Report: Office stock to reach 26.5 million sqm in Central and Eastern Europe by 2021

Office buildings planned to be delivered by 2021 will increase by 20 percent the stock in place today in Central and Eastern Europe and it is estimated to reach 26.5 million square meters. The increase is the result of an unprecedented flow of capital, mainly Asian, with South Korean companies being the most active investors in the real estate market in 2019.

According to the latest investment report for Central and Eastern Europe (CEE) “Thriving metropolitan cities”, made by Skanska, Colliers International and Dentons, the region’s economic performance is increasing. The favorable economic situation and the very good performance of CEE cities has resulted in an increase in demand for new investments, including in the office market. Office stocks, which have grown in recent years, currently total 21.8 million square meters in the EEC. The constructions planned to be delivered by 2021 will increase the figures by 20 percent, reaching a total of 26.5 million square meters. Investments in CEE real estate markets last year reached about EUR 13.2 billion, with over EUR 5 billion traded exclusively on the office market.

In Bucharest, the only city in Romania where Skanska is currently operating, the stock of office space has already reached 2.5 million square meters. The activity report shows spectacular results for the capital, which has the highest GDP growth in the last 10 years (96 percent) and ranks 6th in the cities with the fastest evolution in the European Union.

Besides GDP growth and the sustained pace of total economic development, Bucharest reaches a third record, being the most dynamic of the CEE cities in terms of revenue growth. Considered one of the best locations for investments in the IT sector, the city has become a hub where innovation is generated and further disseminated, making it a profitable city for both local and foreign investors and its residents.

“Since we started our activity in Romania, we have witnessed the accelerated modernization of the capital, an evolution we like to believe that Skanska has also contributed. Bucharest is attracting more and more investments in the IT area, becoming an Innovation HUB for Outsourcing centers. The results of the investment report for Central and Eastern Europe highlight the accelerated rate of GDP growth, the general speed of development and the increasing interest that big cities have for foreign investors. All these represent solid foundations for a maturing market,” said Aurelia Luca, Managing Director, Skanska Romania.

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One of the most important trends that the report reflects at CEE level is that the strong development of the office market has attracted an unprecedented flow of Asian capital. In 2013, the CEE region received less than 3 percent of the total capital spent by Asian investors outside the home continent. This year, the figure reached 9.5 percent for the CEE region, while investments aimed at Europe increased to 14.5 percent. The total value of Asian capital invested directly in the CEE, from 2013 to date, is EUR 7.7 billion, compared to the German capital flow of EUR 8.6 billion.

“Being the largest office developer in the CEE region, I have noticed with great interest the increase of the flow of foreign investors, especially of Asian origin, who are looking for opportunities in the CEE office markets,” said Adrian Karczewicz, Head of Divestments of the division Skanska Commercial Development from CEE. “In 2018 I made the first transaction with a Filipino investor, while this year we had a first direct transaction with Korean funds in Budapest. At the same time, Koreans often invest in European markets and through asset management companies, such as CBRE GI, as was the case in our Prague transaction. Europeans, especially Germans, used to be the largest and most basic group of investors looking for Class A opportunities in the EEC. With the new investors, especially those from South Korea, who are becoming more active in the CEE markets, this situation is changing. Asian investors already know that in CEE they can find top-notch, future-proof office buildings that generate profit and create added value.”

This trend is also evidenced by the data recorded for 2019. According to the EEC investment report, South Koreans are currently the most active foreign investors in the EEC and are playing an increasingly important role in the commercial real estate market. The conclusions of the report confirm that in the first semester of year 2019, was placed over EUR 1 billion in the CEE region only in South Korea, exceeding the German investments.