Future trends and trading patterns will benefit CEE, experts agreed at the Investment locations and opportunities: Countries and Cities briefing, part of the 7th CEE Summit, organised by Real Asset Media and Poland Today, which this year took place online.
“CEE has continued to attract investment over the last few months, especially in Logistics,” said Daniel Harris, principal and head of European investments, Cain International. “This puts the region in a very good position moving out of the crisis. I think there will be a very strong recovery next year.”
Logistics has performed extremely well in CEE for a long time and yields are as low as they are in Western Europe, he pointed out. It has been a winning sector throughout the pandemic but, more importantly, it is set to continue doing well in the future.
The nearshoring trend will benefit CEE and provide great opportunities for logistics investors, while longer term the increased trade flow from China and the East will pass through the region and make it even more pivotal.
“We like Logistics and we’re heavily invested in the sector, but we also hear a lot of concerns,” said Petra Blazkova, head of continental European research, LaSalle Investment Management. “First of all, 40% of demand is still driven by retailers, which have been struggling, so there will be defaults and bankruptcies. Secondly, investments are difficult to justify if there is no rental growth.”
Caution is needed when investing in logistics, because it is easy to make mistakes, especially when there’s a rush to buy and a lot of capital is chasing a limited number of deals.
Warning of looming logistics bubble
“A lot of people are being blinded by the trend and need to be careful,” said Harris. “I agree that logistics is a bet on retail in the end. The other factor to take into account is the quality of the tenant, as it’s one thing to have Amazon and quite another to have a small retailer. When I see that prime yields in logistics are below prime office yields, I fear there’s a bubble being created.”
Logistics also finds itself in the opposite situation to most other sectors, as it has been on a high throughout the pandemic and there are now fears that the good times may end.
“The demand for warehouses has been brought forward and that’s why there is some concern’, said Sabina Kalyan, co-global head of research and global chief economist, CBRE Global Investors. “Logistics has shown great resilience this year, but people are worried about what might happen next year. It’s the total reverse of retail, hotels or offices where things can get only get better.”