Central and Eastern Europe is bucking the negative trend and attracting more foreign capital, including new investors from all continents seeking to put their money into real estate, delegates have heard at the PropertyEU CEE Investment Briefing.
'Investment flows into Europe, UK included, have been falling from their 2015-peak and last year were down around 40%,' said Mark Robinson, research specialist for CEE at Colliers International told the event hosted at Colliers' Warsaw offices. 'By contrast, investments into the six CEE countries are growing and the region is becoming ever more important in Europe.'
CEE is also well positioned to withstand the downturn that Western Europe is seeing, because the strength of the economies of the area is sustaining the outlook for real estate. Good GDP growth, significantly lower unemployment than the Eurozone, fiscal expansion and strong consumer confidence all contribute to a positive background.
The other ace up the region’s sleeve is its rich neighbour, said Robinson: 'Germany is in a strong position going forward, as the IFO survey shows, the economies are closely linked and therefore we should be optimistic about prospects for CEE, at least in the short term.'
Yields are a manifestation of this positive momentum in the market, he said: ‘We have seen a lot of compression but evidence points to its continuing for a while longer, as the markets becomes bigger and more liquid.’
The most obvious threat on the horizon in terms of investments and funding is rising bond yields, but the CEE market is so strong that, unlike other emerging markets, it will be shielded from the negative impact, Robinson said: ‘There is a lot of room for bond yields to rise.’
Other potentially disruptive factors, like the rise of inflation and increasing wages, will have a largely positive effect, Robinson said: ‘Rising prices will be a positive for rents and good for landlords, while tenants are benefitting from economic growth and so will be in a position to absorb cost increases.’
As for higher wages, they will help the retail sector, which according to Colliers International is the most promising of all, despite the threat of e-commerce. 'Consumer confidence continues to rise in CEE and there is a strong correlation with investment flows,’ said Robinson. ‘The consumer is important and retail is crucial, because it drives manufacturing, logistics and industrial. And we are most bullish on retail in the region.'
The retail sector's good prospects are driven by domestic demand and a continued momentum in consumption-led GDP growth. ‘Last year there were retail deals worth €2bn and this year it is still going strong,’ said Piotr Mirowski, director CEE Investment Services Poland at Colliers International. 'Investors are still willing to take a bet on a buoyant sector.'
