Poland and other countries in the region remain attractive to real estate investors despite increasing geopolitical uncertainty and a worsening macroeconomic outlook, delegates heard at the 8th annual CEE Summit, organised by Poland Today and Real Asset Media, which took place in Warsaw yesterday.
“Our attention is still focused on CEE and we’re still committed to the region,” said Sabina Reeves, chief economist and head of insights and intelligence , CBRE Investment Management. “There is value to be found.”
The real estate sector is at a turning point as inflation, interest rates and financing costs rise and investors have to be more selective in their decision-making.
“We’ve had it good as real estate investors, we’ve had many tailwinds like political stability, globalisation, beneficial Central Bank policy and low financing costs which enabled us to take risks,” said Reeves. “Now we can’t take any of that for granted.”
The pandemic was the first shock, which broke global supply chains and changed work habits. Inflation, which was underestimated, keeps rising and is leading to an increased risk of recession. Then the war in Ukraine occurred.
“Capital will look at geopolitics much more closely and investors are really thinking about where their assets are,” she said. “I think CEE will benefit from this shift.”
There are doubts about the ability of central banks to manage an “immaculate deflation” – pushing inflation down while avoiding a recession. The context has already become more challenging and the pricing of real estate deals has shifted as forward financing costs are going up.
Difficult decisions for investors as cycle reaches turning point
As the world becomes harder to find opportunities in, investors have to make difficult decisions at a turning point in the cycle.
“It’s very hard to call,” she said. “We put our trust in structural drivers. We’ll double down on being a thematic investor and we’ll focus on three sectors: logistics, residential in all its forms and next generation assets like labs, science parks and life sciences hubs.”
CBRE is targeting investments that deliver a clear and compelling customer proposition, with leading ESG credentials. It will build as well as buy modern logistics, focusing on major population centres and key transport nodes. It will build as well as buy multi and single family rentals, given the structural undersupply of good quality, affordable homes in all major cities. And it will build as well as buy lab/life sciences space in leading clusters to exploit structural demand.
CEE scores on all fronts, said Reeves: “Poland is the premier logistics hub in Europe, so we’ll be here. Resi is a nascent sector so there’ll be interesting opportunities. As for next generation sectors, this is a dynamic, innovative place with a fantastic workforce. The CEE region will continue to provide opportunities in all three sectors.”