Currently referred to as emerging markets, Poland and the Czech Republic have recently been promoted by Barclays Capital to the league of developing countries. The bank's latest report "Advanced Emerging Markets: The Road to Graduation" removed the label "emerging market" from the two countries (together with eight other nations) and called them "Advanced Emerging Markets".
Paradoxically, this is all thanks to the global crisis which was a turning point in the way the economies of emerging markets were perceived by the financial markets. The two nations in question "conducted fiscal consolidation and showed independence from external sources of financing in a time of global crisis," according to Barclays analysts wrote. Far from the stereotypes of the 90's when seen as markets of great risk, today, they offer solid and stable growth prospects with risks similar to developed nations, yet crucially with potential higher returns.
John Duckworth, CEE Managing Director for Jones Lang LaSalle confirms: "The Barclays report underlines the view we have formed in recent years that the Polish and Czech economies have demonstrated their resilience in the face of the wider financial crisis. Clearly the impact of the crisis was keenly felt across Eastern Europe and the readjustment in attitudes across the property market was significant. Nevertheless it has caused people to reassess some of the key market fundamentals underpinning these economies, and in doing so Poland and the Czech Republic, are positively differentiated from other regional economies. Key indicators such as retail sales, consumer spending, FDI, business confidence, and of course GDP, have variously pointed to a longer term and sustainable recovery in these markets which provides confidence for investors. We expect similar trends to develop in other CEE markets over the next 2 years including Romania, Hungary, and Slovakia."
This confidence was clearly visible at this year's Expo Real commercial property and investment trade fair where Poland in particular had a notable presence; the number of exhibitors increased by 60% in comparison to 2009 (source: Expo Real website). Tomasz Trzós³o, Regional Director of CEE Capital Markets and Investment Business at Jones Lang LaSalle, who visited the Expo Real 2010, confirms the overall sentiment on the market to be encouraging: "A brisk upturn in business was clearly noticeable in Munich. As for the CEE countries, Poland received the biggest attention from potential investors. Also the Czech Republic, where economic and real estate market perspectives are also positively appraised, is viewed very well and we expect an increasing amount of investment activities. In general, investors see that there is a growing commercial property tenant demand in all real estate sectors and across all CEE countries.
This builds investor comfort and, as a result, their interest in investing in the CEE. Based on that changing sentiment, we do now expect increasing transactional activity not only in Poland and Czech Republic, but also in Slovakia, Hungary and Romania. In terms of specific product interest, this depends on investor groups, but it can be said that the interest is primarily for prime offices and shopping centers, with secondary product being more difficult to trade. We now also believe that based on increasing letting activity in the warehouse sector there is increasing interest in investment in this asset class also."
George Lewis, National Director for Capital Markets and Investment Business at Jones Lang LaSalle in the Czech Republic, confirms that: "Investment interest with regards to the Czech Republic is very positive but hampered by the lack of core available product. We anticipate more product to come to the market over the next few months and for a number of transactions to close by the year end. For the best product, yields are compressing, although in many cases there is still a pricing gap between buyers and sellers. Financing is available from a limited number of banks for the best income producing pro