Multiple structural trends are boosting logistics sector in CEE

The logistics market in Central and Eastern Europe is a huge growth opportunity, experts agreed at Real Asset Media’s Trends 2023 – CEE Investment briefing, which took place recently in London at the City offices of CMS.

“The region is open for business,” said Dirk Sosef, head of research and strategy, CTP. “The nearshoring trend is really helping the sector and CEE’s location is key.  Demand is growing, driven by multiple structural trends.”

From left to right: Dirk Sosef (CTP), Justyna -Kedzierska-Klukowska (Berlin Hyp), Simon Wallace (DWS). Photo: Karla Gowlett

Prices are also a big factor, he said, as “Poland is more competitive than China on labour costs”. But there are big differences between the six countries, with Poland and the Czech Republic ahead, as they are more liquid and seeing rental growth, while the others are catching up.

The challenges across the region are high construction costs and lack of supply, as development slowed down during the pandemic.

“The industrial and logistics market in CEE is favourable to landlords, but it is not without challenges.” said Kevin Turpin, regional director capital markets CEE, Colliers. “Demand is high, but delivering product is difficult. Vacancy rates are below 5% across the region and less than 1% in the Czech Republic.”

Demand is expected to remain high, as more countries catch up to the e-commerce trend and more companies seek to bring their products closer to their customers in Europe.

“Logistics is a huge growth opportunity in the next few years,” said Simon Wallace, global co-head of alternatives research and strategy, DWS Group. “The inshoring trend is going to be a big driver, labour is affordable and there is easy access to big markets like Germany.”

Aside from nearshoring and the growth of e-commerce, another development could transform the market in the region. Romania and Bulgaria could soon join the Schengen area, which would entail the abolition of border checks.

The European Commission has repeatedly confirmed that the two countries have met all technical conditions since 2011, while the European Parliament in October passed a resolution asking to “end discrimination” and allow Romania and Bulgaria to join Schengen as soon as possible.

The Czech presidency of the EU Council intends to get the accession approved in December, but the problem is the Dutch veto. The decision requires unanimity and the government of the Netherlands has repeatedly blocked Romania and Bulgaria, citing concerns about border surveillance, corruption and organised crime in both countries.

“It will make a big difference if Bulgaria and Romania enter the Schengen area, as it will make the market more efficient,” said Sosef. “It will become more institutionalised and the infrastructure will be improved.”