Geopolitics hung over the CEE investment panel at MIPIM this year. In retrospect it was probably naïve to hope that the war next door would be resolved without an upheaval of the larger security arrangements. We’ve endured a steady diet of disruptions over the past years, so it’s almost becoming routine.
But it doesn’t help.
“When we were speaking to investors at the end of Q4, there was very little mention of geopolitical risk at all,” Katarina Horvathova told the audience. “As of January and February this changed. So unfortunately, we are back to discussing this risk.”
It’s not that investment has dried up. CEE markets demonstrated resilience with €10 billion in investment volume last year, with Poland contributing roughly €5 billion. But the proximity to the ongoing conflict continues to influence investment decisions of international players.
Dieter Knittel (Pfandbrief) noted that local market participants have developed resilience to regional volatility. “If you’ve been active in the CEE countries for a long time, you’ve always had to deal with risks by finding answers to them, you did your business and it worked well.”
Speakers focused on the inherent strengths underpinning the region’s investment case. The office stock is relatively new and more ESG-compliant than many Western European counterparts. Warsaw has demonstrated the highest net take-up in Europe over a five-year average. Additionally, most markets offer attractive yield spreads compared to financing costs—CTP recently raised a €1 billion green bond at 4%, well below their CEE portfolio yield of approximately 6.5%.
And on the industrial front, nearshoring continues to drive demand. Maarten Otte (CTP) said that 20% of the company’s 2024 leasing activity coming from Asian manufacturers seeking European production facilities. The new arms-led investment bonanza unveiled by the German government this week should only bolster the trend.
Knittel used the labor action at German airports on the first day of MIPIM to highlight the fundamental advantage foreign investors are missing. “I mean, could you imagine that all airports in CEE would be closed because everyone is on the strike? It would never happen. That’s the good thing about the region. The people want to work hard, they want to produce something. That’s why we believe in the area.”
Also in ThePrime
