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The financial crisis is having a domino effect among real estate players in Central and Eastern Europe: one sell-off leads to other sell-offs, a postponed development plan to a slew of postponements.

Talking about the turbulent situation in the Russian real estate market, Sergey Riabokobylko, senior executive director at Cushman & Wakefield Stiles & Riabokobylko in Moscow, sees the experience of Russia’s financial crisis in 1998 as a touchstone for what approach to take.

'There are people who have gone through the crisis who see it as a further opportunity, as a time and place you can break away from your competition and create some distance from the rest of the pack. That's what some of the more forward-looking players on the market are starting to do,' says Riabokobylko.

He cites AIG/Lincoln, which launched construction in September of its 63,000 m² White Gardens office project in Moscow. Riabokobylko: 'When you look at the rest of the news about the sector it's a little counter-cyclical to start a project at a time like this. But AIG Lincoln has gone through other corrections and downturns and they believe this is the time to deliver the best project on the market. I agree. I think companies like that will have a commanding position when the market turns.'

Staying power

It isn't only the financial crisis which necessitates a longer-term outlook among property developers. There are also specific market trends - where consensus opinion says to look elsewhere - which can provide opportunities for those willing to chart their own course.

After ECE had built three shopping centres on the relatively small Hungarian market there was talk of shifting the company's resources and personnel to more promising locations in South-eastern Europe. Instead the company remained and has been able to catch the latest retail development wave there. As a result ECE is extending its Budapest shopping centre and further adding to its presence in regional Hungarian cities. ECE's agenda includes opening the 30,000-m² Forum Debrecen in a catchment area of almost 600,000 people in November and its fifth Hungarian shopping centre, Arkad Szeged, is projected to begin construction in the Spring of 2009.

Thinking locally

Even much larger markets are subject to questions regarding their continued viability when speculation begins that saturation is being reached. The massive amount of retail development taking place in Istanbul has led some to conclude that the picture is overcrowded, particularly with a significant number of projects still in the pipeline.

The discussion has reached the point of questioning the decision to locate two prominent modern retail malls like Metro City and Kanyon in close proximity to one another in the city's Levent district. But according to Matthew Warner, managing director at King Sturge in Turkey, the issue demands a local perspective.

Warner: 'The wisdom of such choices cannot be seen in a general European context, however, but needs to be looked at in relation to the Istanbul market itself. Taking the example above, these two centres are situated in what has now become known as the modern CBD strip, which runs from Esentepe through Levent to Maslak. It was the very development of the major retail based mixed-use schemes and office towers, in tandem with the opening of the new metro line, that changed the dynamic of the location to what it is today.

'This development redefined the area and was not hindered by any existing complex street structure that brought with it its own retail pattern. The nature of retail experience at Metro City when compared to Kanyon is very different and it might be considered that shoppers today go between the two, much as they would go between Tottenham court road/Oxford street and Bond street/Mayfair in a London West End context, seeking a mix of retail and leisure pursuits.'

One result of the frenzied development process has been that international investors have been attracted to the high-quality investment stock newly available on the Turkish market. For Warner, the development is set to continue, in spite of the economic climate and providing property players do their homework in regard to competition and infrastructure issues. 'At the end of this process there will doubtless be winners and losers. But there will still be opportunity for new development within the retail sector in Istanbul, as key sites that were not previously able to be delivered come to the market,' says Warner.