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Fprop CEE Snapshot
Q1 2017

Country Manager: Przemyslaw Kiszka
GDP growth (one of highest in Europe):
2016 (E): 2.8%; (BMI)
2017 (F): 3.2%; (BMI)
2018 (F): 3.4%. (BMI)

2016 (E): -0.8%; (BMI)
2017 (F): 1.7%; (BMI) – positive from Nov-16
2018 (F): 2.8%. (BMI)


Interest rates:
PLN benchmark rate: 1.5% pa. since Mar-2015, an all-time low;

10 year government bonds: c3.7% pa, having narrowed from c6% pa. 2008-12.

Credit rating:
Fitch: A-, outlook stable (Jan-17).


Government debt as % of GDP:
Low at 52.0% (constitutional limit = 55% then 60% of GDP).

EUR 1/ PLN 4.31. Range since 2012: 4.10-4.45.

EC Winter Forecast (DG ECFIN): “The economy is expected to gather momentum in 2017 and 2018 as investment gradually recovers from a substantial contraction in 2016. Private consumption is set to remain the main growth driver, and the labour market is expected to tighten further. Costs from a lowering of the statutory retirement age are set to add to the widening of the budget deficit.”

Country Manager: Catalin Ana
GDP growth (one of highest in Europe):
2016 (E): 4.9%; (EC) – post crisis high
2017 (F): 4.4%; (EC)
2018 (F): 3.7%. (EC)

2016 (E): -1.1%; (EC)
2017 (F): 1.6%; (EC) – turned positive in Jan-17
2018 (F): 2.9%. (EC)


Interest rates:
RON policy rate: 1.75% pa. since May-2015, an all-time low, down from 12.5% pa. in May-2005;
10 year government bonds: c3.6% pa., having narrowed from >10% pa. in 2009.

Credit rating:
Fitch: BBB-, outlook stable (Jan-17)

Government debt as % of GDP:
Low at 38.4%, fourth lowest in Eurozone.


EUR 1/ RON 4.50. Relatively stable since 2012.


EC Winter Forecast (DG ECFIN): “Real GDP growth is forecast to remain strong over the forecast horizon, supported by fiscal easing and wage increases. Unemployment decreased significantly in 2016 and is projected to remain stable at low levels. With a positive output gap and the impact of previous tax cuts fading, inflation is set to pick up. The general government deficit is projected to widen due to tax cuts and public spending increases.”
Anti-corruption protests abating as government complies with demands of EU (and electorate).
Prime yields now sub 6% in Warsaw, despite continued new development and mid teen vacancy rates (= continued tenant’s market: rents = €21-€24m2 per month for prime central CBD, and €11-17m2 per month for outer locations);
Prime yields in major regional cities at c6.25%.

Yields range from sub 6% for large prime assets in Warsaw and major regional cities to 8-8.5% for smaller assets in smaller towns;
New development slowing despite low vacancy rates.

Transaction volumes:
Rising. 2016 = €4.5bn, 2015 = €4.1bn.


Prime yields c7.5%;
Overall vacancy rate for Bucharest offices c12%. Prime rents stable at €18.5m2 per month.

Occupier demand growing, boosted by rising retail sales (up 13.5% yoy 2016 vs 8.9% yoy 2015).


Secondary - mismatch persists in pricing expectations between buyers and sellers.

Transaction volumes:
2016 = €714m, 2015 = similar.

Cost of new government’s populist measures may impact the economy in due course.


Illiquidity of commercial property market;
Population in decline.

Fprop Track record in CEE

…has been earning >20% pa. ROE from rental income alone for many years;

…is ranked No. 1 vs MSCI’s IPD CEE universe for the ten years from the commencement of its operations in Poland in 2005 to Dec-2015, and for the annualised periods from the end of each of the years between Dec-2008 and Dec-2015.

Fprop CEE Investment Strategy & Property Requirements
Investment strategy:
Targeting higher yielding property to generate a minimum IRR & ROE of 15% p.a. (geared).

Property Requirements:
All sectors considered but focus on offices, retail and mixed-use;
Lot sizes of €5m+ with no ceiling;
Minimum 7.5%+ net initial yields - unless partially vacant, in which case lower.
Fprop Diary
Contact Fprop:


Jeremy Barkes
Director, Business Development
+44(0)20 7340 0270

FPAM funds rank No.1 versus MSCI’s Investment Property Databank (IPD) Central & Eastern European (CEE) Benchmark for the ten years from the commencement of its operations in Poland in 2005 to 31 December 2015, and for the annualised periods from 2005 to the end of each of the years between 31 December 2008 and 31 December 2015.
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