* Yields in two cities seen widening versus rest of CEE
* Investors favour Warsaw, Prague
By Daryl Loo and Adrian Krajewski
LONDON/WARSAW, Feb 3 (Reuters) - Poland and the Czech
Republic are again luring global property investors, slowing the
medium-term growth prospects of commercial real estate markets
in economically weaker Central and Eastern Europe nations.
"We think Central and Eastern Europe (CEE) is an attractive
market, but there is a bifurcation between the quality economies
and those facing a lot of challenges," said Alex Jeffrey, chief
executive for Europe at private equity property investor MGPA.
The global financial crisis saw most CEE commercial real
estate markets lose their signs of buoyancy for stagnation in
2008-09, while the stronger and more stable Polish and Czech
economies facilitated continued sector growth in those nations.
Prime yields in the principal cities of Bulgaria, Serbia,
Romania and Hungary are up to 250 basis points above those in
Poland and the Czech Republic, and that bleak spread is expected
to widen further in 2010, analysts said.
"Poland to us stands head and shoulders above the rest,"
Jeffrey, whose Macquarie-linked <MQG.AX> firm has raised 1.3
billion euros ($1.81 billion) to invest in Europe, said. Other
property investors also hold a tight focus on Poland and the
Czech Republic at the expense of other CEE nations.
German insurer Allianz <ALVG.DE> is selective with its up to
2 billion euros annual pot for property deals, seeing the two
countries as likely receiving some of that money in the CEE, and
to a lesser extent Hungary.
Investors mainly cite the stability of the Polish and Czech
markets as key to their investment focus, with those nations'
looming euro ascension and growth prospects adding to the
investment case. []
Not so for Bulgaria, Romania, often Hungary, and the Baltic
states, which have lumpy GDP forecasts for the period 2010-2012.
Such forecasts do not inspire investors wanting assurances of
market growth and consistent tenant demand before sinking
millions of euros into developments. []
"If you talk about Russia, Romania, Bulgaria ... that is out
of our scope," said Stefan Brendgen, chief executive of Allianz
Real Estate Germany, a unit of Allianz.
"We think these markets are not yet mature enough for an
insurance company to invest, so we won't be investing there for
the foreseeable future ... But if the right opportunity came up
in Budapest, we would take it," Brendgen said.
NOT ON RADAR
A recent survey by PricewaterhouseCoopers and Urban Land
Institute on emerging property trends, ranking 27 European
cities for development and investment potential, excluded CEE
cities save Warsaw, Prague and Budapest. []
"It really is about both market sizes and international
interest ... even in the best of years, Bucharest and Sofia were
not on the radar screen of investors to the extent that Budapest
and Warsaw were," ULI Europe president William Kistler said.
"Romania is still interesting because of its size ... But
lack of planning means predictability of its market is
considerably more difficult,"said Pavel Schanka, director of
CEE Capital Markets at CB Richard Ellis <CBG.N>.
"There is a chance some prime, well-located projects in
Romania will become attractive again in a few years, but mainly
in Bucharest and not in regional cities like Poland."
In Bulgaria, the EU's poorest member, economists said the
economy shrank about 5 percent in 2009 halting 12 years of
growth, but its government expects slight GDP growth this year
helped by tight fiscal policy. []
"There's also not much to attract people in Bulgaria at the
moment because of its very poor infrastructure ... that will
take at least 20 years to develop," said Richard Petersen,
Cushman & Wakefield managing partner for the CEE region.
Globe Trade Centre (GTC) <GTCE.WA>, Poland's largest listed
developer with projects in the CEE region, sees scope for
outperformance among some smaller CEE markets, such as Serbia
and Croatia, said board member Mariusz Kozlowski.
"I also think that the Hungarian real estate market could
wake up soon, as international corporations look at costs from a
regional standpoint and at this moment Budapest is the city of
lowest rents in EU," Kozlowski said.
(Additional reporting by Maciej Onoszko in WARSAW; Editing by
Andrew Macdonald)
($1=.7188 Euro)
(See www.reutersrealestate.com for the global service for
real estate professionals from Reuters)
