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Real Estate

Reliance on foreign capital challenges CEE real estate market

Investors and developers at Europe GRI 2023 express challenges in the CEE region, including cash flow for real estate

1 MIN READ November 24, 2023

Written by Helen Richards

The real estate market in Central and Eastern Europe (CEE) is driven largely by a strong presence of foreign investors, and the limited supply of local capital in the region is apparent. At the recent Europe GRI 2023, discussions among investors, developers and lenders on the CEE regional panel highlighted a number of challenges including valuation difficulties and high costs of capital.

Main Challenges

The real estate investment cycle in the region is still in its early stages, and participants in the discussion anticipated more significant deals to emerge in the near future. The overall sentiment was mixed, with some expressing hopeful optimism - particularly Poland, and the residential and logistics asset classes - while others shared concerns about political conflicts and developments in the region.

Another major challenge highlighted during discussions was sourcing attractive real estate deals, and developing local partnerships in the region was recommended. A lack of robust historical data and differences in local market dynamics mean that local partnerships assist tremendously in sourcing, pricing, and securing deals.

There is heavy reliance on foreign capital in CEE due to limited local resources. Cash flow remains a concern, with suggestions that adopting the euro as the official currency would help align the region with other European markets and consequently enhance its appeal to international investors.

CEE’s attractiveness to international businesses could mitigate other economic challenges. (Image: Noppasinw)

Unique Characteristics of the CEE Market

The CEE market has unique characteristics when compared to the US and Western European markets. One notable difference is the financing structure. CEE benefits from stable, long-term investment funds, making it an appealing choice for investors seeking reliable, sustainable returns. Participants even considered CEE as a potential hedge against instability in Western European and US markets.

Economic challenges are present, and debates arose regarding GDP growth, inflation, and rent affordability, however some participants believed that CEE’s attractiveness to international businesses could mitigate these economic challenges.

Discussions on the CEE real estate market will continue at the upcoming ‘CEE Economic Series’ Club Meeting on December 7 in Warsaw. Read more and register here.
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