Belgrade 2H 2011 2010 Belgrade || 1H 1H 2010
Real Estate
Market & Trends Outlook
For further market information, please contact
Zana Sipovac Head of Valuation and Investment Advisory zana.sipovac@leroy.rs
Mitar Bulatovic Head of Commercial Brokerage Services mitar.bulatovic@leroy.rs
T + 381 11 26 32 300 F + 381 11 32 84 647 17, Cara Urosa Street - Belgrade office@leroy.rs www.leroy.rs
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Table of Contents ECONOMY OUTLOOK
2
Table – Economy indicators
3
OFFICE MARKET & TRENDS
54
Chart – Belgrade office stock
5
Supply
Chart – Belgrade office delivery, semiannual
5
Demand
5 65
Chart – Belgrade office vacancy rates
6
Vacancy
6
Chart – Average rent levels
7
Rents
Chart – Office yields
7
Pipeline
6 7
Table – New office deliveries & pipeline projects
7
Forecast
7
RETAIL MARKET & TRENDS
9
Supply Demand Vacancy Rents
9 119 10 12
9
Chart – Structure of retail sale in Serbia Chart – Shopping center stock in Belgrade
10
Chart – Big-box stock in Serbia & Belgrade
10
Table – New retail deliveries
11
Table – New high street tenants
11
Chart – Prime rents in Belgrade
12
Chart – Shopping center rents in Belgrade
12
Chart – Indicative retail yields
12
Pipeline & Announced
10 12 11 12
Forecast
11 13
INDUSTRIAL MARKET & TRENDS
13 15 13 15
Table – Projects under construction
13
14 16 14 16
Chart – Modern industrial & logistics stock in Serbia
15
Chart – Modern logistics stock in Serbia
15
Rents
14 16
Chart – Industrial & logistics construction permits issued
Pipeline & Forecast
15 17
Supply Demand Vacancy
in Serbia
16
Chart – Industrial & logistics construction permits issued 18 19
in Belgrade
18 19 19 20
Chart – Modern warehouse rents in Belgrade&wider area 16
19 20 19 21
Chart – Number of constructed apartments in Serbia &
Announced
22
Chart – Number of constructed apartments in Belgrade
Forecast
19 22
municipalities
19
Chart – Structure of new apartments in Belgrade
19
RESIDENTIAL MARKET & TRENDS Supply Demand Pricing Developed & Under construction
16
Belgrade
19
Chart – Residential construction permits issued in Serbia & Belgrade
20
Chart – Residential construction permits issued in Belgrade municipalities
20
Table – New residential deliveries & under construction
21
Chart – Average asking prices in Belgrade municipalities 21 Chart – Average asking rents in Belgrade municipalities
21
Real Estate Market & Trends Outlook | 1
1H 2011
Economy
Outlook Since the beginning of the year, the Serbian government
has
faced
significant
structural
Since the start of recession, the biggest challenge has been to stop negative trends in the labor market. Labor force survey from April indicates the unemployment rate of 22.2%, which is a 3% increase
problems related to a rising inflation, unemployment
since October. Stabilization of the labor market has not been reached
and
yet, and this problem will continue to be the biggest challenge
the
budget
deficit.
The
unsuccessful
through 2011.
privatization of the national telecommunication company “Telecom Serbia” has increased the
The inflation in June 2011 amounted to -0.3%, while the year-on-year
problem of the budget deficit.
explained by slowdown of food prices growth. However, the
growth amounted to 12.7%. Decrease of inflation pressures can be inflation in 2011 is expected to reach a double digit level (10.3%),
Serbia’s rating according to Dun&Bradstreet has maintained its moderate risk DB4d, where the potential medium-term threat is the budget issue.
which is well above the projected level (6%). Meanwhile, as a response to rising inflationary pressures, the National Bank of Serbia tightened monetary policy and the reference rate in June amounted to 12%. Retail prices of goods and services in June decreased by 0.3%,
The strict austerity measures necessary for structural reforms of the
compared to the previous month. In June 2011, the retail prices were
budget system are not likely in pre-election year. Therefore, the
higher by 12.7% than in the same period in 2010. Retail turnover in
rising budget deficit is planned to be overcome by the issuance of
June 2011 decreased by 16% in constant prices compared to June
euro bonds (EUR 500 millions) and through the commercial loan
2010.
with the guarantee of the World Bank (USD 400 millions). The average net salary in Serbia in June 2011 was RSD 39,322, which According to the Statistical office of the Republic of Serbia, GDP
is an increase of 2.1% in real terms compared to June 2010.
growth in the first quarter of 2011 was 3.4% compared to the same
Considering the period January-June 2011, the average net salary
period last year. The highest growth has been recorded in the
decreased by 2.2% in real terms compared to the same period last
following sectors: transport (9.8%), electricity and gas supply (7.5%),
year.
manufacturing (6.2%), financial and insurance (6.2%), while the largest decline has been in the construction sector (2.9%).
In the field of European integration, despite certain issues regarding the Kosovo question, the EU candidate status will probably be
Industrial production continued with growth and in June recorded
granted to Serbia by the end of current year. This improvement in the
3.3% increase compared to the same period last year. In January-June
field of European integration will certainly affect the economic
2011 industrial production rose by 4.8% compared to the same
prospects of the country.
period in 2010. In June 2011 the highest growth was recorded in the mining sector (17.8%), then the sector of energy and gas (13.3%) and
New estimates for net FDI in 2011 are USD 2 billion, which is far
manufacturing (0.5%).
from the projected level of USD 4 billion. The reduced level of net FDI can be explained by the unsuccessful privatization of majority
Decline in the construction industry recorded in the Q1 2011 (2.9%)
stakes of the national telecommunication company “Telekom
has been reduced compared to 2010. Recovery in the construction
Serbia”. In the first six months of 2011, the largest investment was the
industry depends greatly on the government initiative to start major
acquisition of the local retail chain “Maxi” by the Belgian “Delhaize
infrastructural developments.
Group” for the amount of EUR 930 million. The largest FDI inflow in 2011 is expected in the retail and manufacturing sectors.
Real Estate Market & Trends Outlook | 2
Indicators GDP (EUR bn) GDP per capita (EUR) GDP (constant prices yoy %) CPI (average, yoy %) Central bank reference rate Monthly wage, nominal (EUR) Unenmployment rate (%) Budget balance/GDP (%) Current account balance (EUR bn) Current account balance (% of GDP) Net FDI (EUR bn) FDI (% of GDP) Gross foreign debt (EUR bn) Gross foreign debt (% of GDP) Exchange rate to EUR avg
2008
2009
2010
2011F
2012F
32.7 4,443 3.8 11.7 17.80 560 13.7 -2.6 -7.1 -21.6 1.8 5.6 21.8 66.7 81.49
28.9 3,943 -3.5 8.4 9.50 470 16.1 -4.5 -2.1 -7.2 1.4 4.8 22.8 78.9 94.05
28.6 3,917 1.8 6.3 11.50 462 20.0 -4.7 -2.1 -7.3 0.9 3.0 23.8 83.3 103.12
33.5 4,607 2.7 12.5 9.50 526 19.5 -4.5 -2.8 -8.3 2.0 6.0 26.0 77.7 101.00
37.3 5,150 3.5 7.9 8.50 574 18.8 -3.9 -2.9 -7.8 2.0 5.4 29.0 77.8 101.50
Source: UniCredit Research
Forecast Inflation will continue to be the biggest challenge in 2011. The estimated inflation of 4.5% with deviation of
1.5% has already
exceeded. According to "Dun & Bradstreet�, the increase of food prices and unfreezing of salaries and pensions in the public sector will increase inflationary pressure in 2011; the increase of the budget deficit is a potential medium-term threat for the country rating. The projected GDP growth in 2011 is 3%. According to the IMF forecast, a strong GDP growth is expected from 2012, indicating 4.5% growth in 2012 and 5.5% in 2013. However, estimated growth is likely to be lower than expected. Considering the real estate industry in Serbia in the light of current economy, the industry will continue to downsize in 2011. Despite negative tendencies, retail takes the lead in the sector rankings. The reduction in the lending capacity of banks in real estate continues to put a limit on the number of potential investors.
Real Estate Market & Trends Outlook | 3
Real Estate Market & Trends Outlook | 4
1H 2011
Office
Market & Trends After a large increase in vacancy rates in the first half of 2010 coupled with substantially depressed
new developments are located in the area of New Belgrade (CBD – 57% and Wider Center – 43%).
tenant demand, performances of the office market
After a period of intensive supply, the last 12 months have brought a
remained subdued. Occupier activity and rent levels
reversal. The supply pipeline has been postponed while new
are fairly stable compared to year-end.
12 months the market has experienced zero delivery.
Slow growth prospects and instability in the labor market together with rising unemployment, question the time of office market recovery. The postponed new supply brought certain stabilization, but we are
speculative construction is almost suspended. Therefore, in the last
The postponed projects, currently under construction, will bring additionally 53,000 sq m of GLA of speculative space. However, it is still uncertain when these buildings will be introduced to the market. Development completions are expected to be low over the next two years. With limited new supply and moderate demand we will see slow but steady absorption of the vacant space in the next period.
cautious as demand is still low as well as
Belgrade office stock
predictability of the economic environment. In the
600,000 500,000
delivery.
400,000
Supply
Sq m of GLA
last 12 months the market has experienced zero
300,000 200,000 100,000 0
As relatively immature, the office market in Belgrade was
2004
2005
2006
2007
2008
2009
2010
1H 2011
2H 2010
1H 2011
characterized by average delivery of 60,000 sq m of GLA, which affected a comparably low vacancy levels during the period of 20032009. Many speculative developments were commenced during the
Total
Class A
Class B
Source: LeRoy Research
economic expansion in 2007-2008. The highest delivery of 70,000 sq Belgrade office delivery, semiannual
m of GLA was recorded in the second half of 2008 causing, for the first time, a double digit vacancy level for the new class A
50,000
developments.
contemporary office space with the delivery of a few large scale developments both in the class A and class B segment, bringing the total office inventory (class A&B) to 610,000 sq m of GLA, which is 15% growth in total stock. Office deliveries scheduled for the second half of 2010 have been postponed.
Sq m of GLA
The first half of 2010 saw a record level of 80,000 sq m of GLA of
40,000 30,000 20,000 10,000 0 2H 2007
1H 2008
2H 2008
Total
The new class A developments delivered in 2010 amounted to 50,000
1H 2009
Class A
2H 2009
1H 2010
Class B
Source: LeRoy Research
sq m of GLA, while the class B amounted to 30,000 sq m of GLA. All
Real Estate Market & Trends Outlook | 5
Demand
increased vacancy is recorded also within lower quality class B and C
Belgrade office market saw a significant saturation caused by
buildings and secondary locations, since many tenants have decided
reduction in take-up. The past 6 months have not been easy,
to relocate.
following a similar trend to the previous year with continued occupier uncertainty and limited market activity. The fundamentals in the occupier market are weak, particularly because of the high unemployment rate.
The new supply of 80,000 sq m of the contemporary class A & B office space in the first half of 2010, substantially raised the overall vacancy which amounted to 25% at the year-end. The postponed delivery of a few projects resulted in slow absorption of the available
The market activity was mainly supported by small to medium size transactions, but unlike previous 12 months we noticed increase in expansionary led requirements. Relocation requirements and lease renegotiations are still an active segment of demand. In the first six months of 2011 we noticed stable demand compared to year-end. Recorded take-up in 1H 2011 is between 18,000 and 21,000 sq m. The banking sector particularly registered a positive demand and
office space and the overall vacancy rate decreased by 2% during the first half of 2011 to 23% (22% class A and 25% class B). Vacancy rate is still very high and taking into account the current demand, a considerable drop in the vacancy is not likely during 2011. On the other hand, we do not expect a further increase in vacancy rate, since the announced office deliveries for 2011 will probably be delayed.
appeared among larger occupiers in 2010. In the first six months
Office vacancy rates
there has been a change in the structure of demand. Unlike banking sector that dominated throughout 2010, communication/media, IT
30.0%
and pharmaceutical/medical sector were the main occupiers in the
25.0%
first six months of 2011.
20.0%
A typical demand is oriented to smaller and medium size premises
15.0%
between 100 and 300 sq m. Almost 70% of all transactions referred to
10.0%
the surface up to 500 sq m, while only 30% of transactions referred to
5.0%
the larger space (above 500 sq m). The demand is predominantly
0.0%
focused on the New Belgrade area, while only 15% of lease
2005
2006
2007
2008
2009
2010 1H 2011
transactions relate to offices in the downtown area. Class A
The recovery in demand will be slow, and rising economy uncertainty
does
not
contribute
to
strengthening
Class B
average
Source: LeRoy Research
business
environment. Economic sentiment within the country is still low, while a potential deepening recession in EU doubts the pace of
Rents
recovery. At the local level, the flexibility of landlords, offering more favorable lease terms, rent free periods or space fit-out, is aimed at
The rents seem to have been mainly stabilized during 2010, with only
stimulating the demand. Although without the increase in number of
slight downward correction of approximately 2%. The headline office
expansionary led requirements, the office market recovery cannot be
rents for the prime stock have remained stable, while corrections
expected. Despite the increase of expansionary demand in the last 6
have occurred for space in the non prime areas. The landlords are
months, the demand level is still historically low and as a result there
generally reluctant to reduce the rental levels and they are providing
still remains unpredictability of the short term trends in the market.
increased tenant incentives to safeguard the rent levels, such as fit-
During 2011 companies will continue to look for relocation and this
out contributions and rent free periods. The largest incentives have
will generate a larger amount of gross take-up.
been available for large tenants.
Vacancy
The prime class A rents stabilized to EUR 14-15.5 per sq m/month, while the prime class B rents are EUR 11-12 per sq m/month. The
A strong pace of new developments delivered in 2010 together with a
rental levels in CBD area for the class A space is EUR 13.5-14 per sq
decrease in demand and the relatively high ratio of lease renewals,
m/month on average, while for the class B premises it is EUR 10.5-11
increased the vacancy to the highest recorded level since 2000. The
per sq m/month. The rents in the Wide Center area for the class A
majority of vacant space remains within new developments and the
ranges from EUR 12.5-13 per sq/month and for the class B from EUR 10-10.5 per sq m/month.
Real Estate Market & Trends Outlook | 6
The average achieved rents are at a slightly lower level.
The most prominent class A developments expected on the market in 2012/2013 are “Tri Lista Duvana” (8,000 sq m of GLA) located in the downtown of Belgrade and “B23” (35,000 sq m of GLA) located in
Average rent levels
the CBD area of New Belgrade.
EUR/sq m/month
19.0 17.0 15.0
Another office development due for completion is Atlas building
13.0
(4,000 sq m of GLA) located in the downtown area (Takovska Street).
11.0
Raiffeisen Bank started with construction of its office building in
9.0
Djordja Stanojevica Street in New Belgrade. Total GLA will be 15,000
7.0
sq m. Expected time of delivery is 1H 2012.
5.0 1H 2007 2H 2007 1H 2008 2H 2008 1H 2009 2H 2009 1H 2010 2H 2010 1H 2011
Class A
The International Falkensteiner Michaeler Group started the
Class B
construction of a hotel and office complex in block 11a in New
Source: LeRoy Research
Belgrade. The four-star hotel (4*) will have 171 rooms and will occupy the area of 24,000 sq m. The office building will be connected Office yields
with hotel and the total GLA will be 6,000 sq m. The expected time of delivery is the end of 2012 or beginning of 2013.
14.0% 12.0%
Intesa Bank announced construction of its office building at the 10.0%
corner of Mihajla Pupina Boulevard and Tresnjinog cveta Street in
8.0%
New Belgrade (block 11a). The construction works should be
6.0%
commenced during 2H 2011 and expected time of completion is the end of 2013.
4.0% 2004
2005
2006
2007
Class A
2008
2009
2010
1H 2011
Forecast
Class B
The lack of new supply together with a weak economic recovery will
Source: LeRoy Research
stabilize the office market in 2011, but a return to a significant Office yields seem to have bottomed out in 2010, and we noticed
growth and expansion is unlikely to happen before 2013. Foreign
slight downward movement in the first six months of 2011. If the
Direct Investments (FDI) is still relatively quiet, so the demand
existing stock remains stable, average rents are not expected to
expansion is likely to be limited during 2011. Rents are expected to
decline further, especially in the prime office segment. Otherwise,
remain under pressure throughout 2011, but further rent corrections
the prime rents will come under further pressure. The same applies
are not likely. The trend of high ratio of lease renewals is expected to
to yield.
continue in 2011. Growing uncertainty in the European market will certainly be transferred to Serbia, further slowing the recovery. Therefore, expansionary demand will be limited in the second half of
Pipeline
2011.
Regarding new deliveries, the current year will indicate the slowdown of the office market. Two large scale CBD projects, scheduled for delivery in 2010, have been postponed with the unknown delivery date. Also, a few smaller projects are close to completion, but the time of opening is still unknown. About 53,000 sq m of GLA (speculative space) is under construction and expected for delivery during 2012/13.
The reduced office development pipeline during 2012/2013 (30,00053,000 sq m of GLA) with improved occupier outlook, would suggest better absorption of today’s stock and decline in the overall vacancy rate. This slow recovery combined with the supply slowdown could set the scene for a slight increase in rents, starting from 2012. The overall impression is that Belgrade office market shows a good outlook in the medium run.
Pipeline projects:
Pipeline projects Project Tri Lista Duvana Atlas B 23 Raiffeisen bank Intesa Bank Falkensteiner building
Location
Size (Sqm of GLA)
Investor
Delivery date
Downtown Downtown New Belgrade New Belgrade New Belgrade New Belgrade
8,000 4,000 35,000 15,000 30,000* 6,000
MPC Atlas Group Verano Group Raiffeisen bank Intesa Bank Falkensteiner Group
2012 2011/2012 Unknown 2012 2013 2012/2013
Source: LeRoy Research *GBA
Real Estate Market & Trends Outlook | 7
Real Estate Market & Trends Outlook | 8
1H 2011
Retail
Market & Trends The second half of 2010 marked the entrance of a few new brands in high street locations which slowly re-
The structure of retail sales indicates the changing structure of personal consumption in Serbia. The share of basic food items and overheads within the structure has increased, while the share of
absorbed vacant premises and indicated on a healthy
other items has mainly been reduced (compared to data from
increase of occupier activity. However, the beginning
December 2010). These changes can be explained by the continuous
of 2011 brought the stabilization of demand.
weakening of the purchasing power. All these negative tendencies will keep consumer spending
Vacancy in the prime locations remains scarce. In contrast, vacancy in secondary locations is rising. Downward pressure on rents continued in the first half of 2011 and overall rental growth remained negative. Supermarket chains are still dominant
restricted, until real economy prospects recover. The most active segment will be retail warehouses dominated by supermarket developments.
Supply After a visible slowdown in 2010, Serbian market has seen a slow supply recovery in 1H 2011. A dominant market segment throughout
players in the retail segment.
2010 was retail warehousing (big-box developments), while new shopping center developments were mainly postponed. After a
Growth of unemployment has continued in the first six months of 2011 and together with consumer price growth led to a further
period of delay, 1H 2011 witnessed several new deliveries in Serbia and Belgrade.
decrease of consumer expenditure. According to the data published by the Statistical Office of the Republic of Serbia, the retail trade turnover in Serbia in June 2011, declined by 16% in constant prices compared to the same period in 2010. For the period January-June 2011, the retail trade turnover declined by 13% in constant prices, compared to the same period last year. Unemployment rate increased 3% in six month period and amounted to a total of 22.2% in April 2011.
inhabitants, Belgrade is still an attractive market for various retailers looking for expansion within the region. The overall new supply (all retail segments) in Belgrade in 1H 2011 was app. 30,000 sq m of GLA which is an increase of cca 20% compared to 2H 2010; while in other cities in Serbia it was app. 45,000 sq m of GLA which is a similar level as 2H 2010.
Structure of retail sales in Serbia, 1Q 2011 Food & non-alcoholic beverages Tobacco & alcoholic beverages Clothing & footwear
10.7% 42.3%
16.4%
0.9%
With only 100 sq m of modern shopping center space per 1,000
9.1%
3.5%
3.9%
4.2%
4.6%
4.4%
significant transactions have taken place in this segment in 1H 2011. The largest transaction occurred in the first quarter of 2011 when Belgian supermarket chain – “Delhaize Group” took over the local
Furniture & household equipment Health care
chain “Maxi”. The current market share of this chain is 22% in Serbia
Transport & Communications Recreation & Culture
million.
Education
and 37% in Belgrade. The total value of transaction is cca EUR 930
In April 2011, Croatian chain “Idea” took over Slovenian chain “Tus” with 7 supermarkets. Also, Slovenian “Mercator” announced a
Household utilities & Fuels
Source: Statistical Office of the Republic of Serbia
Supermarket chains are still the most common developments and
possible takeover of the local supermarket chains: “Familija” and “Jabuka”.
Real Estate Market & Trends Outlook | 9
Apart from “Delhaize”, in the first quarter 2011, German discount
Shopping center stock in Belgrade
retailer “Lidl” announced its market entry. Considering all these
160,000
recent changes, we can conclude that Serbian retail market is
140,000 120,000
more open and mature phase.
100,000
Expansion of supermarket chains was similar to the previous year. The Slovenian “Mercator” had the largest expansion. They opened
Sq m of GLA
preparing for another stage of market competition and going toward
80,000 60,000 40,000 20,000
two “Roda Cash & Carry” in Mladenovac and Smederevo, “Roda
0
Center” in Vrbas and two “Roda” supermarkets in Smederevska
2002
2003
2004
2005
2006
2007
2008
2009
2010
Palanka and Velika Plana. With acquisition of the business system “Coka” in August 2010 they received 22 buildings and cca 12.000 sq
1H 2011
Source: LeRoy Research
m. In 2011 Mercator announced opening of “Roda Center” in Jagodina and Krusevac. The market share of Mercator is cca 10%.
Big-box stock in Serbia & Belgrade 500,000
overall, but the third hypermarket in Belgrade. The hypermarket is located in Vidikovac area – Ibarska Road and the opening was in June 2011.
Sq m of GBA
The German chain “Metro Cash & Carry” opened their seventh
400,000 300,000 200,000 100,000
The Croatian chain “Idea” opened supermarkets “Idea Super” in
0
Belgrade, Novi Sad, Jagodina and Kragujevac. They opened small
2004
2005
2006
2007
2008
2009
2010
format markets (200-600 sq m) in Belgrade, Zemun, Novi Sad, Serbia*
Topola, Cacak, Svilajnac. The Greek chain “Veropoulos” opened a hypermarket in Vojvode
1H 2011
Belgrade
Source: LeRoy Research *without Belgrade
Stepe Street, Belgrade, in April 2011.
Belgrade Shopping center developments were more active in 2011. In March,
The modern shopping center stock is being supplemented with a
the shopping center “Forum” was opened in Nis pedestrian zone. A
new development bringing total stock to 160,000 sq m of GLA.
month later, the shopping center “Mladenovac”, known as “TCM”,
Neighborhood shopping center “Pasino Brdo” in Vozdovac was
was opened in Mladenovac. In June, “Roda center” was opened in
opened in the first quarter of 2011 bringing 6,500 sq m of GLA. The
Vrbas. The second stage of the retail park “AVIV” was opened in
tenants are: Roda supermarket, Chacarel perfumery, XXL Design,
Pancevo in June 2011.
café, etc. The investor is the local company Novi Dom.
The only shopping center delivered in 1Q 2011 in Belgrade is the
In April 2011, the Greek chain “Veropoulos” opened its fourth
neighborhood center in Vozdovac area – called “Pasino brdo center”.
hypermarket in Belgrade with 7,000 sq m of GLA. The market Vero is located in Vojvode Stepe Street, in Vozdovac municipality.
Danish chain “JYSK”, which sells “everything for the home”, entered the market in 2011. The first store they opened in Subotica in April,
The Croatian chain “Idea” continued its expansion in Belgrade and
while in June they opened its second store in the retail park “AVIV”
Serbia by acquisition of “Tus” supermarket chain. In April 2011 they
in Pancevo.
opened a renovated supermarket (ex Tus supermarket) in block 62, New Belgrade and small markets in New Belgrade, Zemun,
After a period of stagnation, newcomers started to appear on the
Cukarica, Zvezdara (350 – 650 sq m).
market, which can be a good example to other retailers. 1H 2011 was characterized by the entry of new supermarket chains: “Delhaize”
The German chain “Metro Cash & Carry” opened the third
and “Lidl” and a slow revival of shopping center developments. A
hypermarket in Belgrade in June. The building is located along
lot of announced projects are still waiting for commencement of
Ibarska Road in Vidikovac area and consists of 13,500 sq m of GLA.
construction. The developers are faced with a problem of securing project financing, which will further reduce the market activity.
The French DIY chain “Mr. Bricolage” continued expansion and the opening of their first store in Belgrade in the shopping center ”Pasino brdo” (3,000 sq m) is expected soon.
Real Estate Market & Trends Outlook | 10
Demand
Serbia The Croatian chain “Idea” continued expansion in 1H 2011. They opened the supermarkets “Idea Super” in Jagodina (1,500 sq m),
The first half of 2011 continued the slow pace of recovery. The
Kragujevac (1,500 sq m) and Novi Sad (1,500 sq m) in April, and
retailers are still very cautious regarding expansion and many of
small markets (200-600 sq m) in Novi Sad, Topola, Cacak, Svilajnac.
them have adopted more feasible and reasonable investment strategies.
The Slovenian “Mercator” opened “Roda Cash & Carry” in Mladenovac (4,500 sq m) in April and Smederevo (2,500 sq m) in
Many new retailers started to think strategically and seize good
May 2011. They opened “Roda” supermarket in Smederevska
opportunities under favorable terms. Anchor retailers are active in
Palanka (1,400 sq m) in March. In June, “Roda center” (5,000 sq m)
the market, but they continue to ask for incentives from the investors
was opened in Vrbas. A new store concept, a super market and
to enter new projects, such as rent free period, space fit-out, etc.
technique center was introduced in January in Velika Plana and Smederevo.
Despite the reduced demand, vacancy is low since the market is still
The shopping center “Forum” (10,000 sq m of GLA) in Nis pedestrian zone was opened in March 2011. The entire property consists of 17,000 sq m which is structured as a retail and office space. The retail space occupies the ground floor and two floors. Another two floors are designed as office space (7,000 sq m of GLA). The tenants are: New Yorker, Peacocks, Deichmann, Replay, Guess, Camper, Timberland, Liu Jo, etc. The investor is the local - Fashion Company. In April, the shopping center “TCM” was opened in Mladenovac, (8,800 sq m of GLA).
The tenants are: Roda supermarket, New
Yorker, Takko, Deichmann, Sport Vision, Dexi Co kids, etc. The investor is the Croatian company RIMC.
far from saturation. The shopping center stock of only 100 sq m per 1,000 inhabitants indicates that Belgrade retail market is substantially undersupplied compared to the region, which is an explanation of certain market stability. A demand for shopping centers & high street begins to reappear slowly and is mainly driven by international fashion operators. Vacancy in the prime locations remained moderate, but secondary locations have experienced increase of vacant units. Also, a demand for large units is more constrained, usually leading to their long vacancy. A trend of changing tenants continued through 2011 influencing the
The second stage of the retail park “AVIV” (8,000 sq m of GLA) in Pancevo was opened in June. The tenants are: New Yorker, Takko, Peacocks, Tref sport, Deichmann, etc. The investor is the Israeli company Aviv Arlon.
increase of vacant units that had been unoccupied for more than 4 months. High Street locations witnessed slight slowdown with opening of a few new stores as well as relocation of the few existing tenants. New brands such as “Sephora”, “Lush” and “Evro Giunti” opened in Knez Mihajlova Street and “Laguna” reopened in Kralja
Danish chain “JYSK”, which sells “everything for the home”, opened
Milana Street.
the first store (800-1,200 sq m on average) in Subotica in April, while in June they opened their second store (800-1,200 sq m on average) in
New openings are expected in Knez Mihajlova Street soon, such as
the retail park “AVIV” in Pancevo.
the first “GAP” store.
New retail deliveries Project Pasino Brdo Forum TCM Roda Center AVIV retail park JYSK JYSK Metro Cash & Carry Vero Idea Super Idea Super Idea Super Idea Super Roda Cash & Carry Roda Cash & Carry Roda Mr. Bricolage
New high street openings
Location
Type
Size (Sqm of GLA)
Vozdovac Nis Mladenovac Vrbas Pancevo Subotica Pancevo Vidikovac Vozdovac New Belgrade Jagodina Kragujevac Novi Sad Mladenovac Smederevo Sm. Palanka Vozdovac
Shopping center Shopping center Shopping center Shopping center Retail park Everything for the home Everything for the home Hypermarket Hypermarket Supermarket Supermarket Supermarket Supermarket Supermarket Supermarket Supermarket DIY
6,500 10,000* 8,800 5,000 8,000** 800-1,200*** 800-1,200*** 13,500 7,000 1,500 1,500 1,500 1,500 4,500 2,500 1,400 3,000
Delivery date 1Q 2011 Mar-11 Apr-11 Jun-11 Jun-11 Apr-11 Jun-11 Jun-11 Apr-11 Apr-11 Apr-11 Apr-11 Apr-11 Apr-11 May-11 Mar-11 Pipeline
Tenant Sephora Lush Evro Giunti Laguna GAP
Type
Location/Street
Opening date
Perfumery Perfumery Bookstore Bookstore Fashion
Knez Mihajlova St. Knez Mihajlova St. Knez Mihajlova St. Kralja Milana St. Knez Mihajlova St.
May-11 June-11 June-11 2011 Announced
Source: LeRoy Research
The demand in the retail warehousing segment is rather stable, but more focused on Belgrade. Retailers in the food segment are the most active. A few international as well as local chains have recognized the market moment and started further expansion, such as the Greek “Veropulos”, the German “Metro Cash & Carry”, the Croatian “Idea”, the Slovenian “Mercator” and the French “Interex”.
Source: LeRoy Research * 7,000 sq m is office space ** the second stage ***typical size of JYSK retail space
Real Estate Market & Trends Outlook | 11
Many new retailers have announced their market entry during 2011-
Kralja Milana and Knez Mihajlova Street) have dropped to average
2013, such as the French chain “Carrefour”, the Swedish “Ikea” and
EUR 40 to EUR 90 per sq m, depending mainly on the size and
the German DIY chain “OBI”. Demand is dominantly focused on
position of the unit (smaller units maintain higher range of average
Belgrade market, while expansion to secondary cities is still cautious.
rents). Secondary locations rents move between EUR 15 to EUR 40
However, expected improvement in the economic outlook is
per sq m on average.
encouraging healthy retailers to continue with their strategic expansion plans.
Due to slow economy recovery in 2011, general rental growth is unlikely. We can expect a gradual rental market recovery from the
The demand for retail space and number of transactions are expected
second half of 2012, helped by lower vacancy levels.
to increase in 2011. We can expect a healthy level of demand in the
Prime rents in Belgrade
prime locations, while the demand for secondary locations will fall
150
further. However, the retail market recovery cannot be expected until EUR/sq m/month
the living standard and overall economy has been genuinely improved, which is not expected in 2011.
Vacancy
100 85.0
50
50.0 35.0
0
The vacancy rate is rather stable and a very low number of
Knez Mihajlova St.
unoccupied units was recorded in prime locations. Secondary locations recorded rising vacancy. Considerably depressed rents encouraged new retailers to enter the market pushing the vacancy
Terazije & Kralja Milana St.
min
max
Kralja Aleksandra Blvd.
average
Source: LeRoy Research
rate lower. The overall vacancy (primary and secondary locations) is Shopping center rents in Belgrade
approximately 7%. 70
continue to sustain high occupancy levels. The prime shopping center vacancy is almost zero, but we noticed the trend of changing tenants that continued in 2011. Secondary properties recorded an increase of vacant units. However, this zero vacancy in the prime properties can be explained by more flexible landlords’ approach, as
EUR/sq m/month
60
The main shopping centers serving as dominant retail destination
50
40.0 32.5
30
10
17.5 8.5
0 Hypermarket
Anchor tenants
Mini anchors Inline tenants Small inline (100-200 sq m) tenants
min
The retail market continued to experience declining rental rates and
max
Services
Cafes
Food court
average
Source: LeRoy Research
the market has still not done with contraction.
Rents
32.5
27.5
20
well as by the low level of development that has been started over recent years. Despite the positive movements, we can conclude that
55.0
50.0
40
Indicative retail yields, 1H 2011 9.00%
9.75%
8.00%
10.00%
5.00%
now seem to have bottomed out. Depending on the location, lease rates dropped 30-55% from the 2008 peak level or 3-5% compared to the end of 2010. The prime rent in shopping centers has been following a stabile path, while high street rents experienced certain
0.00% High street
Shopping center
Retail warehouse
corrections. This downward pressure on lease rates will remain, while the rent
Source: LeRoy Research
relief and renegotiated leases will continue in the third quarter of 2011. Landlords are forced to offer better commercial conditions such
Pipeline & Announced
as contribution on their fit out, length of lease, turnover rent, etc. Shopping centers rents maintained mostly the similar levels from EUR 30 to EUR 60 per sq m. Downtown prime street rents (Terazije,
New deliveries announced for 2011/2012 indicate a slow market activity. Many large scale projects announced in Belgrade and other cities have been postponed with uncertain beginning of construction.
Real Estate Market & Trends Outlook | 12
The company “Plaza Centers” reactivated construction of a shopping
Forecast
mall in Kragujevac which initially started in autumn 2008. The shopping mall will offer 28,000 sq m of GLA and will contain more
Despite the ongoing obstacles, Serbian retail market takes the lead
than 100 stores and an entertainment center. The expected time of
over other real estate segments. Therefore, we anticipate a slow but
completion is 2012.
steady improvement in the period to come.
In 2010, “Delta Holding Company” commenced the construction of
In the short term the market will experience a slowdown, since many
Retail Park in Kragujevac. The development will comprise 23,000 sq
proposed developments cannot secure financing and tenants. The
m of GLA and the first stage holding Tempo hypermarket (9,500 sq
development pipeline is progressing in 2011/2012 after a period of
m of GLA) was opened in November. The second stage of
stagnation.
construction will be completed during 2011. The main focus of retailers is still Belgrade where the spending “Belgrade Outlet Center” is currently under construction in Indjija
power is stronger, but there is a re-emerging demand for other cities.
with 30,000 sq m of GLA. The investor is the company “Black Oak
Total retail sales will remain weak in 2011 as the primary catalysis of
Development” and the expected time of delivery of the first stage
spending stays weak, especially job creation. Retailers will lack the
holding 15,000 sq m is postponed for March 2012.
confidence to expand aggressively due to considerable uncertainty attaching to the short term outlook. However, we expect an increase
The Israeli company “BIG CEE” commenced in June the preparation
in tenant demand for top-quality retail assets, while the difference
works for development of a shopping center in Novi Sad. The
between prime and secondary properties will continue to widen.
shopping mall will consist of 30,000 sq m of GLA and will be located in the industrial zone of Novi Sad. The expected time of completion
Very soon we can expect limited opportunities for many new
is the second half of 2012.
retailers to secure good units, especially in Belgrade and the problem could become even higher if the supply of new shopping centers or
The “AVIV Retail Park” in Pancevo announced construction of the
other retail formats remains restricted in the future. As a result, the
third stage that will have approximately 10,000 sq m of GLA and the
supply side will be a key driver of rental recovery.
start of construction is scheduled for the end of 2011. The expected time of delivery is May 2012. The overall development will contain 30,000 sq m of GLA. The investor of the project is the company “Aviv Arlon”. German DIY chain “Bauhaus” announced its entry into the Serbian market. They signed a contract with the local company Delta Real Estate to build the first retail outlet in Serbia as a part of a future retail park with the total area of 70,000 sq m of GLA. The construction start is scheduled for the beginning of 2012. The building will have 20,000 sq m of GLA and will be located in Block 53 in New Belgrade. The expected time of completion is the second half of 2012.
Projects under construction Project Plaza Centers Delta Park Belgrade Outlet center BIG CEE AVIV retail park Bauhaus
Location
Type
Size (Sqm of GLA)
Delivery date
Kragujevac Kragujevac Indjija Novi Sad Pancevo Belgrade
Shopping mall Retail park Outlet center Shopping mall Retail park DIY
28,000 23,000* 30,000** 30,000 30,000*** 20,000
2012 1H 2011 1H 2012 2H 2012 Announced Announced
Source: LeRoy Research * The first stage (hypermatket) was opened in November 2010 ** The first stage (15,000 sq m of GLA) will be completed during 2012 *** The third stage (cca 10,000 sq m of GLA) will be completed in 1H 2012
Real Estate Market & Trends Outlook | 13
Real Estate Market & Trends Outlook | 14
1H 2011
Industrial
Market & Trends The logistics market in the first six months of 2011 has not seen improvement despite the modest supply of new space and stabile vacancy. A slow economic improvement and a scarce expansion leave little room for recovery even in 2011.
During 2009, a new supply in the wider Belgrade area contracted to app. 30,000 sq m compared to the previous annual average of 60,000 sq m. Similar level of construction continued through 2010. New development still remains subdued at less than 50% of peak levels. The overall new logistic/industrial stock in Serbia increased by 350,000 sq m or 23% in 2010. Persistently tight financing conditions, a mediocre demand and a fragile outlook, as well as falling rents and high yields, are making new developments difficult to justify. The estimated stock of contemporary logistic/industrial space in Belgrade
Positive developments in the segment of industrial
wider area is 360,000-390,000 sq m, which indicates a relatively low
production have yet to translate into a heightened
development level of this market segment.
tenant demand for the industrial and logistics space.
Developers were faced with difficulties in obtaining finance and
However, widespread movement in the industrial
unsecured leasing prospects, which kept new completions low
market will likely not occur until 2012.
during 2010. However, growth prospects are already visible in industrial sector especially in central and southern region. Modern logistics stock in Serbia
The industrial production in Serbia marks a positive development during 2010-2011 periods. The industrial production recorded the
500,000
3.3% increase in June 2011 compared to the same period last year.
400,000
production increased by 4.8%.
Sq m
Compared to the period January-June 2011/2010, the industrial
300,000 200,000
Future high prospects for industrial/logistics developments can be
100,000
explained with a favorable country position on strategic corridors 10
0
and 7 that connect Western Europe with the Middle East. The
2005
industrial/logistics zones with the highest development potential are along the highway E-75 and E-70 (Vojvodina Region) and Central and Southern Serbia (Kragujevac and Nis).
2006
Total
2007
2008
Central Serbia
2009
Vojvodina
Source: Statistical Office of the Republic of Serbia
Modern industrial & logistics stock in Serbia
Supply 1,800,000 1,500,000
performance during 2010-2011, with improved prospects in
1,200,000
industrial segment in the first 6 months of 2011. The number of issued construction permits in Serbia for industrial & logistics developments in 2010 decreased by 31% compared to 2009. Therefore, the overall stock will remain relatively stable in 2010/2011 and speculative developments are still missing from the market. The total stock of the modern logistics space in Serbia is 640,000 sq m, while the stock of the modern industrial space is 1,200,000 sq m.
Sq m
A new supply of industrial & logistics space continued weak
900,000 600,000 300,000 0 2005
2006
2007
2008
Total
Industrial
Logistics
2009
2010
Source: Statistical Office of the Republic of Serbia
Real Estate Market & Trends Outlook | 15
Industrial & logistics construction permts issued in Serbia
Number of permits
400
Demand After a considerable decrease in occupier demand, we noticed certain market stabilization, but the ratio of new leases is still low. Occupiers
300
are mainly focusing on modern space offering the adequate ceiling height, a wide manipulation area, a flexible layout and a good road
200
connection. The demand is mainly generated by automotive, 100
distribution, pharmaceutical and FMCG companies and average space requirements are between 1,000 and 3,000 sq m. The highest
0 2006
2007
2008
Total
Logistics
2009
2010
demand is still focused on locations along the highway E-70 and E75.
Industrial
Source: Statistical Office of the Republic of Serbia
The slow economic recovery and rising industrial production Industrial & logistics construction permts issued in Belgrade
stabilized property performance in the first half of 2011 but positive effect on the market is yet to be witnessed.
Number of permits
30 25
Vacancy
20 15
Despite the decline in development activity and scarce speculative
10
completions in 2009-2011 period, the lower demand created an
5
increase in vacancy. Since the occupier demand is focused primarily on the modern stock, the majority of vacant space is concentrated in
0 2006
2007
2008
Total
Logistics
2009
2010
Industrial
old buildings. The estimated vacancy in wider Belgrade area is between 10-12%. Due to the low level of new supply, the vacancy
Source: Statistical Office of the Republic of Serbia
rate is expected to decline.
Car installation manufacturer, Korean company “Yura Corporation”,
Rents
opened its second factory (20,000 sq m) in June in Nis. The total investment is EUR 15 million. The Japanese company “Panasonic” opened its factory (18,000 sq m) in January in Svilajnac. The factory will produce energy efficient electronic components. The total investment is EUR 15 million.
Asking rental rates decreased 20% to 30% on average compared to the peak level (2008). The rents have stabilized in 2011 and we do not expect further rental pressures especially if we consider the reduced new supply. Modern warehouse rents in Belgrade & wider area
New infrastructural developments, such as the construction of the
5.0
Kragujevac; the construction of the Ring road in Belgrade and the construction of a new Bridge over the Sava River will provide better conditions for logistic developments. Many new developments can be expected along the highway E-75 and E-70 (Zemun, Surcin, Dobanovci, Simanovci, Krnjesevci area) and Belgrade Ring Road.
EUR/sq m/month
new part of Corridor 10 (Horgos – Novi Sad); the highway Batocina –
4.0
4.1 3.5
3.0
3.0
3.0 2.5
3.3
2.5
2.0 1.0 0.0
Local and international developers have already acquired large land
Zemun
Dobanovci
Pecinci
St. Pazova
Krnjaca
max
average
Lestane Downtown
plots along the main corridors, and within industrial locations in Belgrade and other Serbian cities. Most of these (announced) developments have been postponed for a while and we can expect a
min Source: LeRoy Research
strong pipeline in years to come. The rental levels for contemporary warehouses depend on location and the highest rents are recorded in New Belgrade and Zemun area between EUR 4 and EUR 4.5 per sq m per month. The modern logistics space in the wider area (Dobanovci, Pecinci, Stara Pazova) is
Residential Market & Trends Outlook | 16
in the range from EUR 2 to EUR 3 per sq m per month. Along
It is important to note that existing companies in the market have
Pancevo Road new warehouses achieve rents from EUR 3 to EUR 4
announced new investments in 2011, such as “US Steel Serbia” (EUR
per sq m per month.
51 million), “Gazprom Neft” (EUR 450 million), “Fiat” (EUR 600 million), etc. Also, many new foreign companies showed interest for
The rental levels for old warehousing facilities also depend on
investing in Serbia. Potential investors are mainly from the
location, but are generally in the range between EUR 1 and EUR 2.5
automotive and textile industry.
per sq m per month. The highest rental range is recorded in the downtown area (old facilities) from EUR 2 to EUR 4 per sq m per
If these announced investments realized in the announced amount in
month, while newer and better maintained facilities range from EUR
2011-2012, the industrial & logistics market will witness a significant
4 to UR 4.5 per sq m per month.
improvement. However, following the previous path of development we are not expecting considerable changes on the market in the next
Due to the constrained new supply, we will see further balancing of
6 months. The announced new investments will set the stage for
supply and demand levels, and therefore a possibility for a moderate
economic
rent increase in 2012.
development of industrial & logistics sector in 2012-2013.
and
employment
growth,
which
will
drive
the
Pipeline & Forecast The north section of corridor 10 that will connect Novi Sad and Horgos (Hungarian border) and Beska Bridge will be opened by the end of September 2011. The deadline for completion of the southern part of the corridor 10 is 2014.
The highway that will connect
Kragujevac and Batocina will be developed by June 2012. With strategic infrastructure developments, especially the corridor 10, Serbia will strengthen its position on European logistic map. Many proposed developments have been postponed with uncertain time of commencement. Improving macroeconomics will support occupier demand over the medium term. The investment of the Italian company “Fiat” into automotive industry generated more demand for industrial premises in central and southern Serbia. Mass production is announced for spring 2012 and will reinforce development of Kragujevac region. In June 2011 Fiat’s cooperator companies “Jonson control”, “Promo magnietto”, “Sigit” and “HTL” started construction of production halls. They will produce seats, plastic parts and tires and the total investment is estimated to more than EUR 100 millions. Expected completion is 1H 2012. The largest “Fiat” cooperator, the company “Magneti Marelli” from Italy announced development of its factory in Kragujevac for 2011. The investment is estimated to EUR 60 million. The other announced “Magneti Marelli” factory will start in cooperation with “Jonson control”. In May 2011, Italian “Benetton” bought the textile factory “Nitex” in Nis for EUR 3 million. Benetton announced expansion of its activities in the next four years and plans to invest EUE 43 million.
Residential Market & Trends Outlook | 17
Residential Market & Trends Outlook | 18
1H 2011
Residential
Market & Trends Number of constructed apartments in Serbia & Belgrade
economic and household conditions depress further
20,000
the already volatile housing market in the first half of 2011. The number of housing loans issued in the first six months was reduced by 18% over the same period last year.
Number of apartments
Following modest activity during 2010, weak
18,162
7,306 5,759
4,977
5,048
4,000 0 2005
2006
2007
2008
2009
2010
Belgrade
Source: Statistical Office of the Republic of Serbia
Number of constructed apartments in Belgrade municipalities
half of the year. In the short term, the demand and
2,000 Number of apartments
Supply
7,601
7,379
7,292
8,000
Serbia
20% will adversely affect the demand in the second
leading the way to another price correction.
18,648
12,000
New measure of the National Bank of Serbia to
transaction volumes are not expected to recover
19,103
16,000
2004
increase the mandatory deposits for housing loans to
19,815
19,049
16,417
16,388
1,966
1,600 1,200
1,011 935
800
558
400
959 600
364 276
659 432 293 313
714
504 214 237 171 152 77196 55 121
0
Residential development completions in Belgrade decreased for 12%, falling from 5,759 apartments in 2009 to 5,048 in 2010. Compared to 2009
previous two years, many new projects are announced and presented to the public, with expected completion in 2012-2013. However,
2010
Source: Statistical Office of the Republic of Serbia
development of the economic situation during the year will certainly determine whether such projects will be implemented within the
Structure of new apartments in Serbia, June 2011
prescribed deadlines. 11%
A visible decline in number of completions in 2010 and reduced number of issued building permits in 2009-2010 period, indicate that
26%
Studio & 1 bdr
26%
the overall annual delivery in 2011 will be similar with possibility of
2 bdr
lower growth.
3 bdr 38%
4 bdr & larger
As in the past few years, the largest development dynamic in 2011 within the immediate metropolitan area was recorded in Zvezdara, Vozdovac
and
Vracar
municipalities.
The
most
significant
construction slowdown was noted in New Belgrade (72% decrease)
Source: Statistical Office of the Republic of Serbia
and Savski Venac (29% decrease).
Residential Market & Trends Outlook | 19
Many new developments are predominantly small in size with 10-20
seen during 2011 and we expect that many announced projects will
apartments on average, lower to mid quality and smaller structure
be delayed as a consequence of unstable demand. The expected
(30-45 sq m). The structure of new apartments remained almost
supply in Belgrade is estimated at app. 5,500 units in 2011.
unchanged. Despite a slight recovery of demand during 2010, the increase in 2010 statistics confirm a decline in number of issued building permits
unemployment registered in Q4 2010 and Q1 2011, and the increased
of 24% in Belgrade and 25% in Serbia, as a consequence of reduced
number of people with the problem of servicing their borrowing
demand as well as the introduction of the new Law on Urban
liabilities will keep the demand restricted. A new measure of the
Planning and Development in September 2009. Slower decline
National Bank of Serbia to increase the mandatory deposits for
continued in 2011 with 600 permits issued in Serbia in the period
housing loans to 20% will negatively impact the majority of potential
January-April, which is a drop of 9% compared to the same period
buyers.
last year. It is expected that the number of issued building permits and building starts will be slightly higher in Q3 2011.
Demand
Residential construction permits issued in Serbia & Belgrade
Number of permits
Economy instability and rising unemployment have an effect on delaying home purchases, further depressing the medium term
4,000
3,281
3,113
confidence
2,901 2,184
2,129
of
potential
homebuyers.
Lower
affordability
of
mortgages together with the new measures of the National Bank will further hinder transactions.
2,000 741
649
566
620
471
600
Positive market signs recorded through 2010 were short-lived. According to the statistics, the number of housing loans approved by
0 2006
2007
2008
2009
2010
the banks in Serbia in the first half of 2011 was reduced by 18%
I-IV 2011
compared to the same period last year. The total number of Serbia
Belgrade
approved loans in 1H 2011 is 3,986.
Source: Statistical Office of the Republic of Serbia
The number of residential transactions in Belgrade is reduced again, Residential construction permits issued in Belgrade municipalities
Number of permits
150
focused on smaller, mid-end apartments, while the demand for
134
larger and more luxurious units was significantly reduced. The
110
100
despite more favorable prices. Most of the active demand was
similar situation can be also reflected on rental market. The demand 78
for affordable housing is likely to rise slowly especially for the
60
50 23
27
20 21 23
32
government financed program of residential construction. 24 18 21
17 5
7
9 3
4
7
0
Economy instability and pressure on limited disposable income continue to dissuade potential buyers from entering the market. Pending any significant macroeconomic developments prices can
2009
2010
Source: Statistical Office of the Republic of Serbia
still decline. Any potential growth is expected to be highly location and asset specific. Residential segment of the market is heavily sentiment driven, so improvement can be expected when economic
During the first half of 2011 several large scale developments were delivered. The second stage of the project “Maxima” in New Belgrade was completed bringing another 6,000 sq m. In April, the
fundamentals improve. However, in the period to come, the demand will depend greatly on the government initiatives and buyers’ confidence, while prices increase still cannot be expected.
project “Metropolitan” in Palilula was delivered with 80 apartments. In Zvezdara area, two projects were completed during the first 6
Pricing
months. The “Prestige” and “Exclusive” projects delivered new 18,000 sq m of residential space.
Following a considerable fall, housing prices show relative stability. The average price decline in the last 30 months is between 25-35%.
We expect further market adjustments in 2011 in terms of supply and
The price decline is slowed in 2H 2010, but continued in the first six
prices. However, the real impact of the crisis on the supply will be
months of 2011 with an average correction of 3-4%.
Real Estate Market & Trends Outlook | 20
The highest price correction has occurred in the case of low to mid
Developed & Under Construction
quality apartments in suburban locations, but a visible correction is obvious for the apartments in central locations, as well as high-end
Several larger projects currently under construction are expected to
projects. In the mid-market segment the highest recorded decrease
be delivered during 2012-2013 period. Most of the developments are
was in New Belgrade.
designed for mid-market buyers.
Asking prices for mid quality projects depend mainly on
The government strategy for reviving the residential market and
municipality and micro location, and vary between EUR 1,300 – 1,900
boosting
per sq m. High quality development prices are on average EUR 2,200
government financed residential complexes that will meet demand
– 3,000 per sq m.
for the affordable housing. The location is in the area of Vozdovac
the
construction
sector
includes
development
of
(ex military base “4. July”) with the development potential of 4,578 It should be noted that these price levels rely on the existing offer.
units. The construction of the first phase commenced in February
Most of developers/sellers still prefer to keep higher asking prices,
2011. The first stage is due for completion in spring 2012 and will
but are more flexible when negotiating with clients. Therefore, the
bring 1,800 apartments, while 2,235 apartments will have been
effective price for a closed transaction can be up to 10-15% lower.
developed by the end of 2012. The announced price for the first time buyers are EUR 1,200 per sq m and shall be exempt from VAT, while
Rental market has also experienced downward trend of demand and
for other buyers the price will be EUR 1,290 per sq m plus VAT.
prices. The rent levels have decreased for approximately 30-35% since the beginning of the crisis. A considerable rent reduction is
The preparation works for another large project (mixed use) in block
especially noted in the mid-market segment and in the segment of
65, New Belgrade started in March 2011. “West 65” complex will
luxury rental homes. Rental decline continued in 1H 2011 and the
have an area of 150,000 sq m and will contain 514 apartments and 100
average price decrease is 7-8%.
retail units. The first stage of construction should begin soon, while the entire residential part should have been developed by 2014. The
Average asking prices in Belgrade municipalities
apartments will be offered to mid-market buyers and the investor of
3,500
this project is the company PSP Farman.
EUR/sq m
3,000 2,500 2,000
2,250
2,200
Construction of the residential project “Marmil Land” in Vracar area
2,300
started in March 2011. The complex will have 3 lamellas with the
1,900
1,500
1,500
1,525
1,400
1,400
total area of 18,000 sq m and will contain 159 apartments and 16 retail units. The investor of this project is the local company Marmil
1,000
Inzenjering.
500
The residential complex “Alpha City” started with construction in min
max
May 2011 in Zivka Davidovica Street, Zvezdara. The complex will
average
contain 7 lamellas with 299 apartments. The ground floor is intended
Source: LeRoy Research
for business units. The investor of this project is the company International Alpha Construction and the expected date of
Average asking rents in Belgrade municipalities
completion is the end of 2012 or the beginning of 2013.
15.0
EUR/sq m
10.0
9.0
Location
Size (Sqm of GBA)
New Belgrade New Belgrade Palilula Zvezdara Zvezdara Dedinje New Belgrade Vracar New Belgrade Zvezdara Banovo Brdo
16,000 6,000 15,000 9,000 44,000 11,500 20,000 18,000 150,000 32,000 19,000
Project
12.0
8.3
8.3 7.3
6.0
6.5
3.0 Downtown
Vracar
min
Source: LeRoy Research
Dedinje
max
New Belgrade
average
Zvezdara
Maxima Center - I stage Maxima Center - II stage Metropolitan Exclusive Prestige* Koling Zeland Maxima Center - III stage*** Marmil Land West 65 Alpha City Golf 8**
No of Deadline units 130 80 99 550 73 84 159 514 299 153
2H 2010 1H 2011 1H 2011 1H 2011 2011-2013 2012 2012 2012-2013 2014 2012-2013 2013
Source: LeRoy Research * Fist stage of 9,000 is delivered in 1H 2011 ** Fist stage (50 apartments) should be delivered in 1Q 2012 *** III stage contains commercial part
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Announced Another possible location for the government financed residential development is in the settlement “Dr. Ivan Ribar” in New Belgrade. The preparation of the site and documentation for the construction is announced for autumn 2011. The complex will bring new 768 apartments in 6 buildings. The announced price is EUR 1,300 per sq m. Expected time for completion is 2013.
Forecast Performance of the housing market in 2011 will mainly depend on the stability of economic outlook, employment and government measures. There is a modest, visible revival of the residential investment activity in 2011 despite the low property fundamentals. Housing market will remain limited, and an excessive construction activity in 2011 cannot be expected since many developers still have the “wait-and-see” attitude. However, developers will be ready to introduce new products once the demand shows stability and steady revival. While there are question marks surrounding the short term outlook, we believe that Belgrade residential market has a strong medium and long-term perspective for further development. A visible fall in completions in 2009 and 2010 will continue in 2011 (expected delivery is app. 5,500 residential units). Despite a significantly smaller number of construction permits issued in 2009/2010 period, the construction of the government financed “low cost” apartments in Vozdovac will maintain the stability of supply and prices. If the announced construction of apartments in New Belgrade – “Dr. Ivan Ribar” starts, that is likely to lead to postponement of some projects that are in the initial stage.
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