The office sector dominates transactions but residential offers the most potential for the future in Central and Eastern Europe, delegates heard at Real Asset Media’s Trends 2023 – CEE Investment briefing, which took place recently in London at the City offices of CMS.
“The most active sector has been offices with 39%, followed by retail at 27%, supported by supermarket chains,” said Kevin Turpin, regional director capital markets CEE, Colliers. “Resi for rent is expected to grow, but at different speeds across the region.”
PRS is still a tiny sector but developing fast, as it has done elsewhere in Europe, driven by demand as more people rent because they cannot afford to buy.
“We see a very strong story ahead for PRS,” said Lukáš Hejduk, partner, head of CEE real estate and construction, CMS. “The economy is changing and property prices in CEE capitals have seen some of the biggest increases in Europe. Now with interest rates rising it’s even more difficult to afford a mortgage, so developers are taking advantage of growing demand.”
The product is slowly but surely becoming institutionalised, as companies build high-quality resi products for rent.
“There’s a definite shift to renting because of high prices and high interest rates, but there’s also a change in mindset, as the younger generations are more keen to rent than to own,” said Dorota Wysokińska-Kuzdra, senior partner, head of corporate finance CEE, Colliers.
Demand for resi is also driven by immigration into Poland and other CEE countries, which was already high but has increased substantially after Russia’s invasion of Ukraine.
“There is huge demand for residential and there is no stock available,” said Wysokińska-Kuzdra. “Three million units are needed in Poland but only 200,000 are built every year, so it will take a long time to meet demand. There’s a currency challenge and underwriting is difficult, but it’s the right time to act if you believe in the fundamentals. Resi is a great opportunity.”
In Warsaw prime rents have reached €32 per sq m, as high demand and shortage of supply are driving rental growth. Even conservative lenders are becoming interested in the sector.
“The resi sector is very promising,” said Justyna Kedzierska-Klukowska, head of Warsaw office, Berlin Hyp. “We’ve decided to start activity in that market.”