EUROPE - Debt-free investors should view Central and Eastern European (CEE) real estate as a lower-risk alternative to investing in emerging markets, according to Holger Schmidtmayr, board member of Austrian property firm Sparkassen.
In an interview with IPE Real Estate, Schmidtmayr said Romania and Bulgaria were on an upward economic trajectory comparable with that of the Czech Republic a decade ago.
"We're essentially talking about an emerging market with the legal and structural framework of the EU," he said.
"That's an advantage because emerging markets usually come with very weak political and economic structures."
He said low per-capita income would have no negative impact on demand for retail, citing a "tendency to orient toward the economic top".
He added: "Of the shopping centres we built in Sofia [€300m] and Bucharest [€200m], both are fully let and are crushingly full of shoppers.
"The Bucharest guys are keener on buying a pair of western jeans than people who already have 10 pairs.
"There's a tendency to orient toward the economic top - we see it in every market we've entered."
However, he warned new zoning regulations in Bucharest and a continuing credit squeeze made further significant investment unlikely in either market in the short term.
"Unless you have a critical mass of pre-lets, no bank will finance the development," he said.
"Many banks already have more exposure to Romania than they want. We're in a position to build the shopping centres without financing.
"We didn't have project finance - neither on the Bulgarian project, nor on the Romanian project.
"There are not many companies that can do that. Development is only 10% of our balance sheet. With the remaining 90%, we can fund our own developments."
Asked whether investors might be deterred by ongoing concerns over corruption in Romania, he said the EU carried a "huge stick".
"It will deliver hundreds of millions of euros' worth of infrastructure there," he said.
"Romania has to behave, or they don't get the money."
Earlier this month, Romanian president Traian Basescu demanded the restoration of powers to the country's anti-corruption state agency ahead of an EU report expected to be critical of the country's efforts.
An earlier report, published in March, was critical of delays in corruption trials and inadequate penalties for non-compliance.
A CBRE report published this week showed investment in CEE commercial real estate totalled 1.5bn in the first five months of 2010 - a 150% increase over the same period in 2009.
Poland accounted for a almost half of the transactions recorded - Bulgaria accounted for none.