep you well informed.

We hope to see you soon and, in the meantime, stay safe!


COVID-19 & Real Estate ImpactRecovery Cycle: 18th May


Bulgaria Czech Republic Hungary

Entry to Country Permitted Restricted (mainly to nationals, residence permit holders and essential workers) Yes (subject to conditions) Yes (subject to conditions)

Quarantine required on Entry

Yes, (currently 2 weeks), with some exception/conditions) . No (subject to fulfilling conditions - see health requirements ) Yes (currently 2 weeks)

Methods of EntryAirplane and Car, subject to the conditions for entry into the country. All cross-border trains to/from the country are suspended.

Airplane, Train and Car.Currently limited routes are available in and out by plane and fewer by train. Cars may have additional complications if traveling from a non-bordering country.

Airplane, Train and Car.Currently limited routes are available in and out by plane and fewer by train. Cars may have additional complications

Purpose of VisitRequirements / Geographical sources

EU and Schengen nationals and third country nationals can enter and visit Bulgaria, only if they are directly engaged in the construction and safety of strategic and critical infrastructure of Bulgaria, certified investment projects and other important economic activities for Bulgaria, certified with a letter by the minister of economy or other relevant minister.

European citizens can visit if they can prove economic activity by completing a form and is signed by the Czech company/Entity they are visiting.

Non-European citizens are currently not permitted entry.

Citizens of South-Korea, Czechia, Germany, Slovakia, Poland, Austria can visit if they can prove their business activity and they have completed a form of request at the website of the police.

Health Requirements

Wearing of protective masks or other face coverings is mandatory only in closed public places e.g. public transport, shops, etc. All persons in open public places are required to keep social distrancing and all anti-epidemic measures, but in case of contact with other people wearing of protective mask or other face covering is mandatory.

Need to a produce negative COVID test (less than 4 days old) If the trip is less than 72 hours they do not need to be retested or go into quarantine. Conditions of return to home country may vary in terms of quarantine.Face masks must always currently be worn outside and are generally recommended along with other common preventative measures.

Need to a produce negative COVID test (less than 4 days old) or stay in qurantine for 14 days if you did not do that before the trip. Face masks must currently be worn at the public transport and in the shops.

Bordering Countries Romania, Turkey, Greece, Macedonia, Serbia Germany, Poland, Slovakia, Austria Slovakia, Ukraine, Romania, Serbia, Croatia, Slovenia, Austria

Flight source/destination operational

Updated info can be found at http://sofia-airport.bg/en/passengersAmsterdam, Frankfurt, Stockholm, and Paris (as of May 18th), Kiev and Bucharest and Odesa May 25th), Minsk, Sofia. Updated info can be found at http://prg.aero/en#/

Berlin, Frankfurt, Athén, Barcelona, Bázel, Berlin, Birmingham, Dortmund, Eindhoven, Göteborg, Liverpool, London, Madrid, Podgorica, Szarajevó, Stockholm és Marosvásárhely, Doha, Zürich, Dubai, Luton. Updated info can be found at http://bud.hu/en

AccomodationHotels and other accommodation can open as of May 14th subject to compliance with the requirements for social distancing and anti-epidemic measures.

Hotels are due to open from May 25th Subject to owner/operator. Hotels can operate in the country with their catering services from 1st of June.

Getting AroundCar rentals and Taxis are operational. Public transport operates with some capacity restrictions and health/social distancing requirements such as wearing of protective masks.

Car rentals and Taxis are operational. Public transport operates with some capacity restrictions and health/social distancing requirements.

Car rentals and Taxis operate. Public transport operates with health/social distancing requirements.

Access to Properties

Public access to some properties types is prohibited. Access to other properties is permitted subject to compliance with the entry regime and measures, imposed by the owner/manager and the mandatory anti-epidemic measures /such as social distancing, regular desinfection, wearing of protective masks, etc.

In general there are no official restrictions on entry to properties. Some tenants may require advance notice or may refuse entry to their spaces. This should be managed in advance through the owner/property manager and may require certain health precautions to be taken as listed and stipulated above.


COVID-19 & Real Estate ImpactCEE Travel & Visitor Guide


Poland Romania Slovakia

Entry to Country Permitted Yes (subject to conditions) Yes (subject to limited conditions, mainly professional reasons) Restricted

Quarantine required on Entry

Yes (currently 2 weeks) Yes (currently 2 weeks, only if COVID-19 symptoms are present) Yes (currently home isolation of 2 weeks) and test for COVID-19

Methods of EntryThe border with Germany, the Czech Republic, Slovakia and Lithuania can only be crossed in designated places. International flights and rail connections are suspended.

Airplane, car (limited routes available for airplanes - subject to a review late May/early June, with many terrestrial border points closed as well)

Bus and Car through designated border-crossing points.

Purpose of VisitRequirements / Geographical sources

European citizens can cross the border if they work in Poland or have residency.

Foreigners traveling for professional reasons (and providing proof of this) are allowed entry. EU citizens benefit from a longer list of exceptions allowing entry, like having relatives in Romania or having a long-term visa for residency in the country.

Entry is restricted only to Slovak citizens and mainly foreigners with residency in Slovakia or persons living within 30km from the border and commuting for work to Slovakia, students (conditions apply), foreign diplomats, freight transport drivers, health service crews, funeral service employees.

Health Requirements Face masks must currently be worn at all times outside and gloves are recommended. No guidelines as to how border traffic will take place after the borders are opened and what the restrictions will be.

Face masks are mandatory in public spaces/areas.Quarantine period can be skipped if COVID-19 symptoms are not present.

Face masks must currently be worn at all times outside and are generally recommended along with other common preventative measures. Change in rules regarding wearing masks are currently being reviewed. COVID-19 testing should be taken at a state organised facility with rules in place to isolate those with positive results.

Bordering Countries Russia, Lithuania,Belarus, Ukraine, Slovkia, Czech Republic, Germany Ukraine, Moldova, Bulgaria, Serbia, Hungary Poland, Ukraine, Hungary, Austria, Czech Republic

Flight source/destination operational

All passenger flights have been banned until May 23rd. All Polish airlines (LOT )domestic and international flights are cancelled until May 31st. Updated info can be found at http://lotnisko-chopina.pl/en/index.html

London, Oslo, Stockholm, Athens, Malmo available as of mid-May, new routes could open subject to demand. Updated info can be found at http://bucharestairports.ro/

None. Bratislava airport is currently closed. Updated info can be found at http://bts.aero/en/

AccomodationHotels are operational from May 4th, restaurants opened on May 18th and additional services will be open in the 4th stage of the lockdown exit

Some hotels / apartments remain open.Short term accommodation (up to 10 days) are currently operational. Hotels are due to open in Stage 4 of the COVID-19 measures release, estimated May 20th (subject to government approval).

Getting AroundCar rentals and Taxis are operational. Public transport operates with some capacity restrictions and health/social distancing requirements.

Ground transportation (taxis, public transportation) is operational, though not functioning at full capacity.

Taxis are operational (subject to the availability of the protective plastic shield). Public transport operates with some capacity restrictions and health/social distancing requirements.

Access to Properties


No specific limitations for access to properties, though there are rules and limitations to the office workplace in general (like wearing a mask). Contact with landlord/property manager prior to visit is advised.

Property visits require advance notice and in general should be managed with the owner/property manager. Additional safety precautions, such as temperature checks, disinfection, face masks, etc. are required.

COVID-19 & Real Estate ImpactCEE Travel & Visitor Guide


Q3 / Q4 2019

CEE INVESTMENT COVID-19Special Insights Series – Opportunities and Challenges in Extraordinary Times

Q1 2020


CEE Investment flows by Country: 2007 – Q1 2020Q1 2020 volumes at ca. €3.91 bn … Q2 volumes onwards will be impacted

PL & CZ take 86% share of Q1 volumes

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 2020

Poland Czech Republic Hungary Romania Slovakia Bulgaria

Source: Real Capital Analytics, Colliers International (Volumes exclude Land and DevelopmentColliers International 2020


CEE Investment flows by Sector: 2007 – Q1 2020Residential makes the headlines Q1 with €1.3 bn deal

Office and I&L take transactions take 27% & 26% shares respectively

Source: Real Capital Analytics, Colliers International (Volumes exclude Land and Development

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 2020

Other Hotel Residential Industrial Retail Office



◼Banks and owners are currently assessing their current loan/asset

portfolios, and are paying particular attention to covenants

◼Relationship clients and prime assets are likely to be preferred

◼Financing for Office and Logistics assets will also be favoured over

Retail and Hospitality.

◼Financing developments may be limited until effects of COVID

have some further clarity

◼Real estate however continues to be viewed as attractive asset

class vs. other investment vehicles and strategies

◼The current restrictions on movement is delaying many deals but

are expected to return once inspections are possible.

COVID-19 & Financing of TransactionsWhat does this mean for CEE?

Indicative investment debt /

Margin Conditions*:

2.0 - 3.5% @

50-60% LTV*The terms quoted are a range for Poland-Romania and will vary depending on various property related

fundamentals, plus the asset class and origin of the bank (domestic/international).


Q2 2007 Q4 2019 Q2 2007 Q4 2019 Q2 2007 Q4 2019

GERMANY (BLENDED) 4.70 2.95 5.65 4.45 6.50 4.20

CZECH REPUBLIC 5.75 4.00 5.50 4.75 6.50 5.25

POLAND 5.75 4.50 6.50 5.25 7.50 6.50

HUNGARY 6.25 5.00 6.00 5.50 7.00 7.00

SLOVAKIA 6.50 5.50 6.50 5.00 6.75 6.50

ROMANIA 6.00 7.00 7.00 6.50 9.00 8.25

BULGARIA 8.00 8.00 7.30 7.25 9.00 9.50

MARKET OFFICESSHOPPING

CENTRES

INDUSTRIAL

& LOGISTICS

CEE & German Prime Yields: Q2 2007 vs. Q4 2019At YE 2019 almost all yields had well surpassed pre-GFC levels

Where to next?



GFC

COVID-19 & Real Estate ImpactCEE Prime Office Cap Rate (%) Trends

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

11.00

Q1

200

7

Q2

200

7

Q3

200

7

Q4

200

7

Q1

200

8

Q2

200

8

Q3

200

8

Q4

200

8

Q1

200

9

Q2

200

9

Q3

200

9

Q4

200

9

Q1

201

0

Q2

201

0

Q3

201

0

Q4

201

0

Q1

201

1

Q2

201

1

Q3

201

1

Q4

201

1

Q1

201

2

Q2

201

2

Q3

201

2

Q4

201

2

Q1

201

3

Q2

201

3

Q3

201

3

Q4

201

3

Q1

201

4

Q2

201

4

Q3

201

4

Q4

201

4

Q1

201

5

Q2

201

5

Q3

201

5

Q4

201

5

Q1

201

6

Q2

201

6

Q3

201

6

Q4

201

6

Q1

201

7

Q2

201

7

Q3

201

7

Q4

201

7

Q1

201

8

Q2

201

8

Q3

201

8

Q4

201

8

Q1

201

9

Q2

201

9

Q3

201

9

Q4

201

9

Sofia Prague Budapest Warsaw Bucharest Bratislava


COVID-19 & Real Estate ImpactValue Sensitivity Based on Change of NOI & Cap Rates

Cap Rates

Ch

ange

on

NO

I

0.0% 4.50% 4.70% 4.90% 5.10% 5.30% 5.50% 5.70% 5.90% 6.10%

-2.0% -2.0% -6.2% -10.0% -13.5% -16.8% -19.8% -22.6% -25.3% -27.7%

-4.0% -4.0% -8.1% -11.8% -15.3% -18.5% -21.5% -24.2% -26.8% -29.2%

-6.0% -6.0% -10.0% -13.7% -17.1% -20.2% -23.1% -25.8% -28.3% -30.7%

-8.0% -8.0% -11.9% -15.5% -18.8% -21.9% -24.7% -27.4% -29.8% -32.1%

-10.0% -10.0% -13.8% -17.3% -20.6% -23.6% -26.4% -28.9% -31.4% -33.6%

-12.0% -12.0% -15.7% -19.2% -22.4% -25.3% -28.0% -30.5% -32.9% -35.1%

-14.0% -14.0% -17.7% -21.0% -24.1% -27.0% -29.6% -32.1% -34.4% -36.6%

-16.0% -16.0% -19.6% -22.9% -25.9% -28.7% -31.3% -33.7% -35.9% -38.0%

-18.0% -18.0% -21.5% -24.7% -27.6% -30.4% -32.9% -35.3% -37.5% -39.5%

-20.0% -20.0% -23.4% -26.5% -29.4% -32.1% -34.5% -36.8% -39.0% -41.0%


Q3 / Q4 2019

BULGARIA COVID-19Special Insights Series – Opportunities and Challenges in Extraordinary Times


COVID-19 & EconomicsBulgaria

2,138 / 102

Cases GDP Unemployment

Aid Package Interest Rate Currency

is the current number of Covid-19 cases and

number of deaths in Bulgaria as of 15 May. Source: https://www.worldometers.info/coronavirus

- 7.2%is the current forecast of GDP growth in real

terms for 2020, down from 3.7% in 2019.Source: European commission

7%is the current forecast for the unemployment

rate in 2020, up from 4.1% in 2019.Source: European commission

In progress 0%

Source: Bulgarian National bank

%

1.96 lv

is the current value of the Bulgarian Lev

against the Euro to which it is pegged.

Source: Bulgarian National bank

The government outline and apply different

measures aimed at supporting the economy, the

most affected business and protecting the

employees.

Since 2016

https://www.worldometers.info/coronavirus


€ 85 million

Volumes TransactionsSplits by Sector

Yields

is the total commercial real estate investment

volume in Bulgaria for Q1 2020. 51%

increase compared to Q4 2019 and 17%

decline to Q1 2019.

6is the number of recorded transactions inQ1

2020, resulting in an average ticket size of ca.

€14 million.

22%

Sources of Capital

75%

3%percentage share of total volumes by sector

#Offices

Retail

Land

%

7.25%

8.00%

9.5%

Offices

Retail

Industrialare the prime yields as of Q1 2020.

COVID-19 & InvestmentBulgaria

Outlook

• Banks have slowed down lending for new

projects, continue funding real estate

acquisitions with slightly revised terms.

• Buyers are considering properties more

cautiously. Transactions on a final step are

continuing.

• The economy slowdown will impact the

speed of delivery of the construction pipeline

to the market in the next 2 years.

84%

16%

Bulgaria

Belgium


COVID-19 & OfficesSofia, Bulgaria

2.3 million m2

Stock Supply Vacancy

Demand Rents Outlook

is the total stock at the end of Q1 2020. A

growth of 1% compared to Q4 2019.

353,300 m2

is the current volume of space under

construction. A total of 105,000 m2 is expected

to be delivered in 2020.

11.2%is the current vacancy rate and represents ca.

258,100 m2 of available space for let.

26,800 m2

is the gross take-up for Q1 2020. The main

sector on the demand side was IT and

outsourcing (73% of all deals). Majority type of

deals were renegotiations (42%), followed by

expansion (20%), relocations (31%) and sublease

(7%).

€16.00is the current prime CBD headline rent per m2

/ per month. Net effective rents typically range

between 6-11% below headline.

• Pre-leases at a final stage of signing are being

finalized - a positive signal for the market.

• New transactions are moving at a slower

pace.

• Office occupiers in some sectors are aiming at

negotiating rent abatements or deferrals.

• Office landlords and tenants are preparing

and implementing action plans for returning

back to office.


COVID-19 & IndustrialSofia, Bulgaria

1.72 million m2



is the total stock in Q1 2020. A growth of 1%

since the end of 2019.

137,300 m2





77,200 m2 of available space for let. The

available space is mostly concentrated in

owner-occupied or class B projects.

19,500 m2

is the gross take-up for the period for Q1

2020. Net absorption is 12,500 sqm.

€4.70is the current prime headline rent per m2 / per

month. Net effective rents typically range


• Logistics properties have faced some minor rent

renegotiations where landlords preferred to

vacate space or replace tenants as opposed to

provide discounts.

• Logistics market dynamics are business as usual.

• Revival in the interest in sale-leaseback deals

from both operators and investors.

• Automotive suppliers reopened their

manufacturing facilities, working on more and

shorter working shifts.


COVID-19 & RetailBulgaria

796,000 m2

S/C Stock Supply

Retail Sales E-Commerce Outlook

is the total modern shopping centre stock in

Q1 2020.

40,000 m2

is the current volume of modern shopping

centre space under construction.

is the forecasted growth rate for retail sales

in 2020. This result is an increase Y-o-Y. (Source: Oxford Economics)

€55.00

is the estimated share of online sales from

total retail sales.

22% of the active population shopped online in

2019.(Source: Statista & Eurostat)

• Shopping malls will reopen on May 18th,

putting pressure on landlords to implement

new management protocols and to retailers to

organize staff and stock.

• Retail parks have been less affected as they

are operational.

• All restaurants and cafes with outdoor spaces

have been opened to public as of May 4th.

Rents

€37.00

€8.00-10.00

>3.5%6.3%

Shopping Centre for Sofia

Retail Parks for Sofia

High Street for Sofia

*Prime headline rents per m2 / per month


Q3 / Q4 2019

CZECH REP. COVID-19Special Insights Series – Opportunities and Challenges in Extraordinary Times


COVID-19 & EconomicsCzech Republic

8,480 / 298




number of deaths in CZ as of 18th May.Source: https://www.worldometers.info/coronavirus

-4.9%is the current forecast of GDP growth in real

terms for 2020, down from 2.5% in 2019.Source: Oxford Economics

4.7%is the current forecast for the unemployment

rate in 2020, up from 2.8% in 2019.Source: Oxford Economics

ConfirmedEnd of state of emergancy. (17 th May) Currently

providing company support programme,

compensation bonus for self-employed,

moratorium of loans and mortgages, postponing

of Electronic Sales Control System, etc.

0.25%is the current 2 week repo rate as of 11th May,

down 200 bps since the Covid-19 pandemic.

Source: Czech National Bank

%

27.60 CZKis the current value of the Czech Crown against

the Euro, a decline of ca. 10% since February.

Source: Czech National Bank



€1.66 billion


Yields


volume in Czech Republic for Q1 2020. Over

52% of full-year volume for 2019.

14is the number of recorded transactions in


€119 million.

10%

Sources of Capital

4%


#Offices

RetailResidential

%

4.75%

4.00%

5.25%

Offices

Retail

Industrialare the prime yields as of Q1 2020

8%Hotel

COVID-19 & InvestmentCzech Republic

Outlook• Many of the transactions that are reasonably

advanced are continuing

• Newer transactions are progressing more slowly

with some bid dates or launch dates being moved

out to accommodate the situation

• Retail / hotel deals are expected to be the most

challenging

• On pricing, some investors consider that as the risk-

free rate falls, pricing will continue to remain

aggressive when the market is currently estimated

to bounce back in Q3 this year

93%

7%

W Europe

CEE Domestic


COVID-19 & OfficesPrague, Czech Republic

3.67 million m2




growth of 4.68% year-on-year.

253,700 m2




5.37%is the current vacancy rate and represents

ca. 197,280 m2 of available space for let.

69,600 m2

is the gross take-up for the Q1 2020. Net

take-up for Q1 reached 53,500 m2. This is

39% decrease Y-o-Y.

€22.5 - €23.5is the current prime headline rent per m2 / per



• Over 90,000 m2 due for completion during

Q2 2020. Some projects can be affected by

the availability of materials or labour

workers.

• Vacancy rate is expected to increase but to

remain in healthy levels.

• Future expansions in terms of office size

can be re-evaluated.


COVID-19 & IndustrialCzech Republic

8.7 million m2




growth of 8.2% YoY.

82,000 m2


construction from Q1. A total of 534,000 m2 is

expected to be delivered in 2020.

5.5%is the current vacancy rate and represents

cca. 476000 m2 of available space for let.

271,500 m2

is the gross take-up for the period Q1

2020. This is 24% decrease Y-o-Y.



between 9,1%-5,8% below headline.

• Construction of large Infrastructure

projects due in 2020 are currently

suspended

• E-commerce and distribution will

strengthen its position as a main driver in

the market

• Automotive and some other industries

are impacted as production is halted due

both health and supply chain restrictions


COVID-19 & RetailCzech Republic

2.4 million m2

S/C Stock Supply


is the total modern shopping centre stock at

the end of Q1 2020.

212,720 m2


centre space under construction or

refurbishment.


in 2020. Pre-pandemic forecast predicted

only mild decrease with 3.3%. (Source: Oxford Economics)

€220.00


total retail sales. (Source: ceska-ecommerce.cz,

18.5.2020)

• Shops are permitted to open, but with

uncomfortable hygienic measures

• The supply chain of some retailers may still

be problematic, even after the lifting of

restrictions

• Retailers will focus on e-commerce or will

collaborate to use already developed

channels

Rents

€135.00

€9.00

11.5%-4.5%

Shopping Centre

Retail Parks

High Street



Q3 / Q4 2019

HUNGARY COVID-19Special Insights Series – Opportunities and Challenges in Extraordinary Times


COVID-19 & EconomicsHungary

3,380 / 436




number of deaths in HUN as of 14th May. Source: https://coronavirus.jhu.edu/map.html


terms for 2020, down from 4.9% in 2019.Source: IMF

4.1%was the forecast in March 2020, up from 3.4%

in 2019. Unemployment will increase due to

coronavirus’s influence.Source: Oxford Economics

Enacted 0.90%is the current reference interest rate, as of

14th MaySource: MNB

%

354.18 HUFis the current value of the Hungarian Forint

against the Euro, a decline of ca. 10% since

February.Source: MNB

The government outlined rescue measures aimed

at protecting the most impacted companies and

SME-s, supporting employees, ensure solvency.

E.g.: moratorium on loans


https://coronavirus.jhu.edu/map.html


€122 million


Yields


volume in Hungary for 2020 Q1. This is a 60%

decrease over 2019 Q1 volumes (€315 mln)

6

is the number of recorded transactions in

2020 Q1, resulting in an average ticket size of

ca. €20 million.

Sources of Capital

55%

#

Offices

%

5.50%

5.00%

7.00%

Offices

Retail


45%Hotel

COVID-19 & InvestmentHungary

Outlook

• Hotel sector has a serious setback due to

the impact of pandemic

• Economic expansion is likely to continue

from Q3 of 2020

• The average transaction price is lower

approximately with 10 % than before the

coronavirus pandemic, even among the

core office products

41% Domestic

41% Germany

18% Israel


COVID-19 & Offices Budapest, Hungary

3.7 million m2




growth of 1.3% since the end of 2019.

580,000 m2


construction (including 150,000 m2 OO). A

total of 184,000 m2 is expected to be delivered

in 2020 (including 10,000 m2 OO).


230,500 m2 of available space for let...

79,600 m2

is the gross take-up for the period Q1 2020.

Net take-up reached 46,100 m2. This result

is a slight decrease Y-o-Y.

is the current prime headline rent per m2 / per


between 20-25% below headline (including EUR

200/sqm fit-out contribution and 3-months rent-

free period) considering a 5-year lease term.*Váci Corridor office submarket

• The market is expected to remain landlord

till the end of 2020.

• Vacancy rate is expected to increase.

• The projects are affected by the availability

of materials and labour workers.

• Tenants will continue to consolidate into

single buildings, fueling competition for the

limited large blocks of contiguous space

and driving pre-leasing earlier in

the development pipeline.

€15.00-16.00*


COVID-19 & IndustrialBudapest and its surroundings

2.3 million m2




growth of 3% since the end of 2019.

228,000 m2


construction.


63,000 m2 of available space for let...

79,600 m2


Net take-up reached 203,700 m2. This result

is an increase Y-o-Y.


month. The net effective rents continued to be

lower with approximately 5-10% than the

headline rents, especially in case of long-term

(10 years +) leasing.

• The growth rate of the industrial stock in

Budapest started to increase in 2015 -

slightly slowed down in 2019 with further

delays are expected due to the pandemic

• Rents are expected to decrease

• Investors are searching for new land

opportunities


COVID-19 & RetailHungary

2.24 million m2

S/C Stock Supply



the end of Q1 2020.

55,000 m2

is the current volume of modern shopping centre

space under construction or refurbishment. Only

one project, Etele Center in Budapest.


in 2020. This result is a 2.5 %-point

decrease Y-o-Y. (Source: FoOxford Economics

€70.00


total retail sales in Q1 2020.

• As a result of the state regulations ordering

the closure of all shopping malls, the retail

market is one of the most affected sectors

during the pandemic, with the exception of the

food industry and other essential products.

• We expect an increase in e-commerce

development in Hungary in particular

regarding food, cleaning products, medical

and pharmaceutical products.

Rents

€80.00

€40.00

9.0%2.6%

Shopping Centre

Retail Parks

High Street



Q3 / Q4 2019

POLAND COVID-19Special Insights Series – Opportunities and Challenges in Extraordinary Times


COVID-19 & EconomicsPoland

17,850 / 893




number of deaths in PL as of 14th May. Source: https://www.worldometers.info/coronavirus

-1%is the current forecast of GDP growth in real

terms for 2020, down from 4.0% in 2019.Source: Santander Macroscope

5.4%was the result quoted in March 2020, up from 5.2%

in 2019. Unemployment will increase due to

coronavirus influence on economy.Source: Central Statistical Office

EnactedThe government outlined the rescue package aimed at

supporting the economy, protecting the employees and

consumers, supporting companies, securing ample

liquidity. The total value of the programme was

estimated at PLN 312bn (EUR 68bn) (ca.15% of GDP).

0.50%is the current reference interest rate, down 50

bps as of 16th March and another decrease

down 50 bps as of 4th May.Source: Central Statistical Office

%

4.56 PLNis the current value of the Polish Zloty against

the Euro, a decline of ca. 7% since February.Source: National Bank of Poland



COVID-19 & InvestmentPoland

€1.72 billion


Yields


volume in Poland for Q1 2020. This volume is

210% higher than Q1 2019 (€819 million).

31is the number of recorded transactions in

Q1 2020, resulting in an average ticket size

of ca. €54 million.

6%

Sources of Capital

36%


#Offices

Retail

Industrial

%

4.00%

4.55%

6.25%

Offices

Retail


Outlook

• A further increase in alternative assets

investments such as student housing and

PRS, both in the capital city and other

major agglomerations.

• High interest in Polish quality assets form

Asian investors, in particular in the

industrial and office sector.

• German investors waiting for borders

opening to start new transactions in

Poland.

14%

13%

12%

8%7%6%

5%5%

4%3%3%2%

18%

Singapore UK

Germany Czech Rep.

RSA Austria

France USA

Switzerland Hungary

South Korea Philippines

other


COVID-19 & OfficesWarsaw, Poland

5.6 million m2



is the total stock at the end of Q1 2020.

A growth of 1.9% since Q1 2019.

792,800 m2


construction. A total of around 414,700 m2 is


7.5%is the vacancy rate at the end of Q1 2020 and

it represents 418,000 m2 of available space for

let.

138,900 m2

is the gross take-up for Q1 2020. Net take-up*

reached over 95,200 m2. This result is an 0.4%

decrease Y-o-Y.* Gross take-up excluding renegotiations




• Tenants’ pressure appearing and expectations

regarding lower rental rates for the period of

official quarantine

• Withholding future lease processes, focusing

on current operations and execution of initiated

lease transactions, increasing share of

renegotiations.

• Delivery dates of office projects uc postponed

due to limitations in number of workers

allowed to work on construction site


COVID-19 & OfficesRegional markets (Kraków, Poznań, Wrocław, Łódź,

Katowice, Tricity, Szczecin, Lublin), Poland

5.5 million m2




growth of 6% since Q1 2019.

955,900 m2


construction. A total of over 390,000 m2 is




220,255 m2

is the gross take-up for Q1 2020. Net take-

up* reached almost 179,900 m2. This result

is an 70% increase Y-o-Y.

* Gross take-up excluding renegotiations

€13.00-16.00is the current prime headline rent per m2/per



• Tenants’ pressure appearing and expectations

regarding lower rental rates for the period of

official quarantine.

• Withholding future lease processes, focusing

on current operations and execution of

initiated lease transactions, increasing share

of renegotiations.

• Delivery dates of office projects uc postponed

due to limitations in number of workers

allowed to work on construction site.


COVID-19 & IndustrialPoland

19.1 million m2



was the total stock at the end of Q1 2020.

A growth of 15.3% since Q1 2019.

2.17 million m2

was the volume of space under construction at

the end of Q1. A total of 1.1 million m2 is

expected to be delivered by the end of 2020.

7.3%was the vacancy rate at the end of Q1 and it

represents ca. 1.4 million m2 of available space

for let.

1.12 million m2

was the gross take-up for Q1 2020.

Net take-up* reached 903,500 m2. This

result is a 28% increase Y-o-.Y * gross take-up excluding renegotiations and short-term leases

€ 3.10 – 4.90is the current prime headline rent per m2/per



• I&L sector to be the least negatively affected

by the global pandemic so far

• Investors looking for new opportunities and

ways to invest their capital

• Sale and leaseback transactions – attractive

financial opportunity for both investors and

companies from industrial sector

• Delaying some investments due to uncertain

situation

• A slow revival visible among tenants starting

to look for new industrial space for let


COVID-19 & RetailPoland

12.2 million m2

S/C Stock Supply



the end of Q1 2020.

440,700 m2



refurbishment.


in 2020. This result is decrease Y-o-.Y. (Source: Oxford Economics)

€ 89.00


total retail sales.

• High sales growth e-commerce.• Expected increase in vacancy rates in shopping

centres.

• Expected decrease rental rates in shopping

centres in the next few months.

• Increased footfall in small retail parks and

convenience centres but decrease in shopping

centres.

Rents

€ 120.00

€ 15.00-30.00

4.3%2.8%

Shopping Centre*

Retail Parks**

High Street*

*Prime headline rents per m2 / per month in Warsaw

** Prime headline rents per m²/per month


Q3 / Q4 2019

ROMANIA COVID-19Special Insights Series – Opportunities and Challenges in Extraordinary Times


COVID-19 & EconomicsRomania

16,871 / 1,107




number of deaths in RO as of 17th May.Source: https://www.worldometers.info/coronavirus


terms for 2020, down from 4.1% in 2019.Source: Oxford Economics


rate in 2020, higher versus end-2019.Source: Oxford Economics

First package of measures aimed at covering

expenses related to technical unemployment,

medical leave, disbursements of late VAT

payments from state to companies, a loan

guarantee scheme for SMEs; total size stands at

RON 30bn (or 2.8% of GDP), other employment-

supportive measures expected. Under certain

conditions, bank loans payments to be frozen

(maybe for remainder of 2020).

2.00%is the current 1-week repo rate, down 50 bps

as of 20th of March (unchanged since then).Source: National Bank of Romania

%

4.84 RONis the value of the Romanian leu against the

Euro as of 15th of May, a depreciation of c.0.7%

versus end-February.Source: National Bank of Romania



€152 million


Yields


volume in Romania for Q1 2020. This is an

increase 23% versus Q1 2019.

8is the number of recorded transactions in 2019

(generally, worth at least €4 million), resulting

in an average ticket size of ca. €19 million.

5%

Sources of Capital

62%


#Offices

RetailIndustrial

%

6.50%

7.00%

8.25%

Offices

Retail


6%Hotel

COVID-19 & InvestmentRomania

Outlook

• Elevated uncertainty amid COVID-19

outbreak, with general capital outflows

(stocks + bonds) from emerging markets

suggesting a less than favourable outlook for

the likes of Romanian real estate (particularly

if current situation translated in an extended

period of economic weakness)

• High domestic RE yields versus CEE peers,

which lagged the past cycle, might support a

defensive twist to Romanian assets

26%

25%20%

12%

7%

6%4%

Greece

Romania

Czechia

Turkey

Belgium

Israel

Cyprus


COVID-19 & OfficesBucharest, Romania

2.8 million m2




growth of 10.8% versus a year ago.

430,000 m2


construction. A total 199,000 m2 is expected to

be delivered in 2020.

10.25%Is the estimated vacancy rate for Q1 2020 and

represents ca. 285,000 m2 of available space

for let.

52,700 m2


Net take-up reached 26,700 m2, a slight

increase over Q1 2019.


month. Net effective rents typically range some

13% below headline.

• General view is that market is in stand-by

mode to see how long this situation will last,

but ongoing leasing deals are still moving ahead

• New projects with a less than ideal pre-lease

ratio may see their delivery date extended

• No significant pressures on rents as of yet

(maybe during some renegotiations), but

extended economic weakness could lead to this


COVID-19 & IndustrialRomania

4.7 million m2




growth of ca. 10% since the end of Q1 2019.

400,000 m2

is the current volume of space estimated to be

under construction. A total 500,000 m2 was

expected to be delivered in 2020 before

COVID-19 outbreak.

6.0%Was the vacancy rate in Q1 2020 and

represents ca. 280,000 m2 of available space

for let.

66,400 m2


This is a 43% decrease over a year ago.

€3.9-4.0is the current prime headline rent per m2 / per



• Market participants in wait-and-see, with some

tentative interest from some players to sign

new deals in Q3-Q4 provided more clarity on

current issues

• Opportunities for online-related players

• Some new deliveries may be delayed, but they

are not being cancelled

• Some pressures for lower rents or other

arrangements during this period of closure


COVID-19 & RetailRomania

4.0 million m2

S/C Stock Supply



the end of Q1 2020.

320,000 m2



refurbishment.


in 2020. (Source: Oxford Economics)

€n/a


total retail sales.

• Shopping centers closed as of 23rd March.

Shops with an exterior entry (so etail parks)

opened as of mid-May, malls - maybe in June.

• State laws passed favouring smaller tenants

in rent negotiations

• Online sales (particularly for food and various

household items) booming

• Outlook for consumption dependent on

duration of current crisis/lockdown, but

March retail figures somewhat encouraging

Rents

€70.00

€15.00

9.8%2%

Shopping Centre

Retail Parks

High Street



Q3 / Q4 2019

SLOVAKIA COVID-19Special Insights Series – Opportunities and Challenges in Extraordinary Times


COVID-19 & EconomicsSlovakia

Currency

€Slovakia adopted the Euro currency in 2009

1,477 / 27



number of deaths in SK as of 14th May.Source: https://www.worldometers.info/coronavirus


terms for 2020, down from 2.3% in 2019.Source: National Bank of Slovakia


rate in 2020, up from 4.9% in 2019.Source: National Bank of Slovakia

Aid Package EURIBOR 3M

ProvidedThe European Commission has approved a €2 billion Slovak

aid scheme for preserving employment and supporting self-

employed individuals affected by the coronavirus outbreak

and the emergency measures taken by the State. Support

includes measures in the forms of business loans,

postponement of tax, household and salary allowances,

postponement of the mortgage payments, etc.

-0.245%is the current EURIBOR 3M rate as of 12th May,

up 0.003% compared to 12th April.Source: Euribor-rates.eu

%



€170.54 million*


Yields


volume in Slovak Republic for Q1 2020. This is

a 125% increase over Q1 2019 volumes (€75.80

ml)

4*is the number of recorded transactions in Q1


€56.85 million.

Sources of Capital

percentage share of total volumes by sector

#

88% Office

%

5.75%

5.50%

6.35%

Offices

Retail


12%Industrial

COVID-19 & InvestmentSlovakia

Outlook• In the first quarter of the year, the effects of the

COVID-19 pandemic were limited, whereby most of

the ongoing transactions were continuing;

• We expect the sectors most affected by the

restrictive measures (retail and offices segments) to

experience increase in yields. Whilst some of the

industrial subsectors, such as just-in-time delivery

and e-commerce are forecasted to stay stable;

• In terms of the deal types, we expect to see more

sale-and-lease-back transactions.

*Excluding pending and confidential transactions

12%

35%

53%

APAC

CEE

EMEA


COVID-19 & OfficesBratislava, Slovakia

1.8 million m2




growth of 2.5% since Q1 2019.

334,609 m2






15,813 m2


up reached 25,776 m2. This result is 16%

decrease Y-o-.Y




• Office tenants are currently slowly adapting the

strategies to come back to the office buildings;

• Government restrictions stimulated office tenants

to seek additional incentives, such as rent

reductions/holidays. Some of the landlords do

offer additional rent-free periods in exchange of

the prolongation of the lease term. Should this

trend continue, we can expect an increased

number of renegotiation transactions in the

upcoming quarter.


COVID-19 & IndustrialSlovakia

2.6 million m2




growth of 13.8% since the end of 2018.

227,576 m2






43,685 m2


up reached 38,831 m2. This result is 21%

decrease Y-o-.Y

Warehouse: €4.20

Logistics & Distribution: € 3.80

are the current prime headline rents per m2 /

per month. Net effective rents typically range

between 7-10% below headline, depending on

developer, location and terms of contract.

• Restrictive measures adopted by the Slovak

government to tackle COVID-19 pandemic had an

uneven effect on the industrial players. While

automotive producers, manufacturing and their

supply chain faced closures, resulting in an

increased caution over future and existing rental

contracts, as well as the need to reassess expansion

plans, B2C logistics sector faced substantial

increase in demand, further strengthening a position

of e-commerce.


COVID-19 & RetailSlovakia

1.2 million m2

S/C Stock Supply


is the total modern shopping center stock at

the end of Q4 2019.

201,690 m2


center space under construction or

refurbishment.


volume index in 2020 (2015=100). This

result is 7.7% increase Y-o-.Y. (Source: Oxford

Economics)

€35.00

is the estimated online commerce revenue

share of companies in 2017. (Source: Statista)

• The loss of sales for retail players is expected to

translate into an inability to make regular rental

payments (particularly for SMEs)

• Unfavourable revenue situation, affecting rental

payment flows, may in turn result in the inability

of landlords relying on bank financing schemes to

repay loans

• Disruptions in construction process resulted in

delays in the delivery schedule for some of the

pipeline projects.

Rents

€45.00

€9.00

22%7.4%

Shopping Centre

Retail Parks

High Street



Luke DawsonManaging Director | CEE+420 606 725 [email protected]

We are here to help.

Kevin TurpinRegional Director of Research | CEE+420 606 725 [email protected]

This report gives information based primarily on Colliers International data, which may be helpful in anticipating trends in the property sector. However, no warranty is given as to the accuracy of, and no liability for negligence is acceptedin relation to, the forecasts, figures or conclusions contained in this report and they must not be relied on for investment or any other purposes. The outbreak of the Novel Coronavirus (COVID-19), declared by the World HealthOrganisation as a “Global Pandemic” on the 11th March 2020, has impacted market activity in many sectors, creating an unprecedented set of circumstances on which to base a judgement. This report does not constitute and must notbe treated as investment or valuation advice or an offer to buy or sell property. Given the unknown future impact that COVID-19 might have on real estate market supply, demand and pricing variables, we recommend that you recognisethat our research and analysis is far more prone to market uncertainty, despite our endeavours to maintain our robust and objective reporting.

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