According to preliminary data, the total volume of commercial real estate transactions in Slovakia reached €478 million in the first half of 2021, thanks to eight closed transactions, which represents an increase of almost 6% compared to the same period of the previous year.
This year, there is an increase in interest in the retail property segment. In the first half of the year, 60% ownership share of the premium shopping centre Aupark Bratislava was acquired by the investment group WOOD & Company and its joint venture partner Tatra Asset Management, thus securing a total leasable area of 59,600 sqm.
The pandemic has also brought to retail investments an increased interest for assets with fewer tenants over longer lease terms. These include retail parks and warehouse units which provide a similar level of risk as industrial warehouses. In both cases, the prime yield is gradually decreasing due to high demand. For retail parks, it is possible to achieve 7% and 7.25% for retail warehouse units.
The industrial real estate sector continues to expand and benefits from the interest of foreign investors among all real estate market segments. It is expected that the logistic segment experiences a localized growth in rents in the city. The growth of rents in other parts of the country is tamed by the wide land availability for future construction, and by the growing competition in industrial hubs.
The wide presence of international investors in the sector provides liquidity, which, combined with the low perceived asset risk, is pushing for a further decline in the prime yield., The prime yield for logistics properties has fallen to 5.75% with a positive long-term outlook. Investments take the form of individual and portfolio acquisitions, they should exceed €200 million by the end of the year. The Australian real estate group Cromwell has concluded the acquisition of a portfolio previously belonging to the Czech investment group Arete Invest. The Czech industrial developer CTP has expanded its portfolio on the Slovak market by acquiring Immopark Žilina, which is located next to Žilina Airport.
The office sector is proving that, despite the pandemic, investor interest in modern and older projects offering an interesting price-risk ratio can be maintained. In a low interest rate environment, investors are motivated to allocate available capital. It is then expected that the demand for newly built office buildings approaching full occupancy will continue. Newly built, fully leased office buildings with average lease lengths of more than 7 years with strong tenants can achieve a yield rate of 5.50%.
The favourable level of liquidity on the market was also translated into a significant transaction in which the real estate fund Erste Realitná Renta of the management company Asset Management Slovenskej sporiteľne bought the office project Zuckermandel from the Slovak developer JTRE. The transaction confirms the price development of prime real estate, which is not affected by a general increase in the vacancy rate or a decrease in lease sizes. The Bratislava Business Center 1 and 1 Plus projects were bought by the Wood & Company investment fund from CA Immo, which ceased its activities on the Slovak market. Office transactions did not take place only in the capital, as the Košice office-retail project Cassovar Business Center I was acquired by the InTeFi group from the Czech Republic.
"Assumptions from the beginning of 2021 about increased investment activity have been confirmed. This is also evidenced by the total volume of investment in commercial real estate, which in the first half reached levels approaching the investment volume for the whole of 2020. We record continuing investor interest in assets in all investment segments, where demand for the logistics segment dominates but suffers from a low supply of projects for sale. This situation, together with the ongoing activity of investors supported by the economic recovery after the COVID-19 pandemic and long-term low interest rates, creates the conditions for further price growth in selected segments of commercial real estate," says Marián Fridrich, Managing Partner at Cushman & Wakefield Slovakia.
“We are currently seeing the redrawing of the risk of individual real estate segments. While the logistics segment was historically considered the riskiest with yields often exceeding 8%, today investors are comfortable with yields below 5.75%, which is currently an unattainable level for the once least risky shopping centre segment," says Tomáš Némethy, Head of Valuation and Advisory in Cushman & Wakefield Slovakia.