CEE Commercial RE: Outlook demanding but manageable
The near-term outlook for the prime-end of most of the key CEE commercial RE markets still looks fairly decent from our perspective. The ECB looks unlikely to push its base rates up visibly in the quarters ahead and we expect property investment volumes in CEE to stay solid this year. This should allow RE cap rates in CE3 to remain at around their current lows at least in 18E, while those in main SEE markets could even show some further mild softening in the case of the best assets in the period. On top of that, office rentals in most regional markets, including Warsaw and Bucharest, seem to have already bottomed out, while locations like Budapest, Prague, Belgrade and Sofia look positioned to continue their gradual recovery going forward. At the same time, given solid consumer demand and limited supply of new space and despite likely further dynamic growth of e-commerce, we do not expect regional retail rentals to show any decline in the quarters ahead, while less saturated markets, like Belgrade, might even witness an increase in this respect. The midterm outlook for the sector, with the rather inevitable pick-up to European interest rates, looks more challenging. We stress, though, that we currently expect the negative impact on CEE property valuations stemming from likely yields decompression in 19E-20E to be largely offset by a forecast macro-driven recovery in rental rates across the region. After the recent fall in stock prices under our coverage, we see decent upside for GTC (Buy maintained) and CPG (upgraded to Buy), while for Echo (upgraded to Neutral) it looks limited.Capital Park SA is a Poland-based company engaged in real estate operations. It divides its business into four segments which build, rebuild, renew and commercialize properties and manage office, commercial, residential and multifunctional projects. Through the Office Projects segment the Company manages office properties in Gdansk and Warsaw. The Commercial Projects segment includes a number of commercial, high street properties located in over 30 Polish cities. It also constructs its own local shopping malls under the proprietary street mall brand of Vis a Vis. The Residential Projects segment is active in development of premises targeted at medium and premium segment groups, such as Rubinowy Dom in Bydgoszcz and Rezydencja Palacowa in Warsaw. The Multifunctional Projects segment is engaged in revitalisation of the post-industrial area of the former Norblin Factory in Warsaw. Capital Park SA is the parent company of Capital Park Group and operates through over 40 subsidiaries.
Echo Investment is a real estate investment and development company based in Poland. Co.'s is engaged in operations in the real estate market, the design, construction and development of shopping and entertainment centers, hotels, office buildings, houses, blocks of flats and apartments. Co.'s operations are organized along three operating segments: Shopping and Entertaining Centers, Offices and Hotels and Residential. Co. also offers general contracting services for third party investors. Co. owns properties throughout Poland, including Szczecin, Poznan, Warsaw, Krakow and Kielce, among others, and abroad, including Ukraine, Romania and Hungary.
Globe Trade Centre is the parent company of the capital group, Globe Trade Centre (the Group). The Group is engaged in the development and rental of office and retail space and the development and sale of residential units. The Group is a real estate company in Central and Eastern Europe and South-eastern Europe, operating in Poland, Romania, Hungary, Croatia, Serbia, Bulgaria, and Slovakia. Additionally, it co-owns land in Ukraine and Russia and operates in the Czech Republic. The Group's portfolio comprises: completed office buildings and office parks as well as retail and entertainment centres; residential projects; and undeveloped plots of land and suspended projects.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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