Offices and warehouses are both set to see rent increases in CEE countries this year as demand grows, experts agreed at Real Asset Media’s European Outlook 2022: Focus on CEE investment briefing, which took place online recently on the REALX.Global platform.
“Logistics and office rents in the region have been stable, but we expect that now inflation will be a trigger for healthy rent increases”, said Dorota Wysokińska-Kuzdra, senior partner, head of corporate finance & living services CEE, Colliers.
The prospect of rent increases will be an extra incentive to deploy money in those two in-demand sectors, despite rising prices and construction and operational costs.
“Projects are less profitable because costs are going up, but on the other hand investors have a huge amount of money available”, said Marcin Juszczyk, member of the management board, CFO/CIO, Capital Park. “Real estate is always seen as a good investment in times of high inflation”.
Investors’ interest will increasingly focus on ESG-compliant assets, which will see higher valuations and higher rents.
Market pressures will do more than legislation to bring people into line, said Hubert Abt, CEO & Founder, New Work Offices: “We don’t need to wait for regulations because the capital markets will force us to adapt. If you don’t comply you will get shot down by the stock exchange or by the big guys”.
The seemingly ever-increasing demand for logistics assets and the reconfiguration of global supply lines will benefit Central and Eastern European countries.
“Global companies have seen the need to put distribution and shared services centres closer to home”, said Juszczyk. “The nearshoring trend has been and will be a big driver for the warehouse market in Poland. It is now 22 million m2 but it is set to double in the next five years”.
As companies have moved or strengthened their existing operations, demand for logistics assets in CEE has soared.
“We’ll continue to see investment in logistics, especially last mile, as market pressure will force growth in the sector across the CEE region”, said Victor Constantinescu, managing partner, Romania & co-head of Real Estate, Kinstellar.
In Romania and Bulgaria there is no sign of a slowdown in demand, but there are two obstacles in investors’ way.
“Roads and highways have not kept up and there are no good transport links, and there are serious labour shortages in both countries, as emigration is still an issue”, said Constantinescu. “But investors are not deterred: they keep looking for portfolios to purchase”.