CEE Real Estate Navigates Global Headwinds, with Croatia Shining as a Bright Spot

The Central and Eastern European (CEE) real estate market is proving its mettle, demonstrating remarkable resilience and adaptability in the face of global economic uncertainties. This was the key takeaway from the Zagreb Property Forum 2025, where CBRE experts Gábor Borbély, Head of Research CEE, and Jana Jovanović, Head of Research SEE, painted a picture of a dynamic market undergoing a period of adjustment but ultimately remaining robust.

"The broader economy is showing relative stability in this region, despite all the headwinds in the manufacturing industry across Europe. This favours both the property investment and development markets, which are performing reasonably well in 2025," Borbély stated, highlighting the overall health of the region.

„Investment activity in the CEE region picked up in 2024 and experienced a strong start to 2025. The market was put on a roller coaster in April due to the global trade tensions, but activity is improving again after summer and the overall volume can be up by 15-20% compared to last year - when talking about the entire CEE region.

Borbély added, that industrial sector continues to attract strong investment volumes, though a cooling market is evident on the occupational side. Offices are experiencing a revival, with companies seeking to enhance the workplace experience. Retail benefits from a strong consumer sentiment, with retail park developments gaining prominence. The hotel sector is celebrating a milestone, anticipating surpassing 2019 benchmark levels of international tourism in the CEE region.

Looking ahead, Borbély emphasized the CEE market's inherent resilience. "The region faces challenges as a whole and all countries have their various nuances, but in general this is a resilient region due to its long-term potential, hence we always find a way how to move forward," he stated.

Croatia: A Market of Opportunity

Within this broader CEE context, Croatia emerges as a particularly bright spot, exhibiting robust economic growth and attracting significant investor interest. Jana Jovanović, Head of Research SEE at CBRE, emphasized the country's favorable outlook, highlighting its strategic location and diverse economic landscape.

„Croatia's economy has demonstrated remarkable resilience, primarily fueled by the service sector, particularly tourism, which significantly contributes to GDP and employment. This is further bolstered by strategic investments in infrastructure. Croatia is experiencing a period of robust economic growth, driven by strategic investments in infrastructure, a favorable geographic position, and a diverse economic landscape," Jovanović noted. "This positive trajectory is creating significant opportunities for investors and developers across various real estate sectors."

Key infrastructure projects, such as the expansion and modernization of the Port of Rijeka, improvements of railroad, and the expansion of the highway network, are enhancing connectivity and boosting trade, logistics, and supporting tourism. Croatia's strategic location within close proximity to key EU markets offers a competitive advantage, particularly in attracting industrial investment..

This has translated into a dynamic investment landscape. The Croatian market is attracting growing interest from regional investors, fueled by a stable economic environment and well-performing assets. Institutional capital is also increasing, with new funds actively seeking investment opportunities.

Sector-Specific Insights in Croatia

Examining the key sectors within Croatia, a compelling picture emerges. While office and retail assets are currently in high demand, emerging sectors like logistics show significant growth potential.

• Office Market: Dominated by Zagreb, the office market faces a unique challenge: a severely limited supply of new office space, resulting in a vacancy rate below 3% and intense competition, especially in the Central Business District (CBD). Renewals are the primary driver of demand. However, relief is on the horizon, with 80,000 square meters currently under construction and 150,000 planned, starting in 2026. This new supply, driven by factors like sustainability and additional amenities, is expected to trigger relocations and attract larger international companies. Low vacancy and rising costs pose challenges for developers and tenants, impacting rental prices and fit-out costs. The market anticipates rising rents and vacancy rates as new supply comes, leading to a more balanced market.
• Industrial Sector: Croatia is poised to become a major logistics hub due to its strategic location and developing infrastructure. While the existing industrial real estate market is moderate in size, substantial growth is anticipated, including over 100,000 square meters coming in 2025, followed by 120,000 square meters in 2026. The country's appeal lies in its potential for development, driven by secured locations and more efficient regulatory processes, attracting international investors. Despite some challenges like higher costs, the market is seeing confidence from retail tenants and a surge in demand from the logistics sector. While current demand is slightly impacted by global uncertainties, the long-term growth drivers remain strong, making pre-lease agreements crucial for investor confidence. The outlook for 2026 is positive, with expectations of increased opportunities for landlords as occupier sentiment improves.
• Retail Sector: The Croatian retail market is undergoing a significant transformation. Shopping centers currently dominate the modern retail landscape, but retail parks are experiencing rapid growth, with over 90,000 square meters currently under development, due to consumer demand for convenience and larger spaces. In response, shopping center landlords are investing in renovations, improving the shopping experience by focusing on entertainment, diverse gastronomy offerings, and overall appeal. This dynamic market presents opportunities for investors, developers, and retailers who understand the key trends and adapt to evolving consumer needs.

• Hotel Sector: The Croatian hospitality sector is thriving, driven by its popular coastline, islands, and historical sites, attracting millions of tourists. While experiencing overall positive trends in arrivals and occupancy, regional performance varies, with Dalmatia and Istria showing strong results, while Zagreb faces challenges. Key demand drivers include the seaside, with Istria excelling due to its off-season appeal and luxury offerings attracting high-end clients.

The industry faces challenges like high construction costs, staff shortages, and seasonality. Mitigation strategies include extending the season through diverse offerings like wellness facilities and conferences. Success hinges on differentiation through unique concepts, sustainable practices, and innovative service. Hotel-plus-residential developments also present a compelling opportunity. Overall, the Croatian hospitality sector is poised for continued growth through innovation, addressing challenges, and capitalizing on opportunities like luxury tourism and eco-tourism.

Challenges and Outlook

Croatia's real estate market is experiencing a dynamic period of evolution and growth, underpinned by strong fundamentals and strategic advantages. While challenges persist, particularly concerning the seasonality of certain sectors and global economic uncertainties, the overall outlook for Croatia remains positive. The market is demonstrating resilience and adaptability, fueled by innovation and strategic investments. Pre-lease agreements are increasingly crucial, particularly in the industrial sector, demonstrating investor confidence and the expectation of continued growth. Croatia is actively positioning itself as an important player in the CEE real estate landscape, poised to capitalize on its inherent strengths and navigate future challenges with proactive strategies.