Despite a volatile geopolitical backdrop, Central and Eastern Europe (CEE) is becoming an increasingly important region for private real estate investors. Preqin’s Real Estate Online tracks 103 institutional investors with a preference for real estate investment in the CEE region. These investors have an average of $27bn in assets under management.
Real estate investors that include the CEE region as part of their investment focus typically have a higher risk appetite; opportunistic and value added vehicles are the most favoured strategies, with 85% and 70% of investors indicating these preferences respectively. Around half of investors tracked indicate a preference for other investment strategies, such as core (52%), core-plus (50%), debt (53%) and distressed real estate (49%).
As can be seen in the chart above, over half of investors tracked with a preference for the CEE region are based in Europe, with the largest proportion based in West Europe. The US contains the largest proportion of investors headquartered in a single country that target private real estate in the CEE region (37%), followed by the UK (14%).
While the region’s economy has improved gradually over recent years, and private real estate fundraising focused on the region is at its highest since 2008, the region is still exposed to exogenous shocks. The ongoing situation in Ukraine and the issues surrounding the Eurozone could deter some investors from the region as they look to more stable markets. However, close ties between the Central European countries and the larger European economies could see institutional investors with a greater appetite for risk target the region as they look for higher risk investments and their accompanying returns.