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A return to normal? Deloitte survey heralds a return to pre-pandemic performance for Central Europe’s real estate industry

Deloitte Real Estate Confidence Survey for Central Europe 2021

Warsaw, 2021-03-23

  • There are widespread expectations for a more positive economic climate
  • Nearly half of respondents anticipate increases in real-estate market activity (46%) and transaction volumes (48%) across the CE region
  • The residential and industrial sectors are seen as the most resistant to the pandemic’s impact

A new report from Deloitte Central Europe on the opinions of real estate professionals shows that developers, investors and specialist market advisers from across the region are looking forward to the positive boost of a post-pandemic economic ‘bounce’.

The report comes ten months after the publication of the 2020 issue, which included the outcomes of two phases of research. The first was from January 2020, immediately before the COVID-19 outbreak. The other was carried out during April 2020 as the economic realities of widespread shut-down were sinking in.

There were major differences in sentiment between the two phases in 2020. Reassuringly, the findings from January and February 2021 are much more closely aligned with the positive sentiments of January 2020 than with the overwhelmingly negative views of respondents in April 2020.

According to Deloitte Partner Associate, Leader of Real Estate Advisory Team, Dominik Stojek,

“In contrast with the negative sentiments expressed in the first months of the pandemic last year, respondents now anticipate a far more positive economic climate. They are looking forward to increasing market activity levels, higher transaction volumes and the improved availability of debt finance. In short, there has been a return to the kind of optimistic outlook we saw before the pandemic broke out – and, in many cases, more optimistic.”
This statement is illustrated by the following key findings:

  • In Q2 2020, no respondents at all expected the region’s economy to improve during the year ahead and just 4% believed it would remain the same. In Q1 2021, 39% anticipated improvement and 37% expected no change in 2021.
  • Just 3% of respondents in Q2 2020 expected the availability of debt finance to increase, and 75% were predicting a decline. In Q1 2021, 24% were looking forward to an increase and 47% anticipated no change.
  • In April 2020, 88% of respondents said they expected overall market activity to decline during the months ahead, with just 5% predicting an increase. Pessimistic responses accounted for just 21% of responses in Q1 2021 (close to the 18% reported in Q1 2020), and 46% of respondents expected activity levels to increase.

Impact on strategy

The 2020 Deloitte Real Estate Confidence Survey for Central Europe confirmed that the pandemic caused almost 81% of developers, 75% of investors and 76% of advisers to make changes to their 2020 strategies. The first group has adjusted to the new reality since then, however, as of Q1 2021, the investors’ group showed only a slightly shrinking share of respondents who say the pandemic has caused them to change strategy.

Investment options

Most market practitioners expect an increase in the availability of investment products, continuing a trend that started in Q2 2020, when 53% of respondents expected choice to grow (up from 36% in 2019). In 2021, this proportion had increased further, up by 5 percentage points to 58%. This view was particularly widespread in Poland, where 72% anticipate growth in the availability of investment products.

Developers: commercialisation as the biggest challenge

Nearly half (45%) of developers now regard commercialising projects as the biggest challenge they face, up from 38% in Q2 2020 and contrasting strongly with the 6% holding this view in 2019 and Q1 2020. The perceived difficulty of receiving project finance has fallen significantly since Q2 2020, down from 35% of responses to 18% in Q1 2021.

Following the collapse of positive expectations during the pandemic, in Q1 2021 13% of developers were expecting margins to increase in the months ahead (up from 0% in the previous edition) with 35% expecting them to deteriorate. This is the most positive finding in all editions of the Deloitte CE Real Estate survey.

Investors: a growing focus on new opportunities

Investors have become noticeably less conservative since Q2 2020, when 63% were expecting to focus on portfolio management. This figure had fallen to 53% by Q1 2021, balanced by growth in those seeking new investments (up from 31% to 41%). An increased proportion is also expecting better investment efficiency: in Q2 2020, 56% were expecting this to decline, with just 13% anticipating improvement. Now, this picture has changed significantly, with just 19% still expecting efficiency to fall and 34% anticipating an improvement.

Advisers: more positive about investment efficiency

Advisers, too, are more positive about their clients’ investments than they were in April 2020, with close to a third (31%) anticipating efficiency improvements, up by 19 percentage points from nine months earlier. Advisers also expect there to be a return of interest in new markets among their clients to pre-pandemic levels (22% in 2021, compared with 25% in 2019 and 0% in Q2 2020).

Market sectors: the winners and losers

Respondents believe that the residential and industrial/logistics sectors are the most resistant to the negative effects of the pandemic. There is also a widely held view that retail and the hotel, tourism and leisure sectors will be the most impacted.

“An important economic impact…”

According to Deloitte Partner, Leader of Real Estate & Construction Sector in Central Europe, Maciej Krasoń

“History shows that most of the outcomes predicted in previous editions of our surveys have subsequently been proved correct by market developments. After the predominantly negative expectations of nine months ago, many market professionals are now seeing the light at the end of the tunnel. We believe that their expectations will have at least as much influence as hard economic data on their investment decisions throughout 2021. The views described in the report will therefore have an important economic impact throughout the year ahead.”

You can download the full report here.

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