The interest rate side will be a definitive factor for investments going forward, while investors that have a strong equity base will have more opportunities to snap projects next year, concluded speakers in the opening panel of CEE Property Forum 2023, held in Vienna.
The host of the day, James Dearsley, mentioned the mixed outlook of the economy and the high interest rate environment that is a challenge for investors. Speaking about one of the long-term questions for commercial real estate, Dearsley highlighted obsolete projects in Europe and the US.
Dr. Marcus Cieleback, Chief Economist, Investment Strategy & Research at Patrizia AG, pointed out that real estate has been sold on a bond yield gap for the past 10 years, but this will have to change because real estate is not an alternative to bonds. He added that the CEE markets look solid, for a typical core product. However, for German investors, there is a political risk factor considering the war in Ukraine.
“The current economic situation is not as bad as expected. Challenges have not gone away. There might be one two or countries seeing a recession in the next quarters. Germany could be one of them,” he added.
Some distressed projects and developments that are looking for refinancing could be some of the investment opportunities for someone who has equity next year, explained Anna Duchnowska, Managing Director – Investment Management, Europe at Invesco Real Estate. She added that the industry is moving away from the traditional model of closing deals and is waiting for the income stream to come.
Speaking about the outlook of the office sector, Duchnowska highlighted the fundamentals driving offices – transportation hubs, access to amenities, places for socialization.
“We need to find alternatives for offices that will be obsolete. Today, it is hard for investors to accept the valuation of obsolete assets,” she explained. According to her, cities might start to strongly ask developers to transform outdated projects, while some ESG credentials will become critical.
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