Current trends in the industrial and logistics real estate market in Central and Eastern Europe are addressed in a new study by Colliers company "ExCEEding Borders: Navigating the Industrial Landscape and Workforce in CEE-13", which includes Bulgaria, the Czech Republic, Hungary, Poland, Romania, Slovakia (i.e. .CEE-6 countries), Estonia, Lithuania, Latvia, Albania, Croatia, Montenegro and Slovenia.
Main conclusions of the study
Investment trends in the industrial and logistics sector
Dominika Jędrak, Head of Research and Advisory for Central and Eastern Europe at Colliers, comments on the results as follows: "We have seen significant interest in I&L real estate, with investors looking for various opportunities such as acquisitions of land or individual buildings, large portfolios and sale agreements and leaseback with long-term income. However, the sector is not immune to geopolitical and economic influences such as higher financing costs, price mismatches between buyers and sellers and limited supply.” Despite these challenges, the I&L sector remains a key investment target in the CEE-6 region.
Diminishing revenues and rising rents
The significant reduction in yields in the CEE-6 region between 2012 and 2021 was due to low supply and strong demand. In addition, rental rates have increased significantly, particularly in the most sought-after markets with low vacancy rates. Rent growth may stabilize in the short to medium term, but economic pressures could lead to a slight decline in some markets. Despite these fluctuations, the overall outlook for the I&L sector in the wider CEE region remains positive and further growth is expected. Compared to Western Europe, capital values per square meter continue to look attractive.
Dynamics of supply and demand in the industrial and logistics sector
The total offer of modern I&L premises in the CEE-13 markets amounts to more than 67 million m2. Despite differences in vacancy rates across CEE-13 countries, demand for I&L properties has been strong in recent years, driven mainly by sectors such as 3PL (third-party logistics), retail and distribution. However, in 2023, most countries saw a decline in demand, which is partly attributed to economic and geopolitical factors.
Sustainability initiatives
In the CEE-6 region, sustainability initiatives affect almost 90% of the total pool of modern industrial and logistics spaces. CEE-6 countries have been implementing green solutions in buildings for a long time, resulting in facilities with the highest levels of environmental certifications, such as BREEAM or LEED. Progress in implementing ESG varies across CEE-6 countries, but in this respect it is the most developed group of countries in the wider CEE-13 group. In the Baltics, there is a growing interest in green technologies and energy efficiency, although progress in the implementation of ESG principles is at different levels.
Labor market dynamics in the CEE-13 region
In the labor market in the CEE-13 region, especially in the manufacturing and logistics sectors, there are significant differences in wages between individual countries, while in the CEE-6 region there has been a significant increase in the past year. This growth is attributed to the nearshoring trend in logistics and automation of production processes. While the manufacturing sector is experiencing strong year-on-year growth, the logistics sector is growing at a more modest pace. The growing demand for qualified workers in logistics and production specializations leads companies to expand and develop closer to the Central European region.
Migration trends and labor force dynamics
In several countries, especially in Romania and Bulgaria, there are significant year-on-year changes in the number of foreign workers. The Western Balkans is also an important source of migration to other European countries. Despite the challenges in recruiting employees with specific competencies, the region remains an important corridor for internal migration, providing industrial firms with the opportunity to recruit employees with a variety of experiences and skills. In addition, labor markets in CEE countries are still more accommodating than in Western Europe.
