“Investors played the waiting game in Romania in the first quarter of 2008, with few important transactions being recorded. In the short term the market will see no substantial changes, but an improvement is expected in the second part of the year. In total, the expectations for the whole of 2008 are the same as last year, EUR 1.8-2 billion,” says Costel Florea, head of capital markets at Cushman & Wakefield Activ Consulting.
A recent investment has put the transactions market back on track in Romania, with the real estate arm of Deutsche Bank having paid the record sum of EUR 340 million for the Upground offices and residences in the capital city, Bucharest.
The situation in Romania was however better in Q1 than in the Czech Republic, where a decrease of 77 percent was registered, or in Greece where no transactions at all were completed in the first quarter of the year. Hungary is in the same situation, with a decrease of 63 percent, according to Cushman & Wakefield. “In Ukraine the situation seems to be better, with a decrease of only 14 percent, but the trading volumes are unimpressive here – only EUR 563 million for the whole of 2007,” say Cushman & Wakefield pundits.
At European level, investment volumes in the first three months of the year fell by 37 percent on the same period in 2007. “A growing number of equity investors appear ready to take advantage of this and look set to re-enter the market as soon as financing markets stabilise. As a result, we are still optimistic that the market will recover more rapidly than some seem to expect,” says David Hutchings, head of European research at Cushman & Wakefield.
According to Michael Rhydderch, head of the cross border capital market team at the firm, “Deals are taking longer and the due-diligence process is more protracted. Where funding is required, the extra scrutiny put in place by the banks adds further to the delay and uncertainty of transactions actually completing.”
At the same time, many sellers are reluctant to accept the offers available to them. Some face few attractive re-investment options and are choosing to sit tight or extend the life-span of their funds. German open-ended funds and sovereign wealth funds are expected to lead the way for new acquisitions. Many investors will maintain a “wait and see” attitude until they have greater confidence in pricing and the economic outlook, according to the researchers.