Central and Eastern Europe may be facing its sharpest economic downturn since the early 1990s, but the region still holds considerable value for equity-rich and opportunistic players who are not swayed by market sentiment alone and who are able to correctly interpret asset level risk while differentiating between countries. That is one of the key conclusions of DTZ's latest investment update for CEE.
Central and Eastern Europe may be facing its sharpest economic downturn since the early 1990s, but the region still holds considerable value for equity-rich and opportunistic players who are not swayed by market sentiment alone and who are able to correctly interpret asset level risk while differentiating between countries. That is one of the key conclusions of DTZ's latest investment update for CEE.
'Just as a tendency to lump all countries in the region together when markets boomed contributed to the mispricing of risk, there is a danger of not differentiating in the downturn,' DTZ said. 'While all markets across the CEE face similar problems, their economic structures vary significantly. CEE’s low levels of household indebtedness and large inflows of EU funds underpin its significant growth potential and should help the region emerge from the downturn quicker,' the authors argue.
The harsher economic climate in CEE makes the affordability and sustainability of rents a critical element in pricing in 2009, the report noted. 'The scope for rental declines is greatest in those countries which are most vulnerable to deleveraging and the recession in the eurozone, where development pipelines are the largest and where unhedged foreign currency exposure is the greatest.'
Local market conditions across the region vary considerably, the adviser added. 'In order to mitigate risks and exploit opportunities in CEE commercial property, DTZ recommends a discerning approach to investment based on country fundamentals, sector, and indeed individual occupier exposure to the downturn.'
