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Spending more – growing faster?

Although external sector was the main driver of growth for the EU in the past years, we now expect net exports to take a back seat to consumer spending as the main driver of the economic growth in 2015.

Confidence among EU consumers was set to fall in H2 2014. People were worrying about the lingering regional military conflicts as those in Ukraine and Syria. At the same time, many business leaders warn that the weak sales outlook is demotivating them from investing in the EU region.

Germany plays a key role in the region and the German government leads many Eurozone policy makers. Starting from October 2014, the country again witnesses the strong month-on-month growth in spending resulting from very low unemployment and increasing income expectations, compared to other countries. Growing consumption in Germany expects to boost also the growth of its important trading partners as Poland, the Czech Republic, Romania etc. However, this over-reliance on Germany is starting to become an issue for some EU countries. The worsening of situation in Germany means reducing in exports for those countries and consequently leads to slowdown of their economies. That is why growing private consumption together with improving labor conditions are becoming the key growth driver also in the CEE region.

Principal data in Russia, Turkey and Ukraine in 2013

The East is coming – but when?

Russia, Turkey and Ukraine represent countries with a promising future potential. The rapidly growing purchasing power of their populations is catching the attention of potential foreign investors. But at the same time political conflicts, like those that stress Turkey and Ukraine nowadays, can shatter investor confidence. Ukraine is still suffering from the global financial crisis and political instability showing an extremely low level of investment attractiveness. Russia continues to be attractive for institutional investors, although the country is still underestimated by many of them, mostly because of lack of transparency on the market. However, those foreign investors who had already been active on the Russian market continue to show investment interest. Talking about Turkey in general, it is definitely one of the most promising emerging economies in the world. Confidence in Turkey's property market has risen at the beginning of 2014, mostly due to the growing national economy. Turkey's economic expansion, attractive investment climate and maturing real estate market build a strong foundation for institutional investment. Already now a number of global investors show interest in the country, especially in the retail and the hotel segments.

Regional shopping centres completions in Poland 2010-2013, 1000 sqm GLA

Poland's Retail continues growing

In 2013 the shopping centre segment in Poland grew by about 700,000 sqm GLA. Construction activity remains high. The market was seeing completions going forward in the largest Polish cities. The leading cities in terms of completions were Poznan, Warsaw, Krakow and Katowice. Extension of existing centres remains one of the key and most prospective trends, especially with regards to the older schemes. More and more modern retail space is to be built in the smaller B and C cities. A suitable example is the recently opened shopping centre Trzy Korony (56,000 sqm GLA) in Nowy Sacz (about 84,000 inhabitants). Both the vacancy rates as well as rents in major Polish cities remained relatively stable in 2013.

Office stock in the European Capitals at the end of 2013 (mln sqm)

The diversity in key European Office Markets

In the last years the office stock across Europe has increased significantly. From the two dominant property market sectors on the CEE market, office is still out-performing retail. Although the office markets of Moscow, Warsaw and Prague are generally viewed in a favourable light, high vacancy rates continue to be a black cloud on the horizon. At the same time, attractive office prime yields help to keep foreign investors' interest in these cities. In 2013 the total stock of A+B office space in Istanbul was about 4.1 m sqm GLA. However, increasing office stock results in rising vacancy rates for class A office buildings in CBD of Istanbul.