Central European market plays to its advantages: Skanska
The economic outlook for Central Europe is currently more promising than that of Western Europe as Adrian Karczewicz, Head of Divestments, CEE, Skanska points out.
“When you look at recent publications such as PWC’s Emerging Trends Europe 2023 you can see that the economies of Central Europe will be growing much faster,” he told Real Asset Insight’s Richard Betts.
Over the next four years Germany, Italy and France will grow at 1.5 to 2% while growth in Central Europe will be 3 to 4%. “This is fuelled by manufacturing, exports and consumer spending so the economies are still trading very well and we haven’t had a recession in Poland or in Czech Republic in the last 20 years”
However, as five- and 10-year bonds are still trading at high levels Karczewicz said it is hard to expect any decent increase in pricing or decrease in yields.
“What will happen, in my opinion, will be the change of the dynamic of the real estate market so you won’t be looking so much at the yield you buy or the exit yield, but at the rents, and here is this connection.”
The economy, consumer spending, manufacturing and exports will fuel companies’ expansion. “Recent investors will be definitely put more focus on rental level predictions for the next years.”
“Let’s say you cannot score on yields, you’ll be looking at the rents. This will make your investment very favourable when you have rental growth compared to locations where you don’t.”
Central Europe has less to fear concerning office obsolescence according to Karczewicz.
“The average age of buildings in Central Europe is 16 years, versus 33 to 35 years in Western Europe,” he said. Levels of physical occupancy are better. Furthermore, the distance from home to the office tends to be shorter in Central Europe. “Many real estate investors and developers have this idea of 15-minute cities. We don’t have to build 15-minute cities because our distance from home to the office is much shorter than in London or Paris.” He said this will definitely be a game changer for Central Europe.
