The low-hanging fruit has been picked in Central and Eastern Europe, but savvy investors can still reap a rich harvest, delegates heard at a PropertyEU’s CEE Investment Summit which was held in Warsaw recently.
‘The bad news is that the easy money has been made,’ said Gordon Black, senior managing director of Heitman’s European Private Real Estate Equity group. ‘Now investing requires significant hard work, time and resources, and capital is still constrained, especially in the secondary market.’
The good news is that CEE has all it takes to ‘continue on the upward trajectory’ it has been on.
In the space of a few years CEE has gone from being an emerging market story with a great growth potential to a region that has undergone ‘staggering change’ but after such a major transformation is now ‘suffering from an identity crisis,’ he said. The challenge is how to move forward.
‘I honestly believe that CEE has so much to offer,’ Black said, mentioning positives like the large skills base, a highly educated workforce, a cost-effective place to do business and good growth prospects. The area is also a significant leader in business process outsourcing, ‘a much higher-value-added outsourcing’, he added, ‘and all these factors together will increase demand for real estate’. This is why, despite political developments and some uncertainty over policies, ‘there remains a broad base of investors who are still investing and who I believe will continue to invest.’
More careful planning needed
One crucial issue, Black said, is improving the masterplan process: the authorities should set up a framework to guide development from the current ad hoc system, which is not working, to the carefully planning of pleasant cities, creating places where people are happy to live and work. ‘Talent will choose where it wants to live, and it wants to live in attractive urban environments,’ he said.
‘Public private partnerships need to feature higher on the agenda,’ he said. ‘We need more infrastructure, beyond roads and airports, to link places and harmonise the environment, not just in the capitals but in secondary cities as well which, especially in Poland, are all very attractive.’ Immigration is an opportunity to exploit because skilled labour is needed to keep the economy going, and urbanisation is an unstoppable trend that must be managed with ‘an intelligent plan', he added.
What is required is an alliance between public and private, government and companies, local authorities and investors, to plan together for a sustainable future, Black said. ‘CEE has come a very long way in a short period of time, now the time has come to invest in the future. If we can get public and private to invest, then the future is very bright for CEE.’
