The logistics sector will continue to power ahead in Central and Eastern Europe, while retail will strengthen as consumers have more disposable income, experts agreed at the PropertyEU CEE Investment Briefing, which took place on Wednesday at Colliers International’s London headquarters.
‘All sectors have been performing well, but industrial and logistics have stood out,’ said Luke Dawson, managing director & head of capital markets CEE, Colliers International. ‘CEE has become a hub for Amazon and other retail giants that continue to expand.’
Retail is the sector that has attracted the most investment - €3.3 bn in the first nine months of the year – and prospects are bright because of economic growth and wages rising well above the rate of inflation.
‘Wage pressures are evident in CEE,’ said Mark Robinson, CEE research specialist, Colliers International. ‘In Hungary salaries are up 13% and CPI is at 2.5%, so this is putting real money in people’s pockets, which is positive for retail and for logistics.’
The retail growth story extends beyond the CEE 6 – Poland, Czech Republic, Hungary, Slovakia, Romania and Bulgaria – to other countries to the South. ‘Retail is the big theme in Croatia and Serbia,’ said Tim Norman, managing partner, Chayton Capital. ‘Middle Eastern investment in Belgrade will transform the city, while in Croatia retail parks and shopping centres are being built in the expectation of more consumer spending.’
Role of e-commerce
E-commerce will not become a threat for some time, he said: ‘Movement around Romania, Bulgaria and even Poland is still poor and postal services are not great. I would be very surprised if Amazon managed to achieve same day delivery in these countries.’
However prospects for the sector, and for the region in general, are made brighter by large infrastructure projects underway, in particular the building of hundreds of kilometres of new motorways that will improve connections and facilitate supply chains.
The opportunities are not limited to logistics and retail. ‘There is huge appetite for quality office stock across the region, but not much has been traded,’ said Dawson. ‘That is a story for the next two years.’ The sector has attracted investments of €2.3 bn in the first nine months of the year, second only to retail, and rents are expected to increase in line with GDP growth.
International and tech companies are the drivers of the office sector, said Norman: ‘Oracle has set up its headquarters in Romania, AIG in Bulgaria. There is a large movement of global blue-chip companies moving in, in a big way, to benefit from a highly educated, English-speaking, flexible workforce.’
Returning work force
This trend will only be strengthened by the ‘boomerang effect’, he said, as many CEE citizens currently living in Western Europe are expected to return home, providing a big stimulus to their countries’ economies and more demand for real estate.
A young, dynamic and qualified work force will demand better accommodation, so the residential market, which has been static, is also expected to develop and grow. ‘The build to rent sector will develop, provided the authorities unlock the opportunities,’ said Dawson. ‘Bureaucracy can be cumbersome, plots to develop are not available, and lack of supply is driving price increases.’
Figures for investments in the hotel sector also show enormous growth, with some large transactions taking place and a total of €701 mln reached in the first nine months of 2017.
Investments are also being supported by a favourable lending environment, dominated by German and Austrian banks. ‘New business is going to reach €750 mln this year for us, which is triple our normal budget,’ said Robert Sztemberg, head of Warsaw Office, Berlin Hyp. ‘This year has been extraordinarily good.’
