The company continues to dynamically develop its investment offer in the CEE region. In 2015, Skanska’s portfolio in Central and Eastern Europe will grow by another six buildings.
2014 was an exceptionally successful year for Skanska in terms of transactions, not only on the world's major global markets but also in cities such as Bucharest, Budapest, Wroclaw and Lodz. Skanska CDE, operating in the Central and Eastern Europe (CEE) region, sold a record-breaking nine office buildings. In 2015, the unit will focus on further developing its offer for investors and is planning new projects. The Swedish developer recognizes the great potential of cities that do not figure in the top-tier rankings due to low transaction volumes but do guarantee perfect conditions for single investment gems.
For Skanska, Central and Eastern Europe is one of the fastest developing transaction markets worldwide. In 2014, the Swedish company sold more modern office schemes in the CEE than in any other region. “Several years ago, we started with a single office building. In 2014, the number of projects sold in the CEE accounted for more than 50% of Skanska’s office transactions worldwide. We recognize great potential for further growth in countries such as the Czech Republic, Romania, Hungary and, of course, Poland,” says Nicklas Lindberg, President at Skanska Commercial Development, Skanska’s office unit operating in Central and Eastern Europe. In Poland, Skanska is present not only in Warsaw, but was the first to invest on a significant scale in the country's largest regional cities. “In many respects, we are investment pioneers in the CEE. We were the first to introduce green buildings in the region and we contribute in the establishment of local transaction markets such as Łódź and Budapest. We also lead the way in building in response to people's needs,” states Nicklas Lindberg.
In 2014, the company sold nine office buildings located in seven office complexes in the CEE region. Total transaction volume was in excess of 330 million euro and was Skanska CDE's best ever year in terms of transactions. The buildings were purchased by funds from the UK, USA, Germany, as well as local financial institutions (Polish, Czech and Hungarian). However, funds from other countries have also showed interest in Skanska’s offer by sending enquiries.
In 2015, Skanska CDE will not slow down as there will be 5 office complexes in its portfolio for sale, located in Prague, Bucharest, Kraków, Poznań and Katowice. “In 2015, we are planning to deepen our relationships with financial institutions from Europe and USA, as well as the Middle East and Asia. We will, of course, continue our successful cooperation with regional funds which are becoming increasingly active in the CEE,” states Adrian Karczewicz, Transaction Director at Skanska CDE.
Skanska CDE's development, as a regional leader, is gaining momentum as it constantly looks for ways to develop its transaction offer in key locations on the Eastern borders of the EU. This unit has the most in-depth knowledge of regional markets of any office developer operating in Central and Eastern Europe. “We constantly analyze the markets we operate in. Not many know that, according to the prestigious Top 100 Outsourcing Destinations ranking published by Tholons in January 2015, Kraków is the best place for locating service centers in Europe. Furthermore, Łódź, located at the junction of European motorway routes, has more residents than cities like Hanover or Manchester. Moreover, Budapest was named the most attractive city for capital investments in Eastern Europe 2014-2015 in the ranking of fDi Magazine, a publication of the Financial Times Group. These are all locations in which we are present, developing dynamically and actively looking for new sites to invest in. These are not one-off investments as we see on these markets increasing, long-term demand for modern, green, office space. These types of projects are part of Skanska's DNA and we have great experience in delivering them,” comments Adrian Karczewicz.
Through Workplaces by Skanska, the company provides solutions that support employees’ real needs, increasing both their motivation and productivity. As a result, satisfied employers are interested in signing longer leasing agreements. This is an important asset for investors. Another is that buildings have flexible office space that can be tailored to the needs of tenants over the long-term. Also important for investors is the guarantee of a high quality building that can respond to future trends and, in turn, retain its market value. LEED Gold or Platinum certification ensures the building's quality and sustainability. “Skanska prepares itself very carefully for divestments and we understand this starting from the acquisition of the plot, everything should be arranged down to the last detail, planned, delivered and checked. As standard, Skanska conducts a pre- due diligence process where the company undertakes a thorough assessment of the building, its preparation, and completeness of documents. We are the ones that point out what elements the client should focus on, what obstacles he may face and how to deal with them. This really distinguishes Skanska on the market,” underlines Adrian Karczewicz
According to a report by Cushman & Wakefield[1], Central and Eastern Europe is attracting an increasing number of investors. Financial institutions looking for products on Western markets are gradually recognizing the diminishing profit opportunities and the attractiveness of the CEE driven by some of the fastest growing economies of any European region. “Office buildings in countries such as Poland are as attractive for investors in terms of quality, lease stability and security as products located in Western European cities. Furthermore, the return on investment can be significantly higher. For example, excluding Warsaw, in Polish cities with more than 500,000 residents, yields for prime office space reach between 6.5 and 7.5%. However, in Germany it averages between 4 and 5%,” says Adrian Karczewicz.
Many global financial institutions have not invested in the CEE due to a lack of local market knowledge and still seeking investments in Western countries. However, this trend looks set to change. According to Colliers overall healthy level of investment volumes in CEE in 2014 should provide confidence to investors seeking opportunities across the region in 2015.The latest data by CBRE shows that the transaction volume in 2014 on the commercial real estate market in Central and Eastern Europe (excluding Russia) grew by 28% compared to 2013. This trend is supported by the significant growth of the outsourcing sector.
“In Poland, this sector employs over 130,000 people, and this total is expected to rise to around 160,000 by the end of 2015. Outsourcing centres generate long-term demand for modern office buildings. That’s good news for investors,” said Jacek Levernes, the chief executive of ABSL, a group representing the business service sector in the CEE.
In recent years, companies from the sector have leased 70% of the office space delivered by Skanska in Poland. According to JLL, in 2014, business services centers with foreign capital signed lease agreements that account for more than 60% of overall take-up recorded in regional markets in Poland. These rapidly growing companies are greatly appreciated by investors as they lease large volumes of office space and sign agreements for longer time periods.
[1] Cushman & Wakefield, 2015 EMEA property investment outlook, January 2015