Real estate is a long-term business so many of the challenges are long term in nature too. The biggest of which is working towards net zero. In Romania, we are installing photovoltaics across our portfolio producing enough green energy on site to satisfy 25-30% of our energy consumption needs. Rolling this type of initiative out across the rest of our portfolio will be part of our 2024 sustainability strategy.
In 2024, the EU is introducing new sustainability reporting standards – which require companies like ours to be audited on our performance, so we and others need to be ready for this. I hope that this will lead towards better harmonization of standards for the real estate industry which vary widely across the EU.
We may also see further fall out across the industry in 2024 as overleveraged players seek refinancing at much higher interest rates. Hopefully rates have now peaked, and markets are stabilizing. This will make financing costs more predictable, so the industry may be able to refinance at lower levels in the next 12 to 15 months which would be very positive.
The CEE Market will continue to hold good opportunities
Average GDP growth in the CEE is set to be double that of the EU 27 states in 2024. That bodes well for NEPI Rockcastle in terms of delivering continued performance from our portfolio, which has already seen double digit increases in both turnover and net operating income – at 14% and 23% higher respectively in the nine months to September 2023, compared with the same period of 2022.
We see good opportunities for the business, though perhaps at a slower rate of growth than we have delivered in the past 24 months. In our markets, the consumer has proven to be resilient, and we have seen robust growth in retailer sales across our portfolio. Given the solid economic forecasts for our region there is no reason to expect this to change.
Our industry is constantly evolving. In CEE, we have seen an influx of international retailers into our markets, which are becoming ever more attractive due to higher growth prospects and lower operating costs. We expect this trend to continue.
Artificial Intelligence is another challenge ahead. We already have trialled AI in our centres to see how it can help us to maximise operating efficiencies. Rolling these technologies out across our portfolio may, for example, have a dramatic impact on energy performance.
Working together as an industry on sustainable initiatives is a win-win scenario for us, but also for our business partners and communities.
Rüdiger Dany is CEO of NEPI Rockcastle, and member of the ACROSS Advisory Board.