Retail and alternative asset classes back in demand in CEE

Logistics is king and the jury’s still out on offices, but other niche asset classes are beginning to appear on investors’ radar screens, experts agreed at Real Asset Media’s CEE Investment briefing, which took place in Warsaw last week.

Agata Jurek-Zbrojska, Partner, Head of Real Estate & Construction, CMS

“Investors are putting capital in residential in Poland, especially in niche areas like student housing,” said Agata Jurek-Zbrojska, partner, head of real estate and construction, CMS. “Opportunistic capital is trying to find off-market deals and distressed assets, but there aren’t many on the market.”

Data centres are also in demand and have attracted considerable FDI recently. Earlier this year Microsoft opened its first “trusted cloud region” in CEE, a series of data centres around Warsaw.  

“We would like to have many more data centres, but the availability of power is an obstacle and so is planning,” said Katarzyna Kotkowska, associate director, investment, Central Europe, Segro. “At the moment it’s mainly owner-occupiers.”

Activity is still limited because the sectors are still very small, but that should not be an impediment to future growth.

“We should remind ourselves that a few years ago logistics was not seen as an important asset class and now it’s number one in Poland,” said Piotr Goździewicz, head of transactions CEE, Cromwell Property Group. “Looking ahead rather than back, the living sector in general will develop and what are now seen as niche markets will grow.”

PRS is now very small, but demand for quality rented accommodation with a professional landlord is set to grow, driven by young professionals who prefer to be mobile and don’t want to be tied down to a mortgage.

“There are opportunities in the living sector, like PRS which is taking off in a small way, or student housing, because there’s no doubt that Poland will attract more international students in future, so demand is set to grow,” said Søren Rodian Olsen, MD, Logicenters Poland, NREP. “But looking at niche products is a sign of crisis, because it means there are question marks about the fundamentals of the main asset classes like offices.”

One traditional asset class that fell from grace may be making a comeback.

“Retail has reached the bottom, it can’t get any worse and now it can only go up,” said Goździewicz. “The numbers are proving that the right asset in the right location works, which is why there is financing available for the sector.”

Even senior lenders are willing to give retail another chance, as there is evidence of projects that have worked well despite the lockdowns and the cost of living crisis.