The combination of intense competition and low yields in some Western markets is pushing investors toward secondary Central Eastern European (CEE) markets, World Property Journal reports.
As a result, they are facing less competition and are able to negotiate more attractive prices on commercial properties, according to research by Christie + Co and STR Global.
Bucharest (pictured), Sofia and Belgrade are some of the largest cities in the CEE; however, their respective hotel markets are considered “immature” in comparison to their European counterparts.
Lukas Hochedlinger, the Managing Director of Germany, Austria & CEE at Christie + Co. stated, “Through our day-to-day conversations with our clients, it is apparent that investors are keeping an eye on the peripheral markets of Bucharest, Sofia and Belgrade. Western European players in particular are attracted by the cities’ strategic geographical positions, Western style cultures and their highly educated yet affordable workforce.”
The report points out that the hotel markets in Bucharest, Sofia and Belgrade are dominated by privately operated hotels. These account for a majority (61 per cent) share of the market in Bucharest, a 67 per cent share in Belgrade and an 84 per cent share in Sofia.
Mr. Hochedlinger went on to say, “International travelers to any of these cities will have been struck by the lack of international hotel brands. As Bucharest, Sofia and Belgrade are not considered Tier I cities in Europe, they are not high on international hotel groups priority lists and as a result, branded hotels in these cities are scarce.
“However, we expect hotel groups will actively be addressing this shortfall as the economic climate improves and the number of inbound visitors to these cities increase.”
Bucharest, Sofia and Belgrade have all witnessed growth over the past five years, while in Belgrade the environment is now more challenging as the hotel sector is oversupplied.
“All in all”, concludes Hochedlinger, “it is apparent that these cities have a high growth potential; the remarkable growth that these markets achieved in the years prior to the financial crisis demonstrates their fundamental and enduring strengths.”
