Urbanisation still drives CEE but geopolitics can frustrate

The dominant theme in CEE real estate markets is geopolitics according to Marcus Cieleback, Chief Urban Economist, Patrizia.

Speaking to Real Asset Insight’s Richard Betts during the recent CEE Summit, staged by Real Asset Media in conjunction with Poland Observer, Cieleback said that people understand that fundamentals in the CEE region have improved tremendously and are “quite solid”.

However, geopolitics constrains many investors, especially at the core end of the spectrum. Cieleback said that they may not currently want to go to their investment committee with a deal there because geopolitics is the dominant theme.

Also, looking at how CEE markets have evolved over the last years, deal sizes, for example Warsaw office towers, are too large for some of the smaller pension funds to invest in. “The challenge here is finding the core buyer with a large enough portfolio to be able to execute these deals,” Cieleback explained.

“That reduces tremendously the number of potential buyers, which I think can be a challenge going forward,” he added.

Urbanisation is the dominant trend that drives capital flows,” Cieleback said. “From a 15-minute-city perspective, the medium to long term will be about mixed use – integrating office, living and some retail.”

However, this will require a change of attitude from many investors who compartmentalise into individual sector-based funds, such as an office fund, logistics fund, residential fund.

“How do you integrate mixed use in that picture? But this is the way we have to go if you really want to have a 15-minute city as the future aim in an ever more urbanised world.”

Nevertheless, Cieleback said that cities have evolved as places of opportunity and they will remain places of opportunity that attract people, and many jobs can only be carried out in cities.

Urbanisation will continue to be the driving force going forward, he added.