Property developers and real estate investors are facing increased uncertainty in their construction projects as the Ukraine war and economic sanctions against Russia exacerbate already rising energy costs and a shortage of building materials.

Executives in attendance at Mipim, one of Europe’s largest real estate events held in Cannes, France, on March 15–18, cited concerns over the risks for ongoing projects, particularly in Central and Eastern Europe (CEE), as Russia’s invasion of Ukraine enters its third week. 


The sentiment of CEE countries appears particularly exposed to the Ukraine war headwinds as the conflict’s frontline is inching closer to their borders. Their domestic real estate markets have previously flourished thanks to large inflows of Russian and Asian capital. 

“In all the countries bordering Russia, people will be a bit more careful,” said Henning Koch, the CEO of Commerz Real, the global real estate arm of Commerzbank Group, which has about €35bn of assets under management.

With Russian capital out of the picture following international sanctions, Asian investors who used to be very active in chasing the above-average return on investment yields in the CEE region are also treading carefully. 

“Now with Ukraine, we really don’t know if we will find a solution within six months or if it’s a deep scenario,” says Barkha Mehmedagic, the global head of institutional sales and group treasury at Commerz Real. “Asian institutional investors who were very keen on the Eastern European market in the past because of the yields picking up are now in a paused position and monitoring [the situation in Ukraine].”

The war has also brought pressure to an existing shortage of construction workers in Eastern European countries. In Poland, where Ukrainian workers account for 11% of the construction sector workforce, the outflow of those returning to Ukraine to join the fight is expected to have a significant impact, according to BNP Paribas. 

But its reverberations are felt all along the property development value chain, way beyond the CEE region as the price of production inputs has fallen under increasing pressure. 

Mr Koch says that some developers are likely to face problems with their projects, “in particular if they have already locked in on forward commitments, but have not fixed their costs”.

Energy prices have soared in the wake of the Ukraine invasion, along with the price of key construction materials. 

Amr Soliman, the founder and CEO of Mountain View, one of Egypt’s largest property developers which is currently building three new cities in the country, told fDi at Mipim that the increasing price of steel has made construction a bigger risk factor. 

“Now it’s a big risk because of the supply chain. In Egypt, there is huge demand for construction by the government and private sector. Cement is not as much of a problem for Egypt as we have many cement plants, but the steel prices have become very high, because 30–40% [of our steel comes] from Ukraine and Russia.”

Steel prices in Europe surged by 22% in the week following Russia’s invasion of Ukraine to reach €1160 per ton, according to data from Kallanish Commodities.

Growing prices of key production input add up to an already tight market as the construction rebound that Europe experienced in 2021 has already made the sourcing of key building materials including bricks, roof tiles and plastic products even more difficult.