Colliers International sees the construction markets as broadly overheated across the CEE-6 countries right now. Office development sqm as a proportion of total stock is at cycle highs, in the 10%-21% range in the CEE-6 capital cities. It is 10%-28% in the Polish regional cities and at a peak in the industrial sector as well.

 

“We believe overall economic sentiment in the region is a leading indicator (by 6 months) of construction new orders demand. That economic sentiment indicator appears to have passed its recent peak in most of the CEE countries. And examining the top of the last cycle in 2007-08, we found that it was spikes in construction costs and prices that helped define the turn at the peak even before the 2008-09 Global Financial Crisis struck.

 

We found that it is labour shortages in particular that appears to be driving up construction costs and with minimum and average wages looking likely to rise at similar rates to last year in the CEE-6 in 2019, the heat is not abating. Romania and Hungary look to us to have the most profound labour supply and pricing issues, whilst demand growth momentum looks softer in Slovakia and might unfold in the Czech Republic. Bulgaria appears to have the least supply-side worries presently, whilst Poland’s larger and more liquid construction market may help it weather any incipient downturn,” according to CEE Research Specialist Mark Robinson.