Tuesday, 6 October 2026
Central and Eastern Europe is facing a more demanding economic environment as weaker European demand, high energy costs and demographic pressures challenge some of the advantages that powered the region’s expansion over the past two decades. At the same time, artificial intelligence and automation are opening another route to growth by allowing companies to increase output without relying on continually expanding workforces.
The World Bank’s latest assessment of Europe and Central Asia, released on 6 October, points to weaker conditions across the region as businesses contend with uncertainty and a less supportive European economy. The slowdown is particularly relevant for Central Europe, where manufacturing, exports and investment remain closely connected to demand from Germany and other major EU economies.
The European Commission is also expecting subdued expansion this year, forecasting growth of around 1.1% for the EU and 0.9% for the euro area. Energy remains an additional concern. Central and Eastern European economies are particularly exposed to changes in electricity and fuel costs, affecting household spending as well as the competitiveness of manufacturing and other energy-intensive industries.
For commercial real estate, these economic pressures are changing how companies evaluate locations. Industrial occupiers increasingly have to consider not only rents, transport connections and labour costs but also electricity availability, grid capacity and the long-term operating efficiency of buildings. These factors are becoming especially important for advanced manufacturing, logistics, data centres and technology-related investments.
Labour represents another constraint. Ageing populations and shrinking working-age cohorts mean that the region cannot depend indefinitely on expanding employment to generate economic growth. Employers have already responded through automation and digitalisation, and the next stage could involve much wider adoption of AI across manufacturing, services, logistics and corporate operations.
World Bank research indicates that greater use of digital technologies and AI-enabled tools could generate meaningful productivity improvements in countries including Poland, Romania, Bulgaria and Croatia. The significance for CEE is considerable: companies able to produce more with the same or smaller workforces could partially compensate for worsening demographics while maintaining the region’s competitiveness as wages converge towards Western European levels.
However, the transition also creates a new infrastructure requirement. AI needs computing power, and computing power requires electricity, data centres and high-capacity digital networks. Greater automation in factories similarly depends on reliable energy, modern buildings and skilled technical employees. Technology therefore does not remove CEE’s infrastructure challenges; in many cases it makes solving them more urgent.
That could gradually alter investment patterns across the region. Cities and industrial locations offering available power, strong grids, digital connectivity and skilled labour may gain an advantage over locations competing primarily through inexpensive land and lower wages. For developers, access to electricity could increasingly become as important as motorway access was during the previous generation of logistics and industrial expansion.
The shift also creates opportunities across real estate. Demand for data centres and supporting infrastructure is expanding the relationship between property and energy, while manufacturers investing in automation require increasingly sophisticated production facilities. Modern offices may also benefit as companies seek buildings capable of supporting technology-intensive operations while competing for a smaller pool of highly skilled workers.
CEE is therefore confronting more than a temporary economic slowdown. The region’s traditional growth formula, competitive labour, manufacturing investment, European integration and nearshoring, is evolving. Energy security, infrastructure capacity and productivity are becoming more important determinants of where capital is deployed.
AI will not remove the economic pressures facing Central and Eastern Europe, but it could help companies operate more productively in an increasingly labour-constrained market. For property investors and developers, the resulting transition could be equally important: the next generation of CEE investment may increasingly follow power, connectivity and technological capacity rather than cheap labour alone.
