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Rising costs threaten end to economic cycle

Alex Hayes 29 January 2019

Alex Hayes


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Alexander Hayes is currently working as a journalist for Eurobuild Central & Eastern Europe magazine. Originally from the UK, he moved to Poland in 1995 and has been working in real estate for over four years. He has a BA in english literature from the University of Buckingham.

Rising costs threaten end to economic cycle
Jonathan Cohen, the director of building consultancy services in Poland
CEE REGION Office development as a proportion of total stock now stands at 10-21 pct across the six capital cities of the CEE region and has reached 10-28 pct in Poland’s regional cities.

Colliers International claims in itsCEE construction markets: The Icarus effectreport that the market has reached its peak.

“Icarus flew too near to sun, melting the wax on his wings and he plunged into the sea. We believe this is the correct analogy for construction markets in CEE, currently. Economic sentiment appears to have recently passed its 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,” claims Mark Robinson a CEE Research Specialist at Colliers International.

Labour costs are driving up construction costs with Romania and Hungary having the most severe labour supply and pricing issues. Bulgaria appears to currently have the fewest supply-side worries, while Poland’s larger and more liquid construction market may help it weather any coming downturn.

“In contrast to 2008 (where despite a fall in commercial real estate investment levels the economy/employment statistics were buoyed up with EU infrastructure investment and BPO/SSC investment), following Brexit and the EUs reduction and reallocation of structural funds, Poland may see reduced infrastructure spending, economic stagnation and as a result overcapacity in the construction sector. This would be further compounded by Polish and Ukrainian workers returning from Western European markets,” says Jonathan Cohen, the director of building consultancy services in Poland.

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