Over the years, the perception of the Central and Eastern Europe region has changed dramatically. Currently, Romania has nine of the world’s top 15 fastest internet cities, Slovakia has seen huge investment including $1.6 billion from Jaguar Land Rover, Bratislava and Vienna have been connected by the first Hyperloop high-speed railway in the world, both the Czech Republic and Poland has agreed deals with China, and many more. There is no doubt about it, the region is expanding and the whole world is watching.

Mission to Outperform, the latest CEE Investment Report, has now been released after cooperation with Dentons, Skanska, and JLL as well as the Association of Business Service Leaders in Poland. According to the report, the CEE region enjoyed GDP growth of 3.1% in 2015 which was nearly double that of the rest of Europe who sat at 1.6%. Within the next twelve months, this is expected to continue and many countries are set to see huge leaps including;

Lithuania - 3.6%
Poland - 3.5%
Estonia - 3.4%
Romania - 3.3%
Slovakia - 3.2%
Hungary - 2.1%

When it comes to operation risk, the CEE region is now seen as one of the safest areas in the world because there is now a lack of political and social elements to worry about. In terms of individual countries, Poland, Slovenia, Hungary, Czech Republic, and Slovakia all made it into the top 25 safest countries.

Currently, the region holds around 100 million people and there seems to be a focus on the performance to contribute towards more growth. Thanks to Foreign Direct Investment (FDI), which is the region’s largest growth engine, the region is now growing faster than Western Europe. Over the last few years, advanced business services, back-office operations, and IT are the three main services that have attracted FDI.

President of Skanska Commercial Development Europe, Katarzyna Zawodna, has said “Apart from favourable macroeconomic conditions, what matters to investors is the region’s well-educated, hard working and talented labor force. Every year CEE produces 1.2 million graduates, many of them with working proficiency in 40 languages which they use on a daily basis. Poland, the Czech Republic, Slovakia and Ukraine provide the market with 285,000 engineers a year—more than the United States. In the OECD’s PISA rankings, Poland, Slovenia, the Czech Republic and Latvia are all in the top 30 countries with the best math results. It is evident that people are the real power of this region. They have all the skills they need to set ambitious goals and achieve extraordinary results for their respective countries.”

Amongst many other factors, young people are showing themselves to be useful for the economy in this region as they have an ability to push businesses forward in the modern world. Due to cost efficiency and the proximity to the rest of Europe, many companies are choosing to settle in the CEE region which is now more popular than India and many other SSC/ITO/BPO countries. Above all else, it is perhaps the sheer amount of shared service centres (SSCs) that have increased recently; this becomes even more pronounced considering the same area has fallen in Western Europe. Looking into the future, this trend is set to continue.

Real Estate Investors Attracted By High Yields

As well as the economy growing as a whole, the construction industry has seen a huge benefit to the aforementioned growth. In recent years, the CEE region has seen large growth in demand for shopping centres, logistics infrastructure, and prime offices.

Managing Director at JLL Poland, Tomasz Trzoslo, has said “CEE offers 24 million square metres of modern office space. Yields are higher than in Western Europe and therefore a combination of attractive risk-adjusted pricing and the availability of institutional quality product delivered by experienced developers provide multiple investment opportunities.”

After looking into the transaction volumes of commercial real estate, this opinion is confirmed. Currently, the Czech Republic and Poland take three-quarters of the €9 billion volume. Despite this, there was also growth in 2015 for Romania, Slovakia, and Hungary. In terms of volume, the market currently looks like this;

Poland - €4.1 billion (46%)

Czech Republic - €2.65 billion (30%)

Hungary - €790 million (9%)

Romania - €650 million (7.5%)

Slovakia - €412 million (4.5%)

Other Countries - €300 million (3%)

Chairman of Dentons, Pawel Debowski, has said “Central and Eastern Europe is viewed as Europe’s darling by an increasing number of institutional investors based in Europe, including the UK, and more recently from North America, South Africa and the Far East. It is an attractive and safe region with sustained improvements in the business environment. This is particularly evident in the commercial real estate sector, where investors can tap into products that deliver profitable yields and long-term profits. TPG Real Estate and Round Hill Capital are just two of those investors who have entered the CEE property market in the last 12 months.”

As you can see from the report, the CEE region is becoming ever-more important for companies looking to enter or grow within the European market. After years of being in the shadows, the region is building a brand new image and the future certainly looks bright.