Economic growth in CEE remained strong in Q3, demonstrating the region’s resilience to weakness in Eurozone manufacturing activity. As a result, 2019 is likely to end slightly below 4% of real GDP growth, well above the 1.2% growth forecast for the Eurozone. For 2020, we still expect growth to gradually slow, as global trade remains lackluster and domestic investment and construction declines. However, household consumption is expected to remain strong and prevent a sharper slowdown. With occupier fundamentals expected to remain positive, investor attraction to core CEE markets is forecast to remain buoyant.
Polish regional office markets hold an attractive yield premium of more than 160 bps to Warsaw and more than 330 bps to core Western European markets. This partially reflects lower liquidity and occupier market risks compared to core markets in Western Europe. However, investors are attracted by positive structural demand drivers, outperforming GDP growth, low unemployment rates and sound job growth figures paired with stronger return prospects in an otherwise low-yield low-return environment.