New promised land for investors
Why do the capital markets believe in Central and Eastern Europe?
There is no region anywhere in the world that is as safe for doing business and as strong economically. If you are looking for a market to invest in, CEE is the place. The potential of the region has been acknowledged not only by financial institutions from Germany and the United States, but also by funds from parts of the world as distant as Asia and Africa.
What is it that attracts capital from all over the world to Central and Eastern Europe? According to the authors of the CEE Investment Report 2017: From Phenomenon to Fundamentals, it is a combination of:
Stable conditions for investment and growth
Katarzyna Zawodna, CEO of the Skanska commercial development business in CEE:
“The CEE region is very attractive to global players for setting up their business because of its impressive pace of economic growth, which is sustainable for years yet, its big internal market and the availability of talented professionals. Growth in the entire business services sector is naturally boosting demand for modern office space. Commercial real estate investment volumes speak for themselves: For many years, we have seen a year-on-year increase in the region and it looks as though we will have another record-breaking year this year. Thanks to the business-friendly environment, CEE is observing a strong capital inflow from both traditional directions and new ones such as Canada, Asia, the Middle East and South Africa.”
An abundant and versatile office real estate portfolio
Tomasz Trzósło, Managing Director at JLL Poland:
“CEE now offers ca.22 million sqm of high quality office stock, with almost 3.5 million sqm under construction and due for delivery within the next 2-3 years. Most of it is leased at rents much lower than those in Western Europe. The low rental levels combined with yields that are meaningfully higher than those in Western Europe produce truly attractive capital values.”
Development of global competences
Jacek Levernes, President of the Association of Business Leaders in Poland (ABSL):
“Over the past decade, the CEE region has become a favorite destination for foreign direct investment – particularly in the business services sector. The investment focus has moved from back-office to middle-office operations centers and on providing complex, value-focused work. Poland’s business friendly environment and talented workers continue to encourage global corporations to open their centers in the country, which already is a top player both in Europe and globally in this sector.”
Qualified human capital and competitive costs
Paweł Dębowski, Chairman, Real Estate Europe at Dentons:
“CEE continues to attract investment thanks to the existence here of a unique combination of legal, economic and market factors, such as the legal safety in conducting transactions, the attractiveness of properties that present profitable yields and long-term profits, and qualified workers, a cheaper workforce and lower rents (in comparison with Western Europe).This is why large companies from the business services sector are increasingly locating their operations in this region and financial investors are pushing up demand for real estate.”
Record-breaking sales volumes
According to the authors of the report, investors spent approx. EUR 5.6 billion on commercial real estate in CEE in H1 2017, close to the 2007 record of EUR 5.7 billion. JLL’s experts expect another record level at the end of the year – investors could spend as much as EUR 13 billion. This is the best recommendation for the region one could wish for.
Report by Skanska, JLL, Dentons and ABSL.