Prospects of the Real Estate Markets in Central and Eastern Europe

Experts from Colliers analyzed the largest economies in Central and Eastern Europe (CEE), providing an overview of 2024 trends and a forecast for 2025. The study includes countries such as Bulgaria, the Czech Republic, Hungary, Poland, Romania, and Slovakia.

In 2024, the CEE real estate market experienced strong consumer demand, benefiting the residential, retail, and tourism sectors due to a vigorous recovery. Despite heightened global uncertainty, investor sentiment towards the CEE region remained positive, continuing to attract significant portfolio investment inflows.

At the same time, the industrial sector faced challenges due to the sluggish economic recovery in Western Europe, particularly in Germany, which has been struggling. Geopolitical risks and a global shift towards protectionism exacerbated these issues. However, these challenges also present opportunities for the CEE region to strengthen its position in global supply chains.

2024 Trends and 2025 Forecasts

Offices

2024. The CEE office markets in 2024 were characterized by historically low levels of new supply across all major office markets in the six countries, including their capitals. In Bucharest, there was virtually no new supply in the first three quarters, while cities like Warsaw, Prague, and Bratislava experienced a sharp decline compared to the previous year. Lease renewals dominated transactional activity across the region, with a focus on quality, as prime properties achieved premium rental rates and high occupancy.

2025. Colliers experts expect that in 2025, hybrid work will continue to influence tenant demand, prompting companies to optimize office spaces. The demand for smart office solutions, such as remote access control and occupancy analytics, will remain strong. ESG-compliant buildings will remain a key focus. Construction activity will remain limited as overall demand appears sluggish, but interest in high-quality buildings will persist, potentially leading to a "two-market" dynamic in many areas of the CEE region.

Investments

2024. Investment markets showed different recovery patterns across CEE countries in 2024. Romania nearly doubled its transaction volume compared to the previous year, while Poland rebounded with strong retail portfolio sales. The Czech market maintained 2023 levels, but investors continued to show increasing activity across the region. Prime bond yields showed signs of bottoming out in most markets, with early signs of recovery in Poland and the Czech Republic.

2025. Investment activity is expected to continue growing, particularly in Poland and Slovakia. Regional investors are expected to play an increasingly significant role in 2025 amid declining foreign presence. Experts anticipate that lower interest rates will fuel greater optimism, while the emphasis on ESG compliance will make relevant core assets more attractive. A key development for the region is potential REIT legislation in Poland, which could transform the market there and inspire other countries to follow suit.

Industrial Sector

2024. The industrial sector across CEE experienced a slowdown. Poland saw a significant decline in new construction, as did other countries in the region to some extent, following a notable drop in demand. Rental growth stabilized across the region, particularly in the Czech Republic and Romania. Vacancy rates increased in most countries, though at varying rates, depending on local market conditions.

2025. The stabilization of construction costs is expected to pave the way for new industrial developments, though demand will remain regionally varied. Some countries may see a decline in leasing demand due to a weaker external environment, while others may experience stabilization. Prime locations and transportation corridors (particularly in Hungary and Poland) will continue to attract the majority of investments. Colliers analysts also foresee increased interest from Asian companies looking at logistics or manufacturing opportunities in much of the region.

Retail

2024. The retail and tourism sectors showed resilient recovery across CEE countries in 2024. Retail sales surged in Romania and Hungary, while shopping centers remained active with new developments. Poland attracted well-known international brands. The tourism and hospitality sector also expanded alongside this growth, with Romania reaching historical highs and Hungary and Bulgaria experiencing significant increases in both domestic and international visitors.

2025. Retail parks will continue to dominate the landscape of new projects, reflecting consumer preferences for convenience/proximity and allowing developers to maintain a lower financial footprint. Large traditional retail developments will remain scarce, as major urban markets are already saturated. However, some gaps may still be filled in specific areas over the next few years. Meanwhile, discount retailers and CEE-based brands are aggressively expanding in the region. There is also a noticeable increase in CEE brands looking to expand into other countries within the region.

Residential

2024. Residential markets remained resilient despite high interest rates. Hungary saw substantial transaction growth, while Romania reported record-high purchase intentions. Supply constraints were a common theme, with building permits in Bucharest reaching historic lows. Poland and the Czech Republic saw a notable shift towards the institutional rental sector.

2025. The positive momentum from 2024 is expected to continue, as rising housing demand is likely to drive price growth. Additionally, high-quality projects will continue to command premiums, while outdated properties will lose appeal.

CEE Economic Development

According to Colliers estimates, the region's average GDP growth rate was only 0.6% in 2023, but accelerated to 1.8% in 2024. CEE economies benefited from declining inflation, which fueled household consumption recovery amid rising wages. Additionally, weaker inflationary pressure allowed regional central banks to cut interest rates, even before the European Central Bank eased monetary policy.

Further interest rate cuts are expected in CEE in 2025, though each step is likely to be more modest than previous reductions. Inflation is expected to remain under control, but the potential for significant further declines is limited, particularly due to rising service and food prices. As a result, central banks are expected to take a dual approach: supporting economies with lower financing costs while remaining cautious about the risk of strong labor markets reigniting inflationary pressures.

Colliers forecasts that the region's average GDP growth will reach 2.8% in 2025. All CEE countries are expected to achieve at least 2% growth, with Poland leading the region at 3.5%. Growth will be driven by increasing investments, partially co-financed by EU funds, which CEE countries have been effectively utilizing. These investments are expected to recover following a weaker absorption period caused by the transition to a new EU budget cycle. However, external challenges remain the primary concern for the region.

Germany’s struggling industrial sector, particularly its automotive industry, continues to limit the potential for a stronger recovery in the CEE region due to its close trade ties with the eurozone’s largest economy. The economic openness of the CEE region and its integration into global supply chains make it particularly vulnerable to international developments. Factors such as the war in Ukraine, the Middle East conflict, tensions between China and Taiwan, and potential decisions by Donald Trump create uncertainties for the region.

Nevertheless, CEE has demonstrated resilience in the face of various challenges, quickly adapting to changing circumstances. As the global economy trends towards greater protectionism, the CEE region could benefit from opportunities in the shifting global landscape, increasing its share in world trade and attracting new investments.