The Belgrade office market saw zero new supply in the last 12 months as speculative construction has been postponed. Demand remains historically low but stabilized in the first half of 2011 compared to the previous year, with small to medium sized transactions dominating. Vacancy rates remain high due to oversupply and weak demand, though absorption of vacant space is expected to be slow but steady over the next two years as new supply remains limited and demand improves gradually. The market recovery depends on strengthening of the local economy and business environment.
3. Real Estate Market & Trends Outlook | 1
ECONOMY OUTLOOK 2
OFFICE MARKET & TRENDS 4
Supply
Demand 5
Vacancy 6
Rents 6
Pipeline 7
Forecast 7
RETAIL MARKET & TRENDS 9
Supply 9
Demand 9
Vacancy 10
Rents 10
Pipeline & Announced 11
Forecast 11
INDUSTRIAL MARKET & TRENDS 13
Supply 13
Demand 14
Vacancy 14
Rents 14
Pipeline & Forecast 15
RESIDENTIAL MARKET & TRENDS 18
Supply 18
Demand 19
Pricing 19
Developed & Under construction 19
Announced
Forecast 19
Table – Economy indicators
Chart – Belgrade office stock
Chart – Belgrade office delivery, semiannual
Chart – Belgrade office vacancy rates
Chart – Average rent levels
Chart – Office yields
Table – New office deliveries & pipeline projects
Chart – Structure of retail sale in Serbia
Chart – Shopping center stock in Belgrade
Chart – Big-box stock in Serbia & Belgrade
Table – New retail deliveries
Table – New high street tenants
Chart – Prime rents in Belgrade
Chart – Shopping center rents in Belgrade
Chart – Indicative retail yields
Table – Projects under construction
Chart – Modern industrial & logistics stock in Serbia
Chart – Modern logistics stock in Serbia
Chart – Industrial & logistics construction permits issued
in Serbia
Chart – Industrial & logistics construction permits issued
in Belgrade
Chart – Modern warehouse rents in Belgrade&wider area
Chart – Number of constructed apartments in Serbia &
Belgrade
Chart – Number of constructed apartments in Belgrade
municipalities
Chart – Structure of new apartments in Belgrade
Chart – Residential construction permits issued in Serbia &
Belgrade
Chart – Residential construction permits issued in Belgrade
municipalities
Table – New residential deliveries & under construction
Chart – Average asking prices in Belgrade municipalities
Chart – Average asking rents in Belgrade municipalities
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4. Real Estate Market & Trends Outlook | 2
Since the beginning of the year, the Serbian
government has faced significant structural
problems related to a rising inflation, unemployment
and the budget deficit. The unsuccessful
privatization of the national telecommunication
company “Telecom Serbia” has increased the
problem of the budget deficit.
Serbia’s rating according to Dun&Bradstreet has
maintained its moderate risk DB4d, where the
potential medium-term threat is the budget issue.
The strict austerity measures necessary for structural reforms of the
budget system are not likely in pre-election year. Therefore, the
rising budget deficit is planned to be overcome by the issuance of
euro bonds (EUR 500 millions) and through the commercial loan
with the guarantee of the World Bank (USD 400 millions).
According to the Statistical office of the Republic of Serbia, GDP
growth in the first quarter of 2011 was 3.4% compared to the same
period last year. The highest growth has been recorded in the
following sectors: transport (9.8%), electricity and gas supply (7.5%),
manufacturing (6.2%), financial and insurance (6.2%), while the
largest decline has been in the construction sector (2.9%).
Industrial production continued with growth and in June recorded
3.3% increase compared to the same period last year. In January-June
2011 industrial production rose by 4.8% compared to the same
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
manufacturing (0.5%).
Decline in the construction industry recorded in the Q1 2011 (2.9%)
has been reduced compared to 2010. Recovery in the construction
industry depends greatly on the government initiative to start major
infrastructural developments.
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
since October. Stabilization of the labor market has not been reached
yet, and this problem will continue to be the biggest challenge
through 2011.
The inflation in June 2011 amounted to -0.3%, while the year-on-year
growth amounted to 12.7%. Decrease of inflation pressures can be
explained by slowdown of food prices growth. However, the
inflation in 2011 is expected to reach a double digit level (10.3%),
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%,
compared to the previous month. In June 2011, the retail prices were
higher by 12.7% than in the same period in 2010. Retail turnover in
June 2011 decreased by 16% in constant prices compared to June
2010.
The average net salary in Serbia in June 2011 was RSD 39,322, which
is an increase of 2.1% in real terms compared to June 2010.
Considering the period January-June 2011, the average net salary
decreased by 2.2% in real terms compared to the same period last
year.
In the field of European integration, despite certain issues regarding
the Kosovo question, the EU candidate status will probably be
granted to Serbia by the end of current year. This improvement in the
field of European integration will certainly affect the economic
prospects of the country.
New estimates for net FDI in 2011 are USD 2 billion, which is far
from the projected level of USD 4 billion. The reduced level of net
FDI can be explained by the unsuccessful privatization of majority
stakes of the national telecommunication company “Telekom
Serbia”. In the first six months of 2011, the largest investment was the
acquisition of the local retail chain “Maxi” by the Belgian “Delhaize
Group” for the amount of EUR 930 million. The largest FDI inflow in
2011 is expected in the retail and manufacturing sectors.
Economy
Outlook
1H2011
5. Real Estate Market & Trends Outlook | 3
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.
Indicators 2008 2009 2010 2011F 2012F
GDP (EUR bn) 32.7 28.9 28.6 33.5 37.3
GDP per capita (EUR) 4,443 3,943 3,917 4,607 5,150
GDP (constant prices yoy %) 3.8 -3.5 1.8 2.7 3.5
CPI (average, yoy %) 11.7 8.4 6.3 12.5 7.9
Central bank reference rate 17.80 9.50 11.50 9.50 8.50
Monthly wage, nominal (EUR) 560 470 462 526 574
Unenmployment rate (%) 13.7 16.1 20.0 19.5 18.8
Budget balance/GDP (%) -2.6 -4.5 -4.7 -4.5 -3.9
Current account balance (EUR bn) -7.1 -2.1 -2.1 -2.8 -2.9
Current account balance (% of GDP) -21.6 -7.2 -7.3 -8.3 -7.8
Net FDI (EUR bn) 1.8 1.4 0.9 2.0 2.0
FDI (% of GDP) 5.6 4.8 3.0 6.0 5.4
Gross foreign debt (EUR bn) 21.8 22.8 23.8 26.0 29.0
Gross foreign debt (% of GDP) 66.7 78.9 83.3 77.7 77.8
Exchange rate to EUR avg 81.49 94.05 103.12 101.00 101.50
Source: UniCredit Research
7. Real Estate Market & Trends Outlook | 5
After a large increase in vacancy rates in the first
half of 2010 coupled with substantially depressed
tenant demand, performances of the office market
remained subdued. Occupier activity and rent levels
are fairly stable compared to year-end.
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
cautious as demand is still low as well as
predictability of the economic environment. In the
last 12 months the market has experienced zero
delivery.
Supply
As relatively immature, the office market in Belgrade was
characterized by average delivery of 60,000 sq m of GLA, which
affected a comparably low vacancy levels during the period of 2003-
2009. Many speculative developments were commenced during the
economic expansion in 2007-2008. The highest delivery of 70,000 sq
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
developments.
The first half of 2010 saw a record level of 80,000 sq m of GLA of
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.
The new class A developments delivered in 2010 amounted to 50,000
sq m of GLA, while the class B amounted to 30,000 sq m of GLA. All
new developments are located in the area of New Belgrade (CBD –
57% and Wider Center – 43%).
After a period of intensive supply, the last 12 months have brought a
reversal. The supply pipeline has been postponed while new
speculative construction is almost suspended. Therefore, in the last
12 months the market has experienced zero delivery.
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.
Belgrade office stock
Source: LeRoy Research
0
100,000
200,000
300,000
400,000
500,000
600,000
2004 2005 2006 2007 2008 2009 2010 1H
2011
SqmofGLA
Total Class A Class B
Source: LeRoy Research
Belgrade office delivery, semiannual
0
10,000
20,000
30,000
40,000
50,000
2H
2007
1H
2008
2H
2008
1H
2009
2H
2009
1H
2010
2H
2010
1H
2011
SqmofGLA
Total Class A Class B
Office
Market & Trends
1H2011
8. Real Estate Market & Trends Outlook | 6
Demand
Belgrade office market saw a significant saturation caused by
reduction in take-up. The past 6 months have not been easy,
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 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
appeared among larger occupiers in 2010. In the first six months
there has been a change in the structure of demand. Unlike banking
sector that dominated throughout 2010, communication/media, IT
and pharmaceutical/medical sector were the main occupiers in the
first six months of 2011.
A typical demand is oriented to smaller and medium size premises
between 100 and 300 sq m. Almost 70% of all transactions referred to
the surface up to 500 sq m, while only 30% of transactions referred to
the larger space (above 500 sq m). The demand is predominantly
focused on the New Belgrade area, while only 15% of lease
transactions relate to offices in the downtown area.
The recovery in demand will be slow, and rising economy
uncertainty does not contribute to strengthening business
environment. Economic sentiment within the country is still low,
while a potential deepening recession in EU doubts the pace of
recovery. At the local level, the flexibility of landlords, offering more
favorable lease terms, rent free periods or space fit-out, is aimed at
stimulating the demand. Although without the increase in number of
expansionary led requirements, the office market recovery cannot be
expected. Despite the increase of expansionary demand in the last 6
months, the demand level is still historically low and as a result there
still remains unpredictability of the short term trends in the market.
During 2011 companies will continue to look for relocation and this
will generate a larger amount of gross take-up.
Vacancy
A strong pace of new developments delivered in 2010 together with a
decrease in demand and the relatively high ratio of lease renewals,
increased the vacancy to the highest recorded level since 2000. The
majority of vacant space remains within new developments and the
increased vacancy is recorded also within lower quality class B and C
buildings and secondary locations, since many tenants have decided
to relocate.
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
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.
Office vacancy rates
Source: LeRoy Research
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2005 2006 2007 2008 2009 2010 1H 2011
Class A Class B average
Rents
The rents seem to have been mainly stabilized during 2010, with only
slight downward correction of approximately 2%. The headline office
rents for the prime stock have remained stable, while corrections
have occurred for space in the non prime areas. The landlords are
generally reluctant to reduce the rental levels and they are providing
increased tenant incentives to safeguard the rent levels, such as fit-
out contributions and rent free periods. The largest incentives have
been available for large tenants.
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
rental levels in CBD area for the class A space is EUR 13.5-14 per sq
m/month on average, while for the class B premises it is EUR 10.5-11
per sq m/month. The rents in the Wide Center area for the class A
ranges from EUR 12.5-13 per sq/month and for the class B from EUR
10-10.5 per sq m/month.
9. Real Estate Market & Trends Outlook | 7
The average achieved rents are at a slightly lower level.
Average rent levels
Source: LeRoy Research
5.0
7.0
9.0
11.0
13.0
15.0
17.0
19.0
1H 20072H 20071H 20082H 20081H 20092H 20091H 20102H 20101H 2011
EUR/sqm/month
Class A Class B
Office yields
Source: LeRoy Research
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2004 2005 2006 2007 2008 2009 2010 1H 2011
Class A Class B
Office yields seem to have bottomed out in 2010, and we noticed
slight downward movement in the first six months of 2011. If the
existing stock remains stable, average rents are not expected to
decline further, especially in the prime office segment. Otherwise,
the prime rents will come under further pressure. The same applies
to yield.
Pipeline
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 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
the CBD area of New Belgrade.
Another office development due for completion is Atlas building
(4,000 sq m of GLA) located in the downtown area (Takovska Street).
Raiffeisen Bank started with construction of its office building in
Djordja Stanojevica Street in New Belgrade. Total GLA will be 15,000
sq m. Expected time of delivery is 1H 2012.
The International Falkensteiner Michaeler Group started the
construction of a hotel and office complex in block 11a in New
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
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.
Intesa Bank announced construction of its office building at the
corner of Mihajla Pupina Boulevard and Tresnjinog cveta Street in
New Belgrade (block 11a). The construction works should be
commenced during 2H 2011 and expected time of completion is the
end of 2013.
Forecast
The lack of new supply together with a weak economic recovery will
stabilize the office market in 2011, but a return to a significant
growth and expansion is unlikely to happen before 2013. Foreign
Direct Investments (FDI) is still relatively quiet, so the demand
expansion is likely to be limited during 2011. Rents are expected to
remain under pressure throughout 2011, but further rent corrections
are not likely. The trend of high ratio of lease renewals is expected to
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
2011.
The reduced office development pipeline during 2012/2013 (30,000-
53,000 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:
Project Location
Size (Sqm of
GLA)
Investor
Delivery
date
Tri Lista Duvana Downtown 8.000 MPC 2012
Atlas Downtown 4.000 Atlas Group 2011/2012
B 23 New Belgrade 35.000 Verano Group Unknown
Raiffeisen bank New Belgrade 15.000 Raiffeisen bank 2012
Intesa Bank New Belgrade 30,000* Intesa Bank 2013
Falkensteiner building New Belgrade 6.000 Falkensteiner Group 2012/2013
Source: LeRoy Research
*GBA
11. Real Estate Market & Trends Outlook | 9
The second half of 2010 marked the entrance of a few
new brands in high street locations which slowly re-
absorbed vacant premises and indicated on a healthy
increase of occupier activity. However, the beginning
of 2011 brought the stabilization of demand.
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
players in the retail segment.
Growth of unemployment has continued in the first six months of
2011 and together with consumer price growth led to a further
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.
Structure of retail sales in Serbia, 1Q 2011
Source: Statistical Office of the Republic of Serbia
42.3%
4.4%4.6%4.2%
3.9%
9.1%
3.5%
0.9%
16.4%
10.7%
Food & non-alcoholic
beverages
Tobacco & alcoholic
beverages
Clothing & footwear
Furniture & household
equipment
Health care
Transport &
Communications
Recreation & Culture
Education
Household utilities &
Fuels
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
other items has mainly been reduced (compared to data from
December 2010). These changes can be explained by the continuous
weakening of the purchasing power.
All these negative tendencies will keep consumer spending
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
2010 was retail warehousing (big-box developments), while new
shopping center developments were mainly postponed. After a
period of delay, 1H 2011 witnessed several new deliveries in Serbia
and Belgrade.
With only 100 sq m of modern shopping center space per 1,000
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.
Supermarket chains are still the most common developments and
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
chain “Maxi”. The current market share of this chain is 22% in Serbia
and 37% in Belgrade. The total value of transaction is cca EUR 930
million.
In April 2011, Croatian chain “Idea” took over Slovenian chain “Tus”
with 7 supermarkets. Also, Slovenian “Mercator” announced a
possible takeover of the local supermarket chains: “Familija” and
“Jabuka”.
Retail
Market & Trends
1H2011
12. Real Estate Market & Trends Outlook | 10
Apart from “Delhaize”, in the first quarter 2011, German discount
retailer “Lidl” announced its market entry. Considering all these
recent changes, we can conclude that Serbian retail market is
preparing for another stage of market competition and going toward
more open and mature phase.
Expansion of supermarket chains was similar to the previous year.
The Slovenian “Mercator” had the largest expansion. They opened
two “Roda Cash & Carry” in Mladenovac and Smederevo, “Roda
Center” in Vrbas and two “Roda” supermarkets in Smederevska
Palanka and Velika Plana. With acquisition of the business system
“Coka” in August 2010 they received 22 buildings and cca 12.000 sq
m. In 2011 Mercator announced opening of “Roda Center” in
Jagodina and Krusevac. The market share of Mercator is cca 10%.
The German chain “Metro Cash & Carry” opened their seventh
overall, but the third hypermarket in Belgrade. The hypermarket is
located in Vidikovac area – Ibarska Road and the opening was in
June 2011.
The Croatian chain “Idea” opened supermarkets “Idea Super” in
Belgrade, Novi Sad, Jagodina and Kragujevac. They opened small
format markets (200-600 sq m) in Belgrade, Zemun, Novi Sad,
Topola, Cacak, Svilajnac.
The Greek chain “Veropoulos” opened a hypermarket in Vojvode
Stepe Street, Belgrade, in April 2011.
Shopping center developments were more active in 2011. In March,
the shopping center “Forum” was opened in Nis pedestrian zone. A
month later, the shopping center “Mladenovac”, known as “TCM”,
was opened in Mladenovac. In June, “Roda center” was opened in
Vrbas. The second stage of the retail park “AVIV” was opened in
Pancevo in June 2011.
The only shopping center delivered in 1Q 2011 in Belgrade is the
neighborhood center in Vozdovac area – called “Pasino brdo center”.
Danish chain “JYSK”, which sells “everything for the home”, entered
the market in 2011. The first store they opened in Subotica in April,
while in June they opened its second store in the retail park “AVIV”
in Pancevo.
After a period of stagnation, newcomers started to appear on the
market, which can be a good example to other retailers. 1H 2011 was
characterized by the entry of new supermarket chains: “Delhaize”
and “Lidl” and a slow revival of shopping center developments. A
lot of announced projects are still waiting for commencement of
construction. The developers are faced with a problem of securing
project financing, which will further reduce the market activity.
Shopping center stock in Belgrade
Source: LeRoy Research
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 1H
2011
SqmofGLA
*without Belgrade
Big-box stock in Serbia & Belgrade
Source: LeRoy Research
0
100,000
200,000
300,000
400,000
500,000
2004 2005 2006 2007 2008 2009 2010 1H
2011
SqmofGBA
Serbia* Belgrade
Belgrade
The modern shopping center stock is being supplemented with a
new development bringing total stock to 160,000 sq m of GLA.
Neighborhood shopping center “Pasino Brdo” in Vozdovac was
opened in the first quarter of 2011 bringing 6,500 sq m of GLA. The
tenants are: Roda supermarket, Chacarel perfumery, XXL Design,
café, etc. The investor is the local company Novi Dom.
In April 2011, the Greek chain “Veropoulos” opened its fourth
hypermarket in Belgrade with 7,000 sq m of GLA. The market Vero is
located in Vojvode Stepe Street, in Vozdovac municipality.
The Croatian chain “Idea” continued its expansion in Belgrade and
Serbia by acquisition of “Tus” supermarket chain. In April 2011 they
opened a renovated supermarket (ex Tus supermarket) in block 62,
New Belgrade and small markets in New Belgrade, Zemun,
Cukarica, Zvezdara (350 – 650 sq m).
The German chain “Metro Cash & Carry” opened the third
hypermarket in Belgrade in June. The building is located along
Ibarska Road in Vidikovac area and consists of 13,500 sq m of GLA.
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.
13. Real Estate Market & Trends Outlook | 11
Serbia
The Croatian chain “Idea” continued expansion in 1H 2011. They
opened the supermarkets “Idea Super” in Jagodina (1,500 sq m),
Kragujevac (1,500 sq m) and Novi Sad (1,500 sq m) in April, and
small markets (200-600 sq m) in Novi Sad, Topola, Cacak, Svilajnac.
The Slovenian “Mercator” opened “Roda Cash & Carry” in
Mladenovac (4,500 sq m) in April and Smederevo (2,500 sq m) in
May 2011. They opened “Roda” supermarket in Smederevska
Palanka (1,400 sq m) in March. In June, “Roda center” (5,000 sq m)
was opened in Vrbas. A new store concept, a super market and
technique center was introduced in January in Velika Plana and
Smederevo.
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.
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.
Danish chain “JYSK”, which sells “everything for the home”, opened
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
the retail park “AVIV” in Pancevo.
Demand
The first half of 2011 continued the slow pace of recovery. The
retailers are still very cautious regarding expansion and many of
them have adopted more feasible and reasonable investment
strategies.
Many new retailers started to think strategically and seize good
opportunities under favorable terms. Anchor retailers are active in
the market, but they continue to ask for incentives from the investors
to enter new projects, such as rent free period, space fit-out, etc.
Despite the reduced demand, vacancy is low since the market is still
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
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
Milana Street.
New openings are expected in Knez Mihajlova Street soon, such as
the first “GAP” store.
Tenant Type Location/Street Opening date
Sephora Perfumery Knez Mihajlova St. May-11
Lush Perfumery Knez Mihajlova St. June-11
Evro Giunti Bookstore Knez Mihajlova St. June-11
Laguna Bookstore Kralja Milana St. 2011
GAP Fashion Knez Mihajlova St. Announced
Source: LeRoy Research
New high street openings
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”.
Project Location Type
Size (Sqm of
GLA)
Delivery
date
Pasino Brdo Vozdovac Shopping center 6,500 1Q 2011
Forum Nis Shopping center 10,000* Mar-11
TCM Mladenovac Shopping center 8,800 Apr-11
Roda Center Vrbas Shopping center 5,000 Jun-11
AVIV retail park Pancevo Retail park 8,000** Jun-11
JYSK Subotica Everything for the home 800-1,200*** Apr-11
JYSK Pancevo Everything for the home 800-1,200*** Jun-11
Metro Cash & Carry Vidikovac Hypermarket 13,500 Jun-11
Vero Vozdovac Hypermarket 7,000 Apr-11
Idea Super New Belgrade Supermarket 1,500 Apr-11
Idea Super Jagodina Supermarket 1,500 Apr-11
Idea Super Kragujevac Supermarket 1,500 Apr-11
Idea Super Novi Sad Supermarket 1,500 Apr-11
Roda Cash & Carry Mladenovac Supermarket 4,500 Apr-11
Roda Cash & Carry Smederevo Supermarket 2,500 May-11
Roda Sm. Palanka Supermarket 1,400 Mar-11
Mr. Bricolage Vozdovac DIY 3,000 Pipeline
Source: LeRoy Research
* 7,000 sq m is office space
** the second stage
***typical size of JYSK retail space
New retail deliveries
14. Real Estate Market & Trends Outlook | 12
Many new retailers have announced their market entry during 2011-
2013, such as the French chain “Carrefour”, the Swedish “Ikea” and
the German DIY chain “OBI”. Demand is dominantly focused on
Belgrade market, while expansion to secondary cities is still cautious.
However, expected improvement in the economic outlook is
encouraging healthy retailers to continue with their strategic
expansion plans.
The demand for retail space and number of transactions are expected
to increase in 2011. We can expect a healthy level of demand in the
prime locations, while the demand for secondary locations will fall
further. However, the retail market recovery cannot be expected until
the living standard and overall economy has been genuinely
improved, which is not expected in 2011.
Vacancy
The vacancy rate is rather stable and a very low number of
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
rate lower. The overall vacancy (primary and secondary locations) is
approximately 7%.
The main shopping centers serving as dominant retail destination
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
well as by the low level of development that has been started over
recent years. Despite the positive movements, we can conclude that
the market has still not done with contraction.
Rents
The retail market continued to experience declining rental rates and
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
corrections.
This downward pressure on lease rates will remain, while the rent
relief and renegotiated leases will continue in the third quarter of
2011. Landlords are forced to offer better commercial conditions such
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,
Kralja Milana and Knez Mihajlova Street) have dropped to average
EUR 40 to EUR 90 per sq m, depending mainly on the size and
position of the unit (smaller units maintain higher range of average
rents). Secondary locations rents move between EUR 15 to EUR 40
per sq m on average.
Due to slow economy recovery in 2011, general rental growth is
unlikely. We can expect a gradual rental market recovery from the
second half of 2012, helped by lower vacancy levels.
Prime rents in Belgrade
Source: LeRoy Research
85.0
50.0
35.0
0
50
100
150
Knez Mihajlova St. Terazije & Kralja
Milana St.
Kralja Aleksandra
Blvd.EUR/sqm/month
min max average
Shopping center rents in Belgrade
Source: LeRoy Research
8.5
17.5
27.5
32.5
50.0
40.0
55.0
32.5
0
10
20
30
40
50
60
70
Hypermarket Anchor
tenants
Mini anchors Inline tenants
(100-200 sq m)
Small inline
tenants
Services Cafes Food court
EUR/sqm/month
min max average
Indicative retail yields, 1H 2011
Source: LeRoy Research
0.00%
5.00%
10.00%
High street Shopping center Retail warehouse
8.00%
9.00%
9.75%
Pipeline & Announced
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.
15. Real Estate Market & Trends Outlook | 13
The company “Plaza Centers” reactivated construction of a shopping
mall in Kragujevac which initially started in autumn 2008. The
shopping mall will offer 28,000 sq m of GLA and will contain more
than 100 stores and an entertainment center. The expected time of
completion is 2012.
In 2010, “Delta Holding Company” commenced the construction of
Retail Park in Kragujevac. The development will comprise 23,000 sq
m of GLA and the first stage holding Tempo hypermarket (9,500 sq
m of GLA) was opened in November. The second stage of
construction will be completed during 2011.
“Belgrade Outlet Center” is currently under construction in Indjija
with 30,000 sq m of GLA. The investor is the company “Black Oak
Development” and the expected time of delivery of the first stage
holding 15,000 sq m is postponed for March 2012.
The Israeli company “BIG CEE” commenced in June the preparation
works for development of a shopping center in Novi Sad. The
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
is the second half of 2012.
The “AVIV Retail Park” in Pancevo announced construction of the
third stage that will have approximately 10,000 sq m of GLA and the
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.
Forecast
Despite the ongoing obstacles, Serbian retail market takes the lead
over other real estate segments. Therefore, we anticipate a slow but
steady improvement in the period to come.
In the short term the market will experience a slowdown, since many
proposed developments cannot secure financing and tenants. The
development pipeline is progressing in 2011/2012 after a period of
stagnation.
The main focus of retailers is still Belgrade where the spending
power is stronger, but there is a re-emerging demand for other cities.
Total retail sales will remain weak in 2011 as the primary catalysis of
spending stays weak, especially job creation. Retailers will lack the
confidence to expand aggressively due to considerable uncertainty
attaching to the short term outlook. However, we expect an increase
in tenant demand for top-quality retail assets, while the difference
between prime and secondary properties will continue to widen.
Very soon we can expect limited opportunities for many new
retailers to secure good units, especially in Belgrade and the problem
could become even higher if the supply of new shopping centers or
other retail formats remains restricted in the future. As a result, the
supply side will be a key driver of rental recovery.
Project Location Type
Size (Sqm of
GLA)
Delivery
date
Plaza Centers Kragujevac Shopping mall 28,000 2012
Delta Park Kragujevac Retail park 23,000* 1H 2011
Belgrade Outlet center Indjija Outlet center 30,000** 1H 2012
BIG CEE Novi Sad Shopping mall 30,000 2H 2012
AVIV retail park Pancevo Retail park 30,000*** Announced
Bauhaus Belgrade DIY 20,000 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
Projects under construction
17. Real Estate Market & Trends Outlook | 15
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.
Positive developments in the segment of industrial
production have yet to translate into a heightened
tenant demand for the industrial and logistics space.
However, widespread movement in the industrial
market will likely not occur until 2012.
The industrial production in Serbia marks a positive development
during 2010-2011 periods. The industrial production recorded the
3.3% increase in June 2011 compared to the same period last year.
Compared to the period January-June 2011/2010, the industrial
production increased by 4.8%.
Future high prospects for industrial/logistics developments can be
explained with a favorable country position on strategic corridors 10
and 7 that connect Western Europe with the Middle East. The
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).
Supply
A new supply of industrial & logistics space continued weak
performance during 2010-2011, with improved prospects in
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.
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
wider area is 360,000-390,000 sq m, which indicates a relatively low
development level of this market segment.
Developers were faced with difficulties in obtaining finance and
unsecured leasing prospects, which kept new completions low
during 2010. However, growth prospects are already visible in
industrial sector especially in central and southern region.
Industrial
Market & Trends
1H2011
Modern logistics stock in Serbia
Source: Statistical Office of the Republic of Serbia
0
100,000
200,000
300,000
400,000
500,000
2005 2006 2007 2008 2009
Sqm
Total Central Serbia Vojvodina
Modern industrial & logistics stock in Serbia
Source: Statistical Office of the Republic of Serbia
0
300,000
600,000
900,000
1,200,000
1,500,000
1,800,000
2005 2006 2007 2008 2009 2010
Sqm
Total Industrial Logistics
18. Residential Market & Trends Outlook | 16
Industrial & logistics construction permts issued in Serbia
Source: Statistical Office of the Republic of Serbia
0
100
200
300
400
2006 2007 2008 2009 2010
Numberofpermits
Total Logistics Industrial
Industrial & logistics construction permts issued in Belgrade
Source: Statistical Office of the Republic of Serbia
0
5
10
15
20
25
30
2006 2007 2008 2009 2010
Numberofpermits
Total Logistics Industrial
Car installation manufacturer, Korean company “Yura Corporation”,
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.
New infrastructural developments, such as the construction of the
new part of Corridor 10 (Horgos – Novi Sad); the highway Batocina –
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.
Local and international developers have already acquired large land
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
strong pipeline in years to come.
Demand
After a considerable decrease in occupier demand, we noticed certain
market stabilization, but the ratio of new leases is still low. Occupiers
are mainly focusing on modern space offering the adequate ceiling
height, a wide manipulation area, a flexible layout and a good road
connection. The demand is mainly generated by automotive,
distribution, pharmaceutical and FMCG companies and average
space requirements are between 1,000 and 3,000 sq m. The highest
demand is still focused on locations along the highway E-70 and E-
75.
The slow economic recovery and rising industrial production
stabilized property performance in the first half of 2011 but positive
effect on the market is yet to be witnessed.
Vacancy
Despite the decline in development activity and scarce speculative
completions in 2009-2011 period, the lower demand created an
increase in vacancy. Since the occupier demand is focused primarily
on the modern stock, the majority of vacant space is concentrated in
old buildings. The estimated vacancy in wider Belgrade area is
between 10-12%. Due to the low level of new supply, the vacancy
rate is expected to decline.
Rents
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.
Source: LeRoy Research
Modern warehouse rents in Belgrade & wider area
4.1
3.0
2.5 2.5
3.5
3.0
3.3
0.0
1.0
2.0
3.0
4.0
5.0
Zemun Dobanovci Pecinci St. Pazova Krnjaca Lestane Downtown
EUR/sqm/month
min max average
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
19. Residential Market & Trends Outlook | 17
in the range from EUR 2 to EUR 3 per sq m per month. Along
Pancevo Road new warehouses achieve rents from EUR 3 to EUR 4
per sq m per month.
The rental levels for old warehousing facilities also depend on
location, but are generally in the range between EUR 1 and EUR 2.5
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
month, while newer and better maintained facilities range from EUR
4 to UR 4.5 per sq m per month.
Due to the constrained new supply, we will see further balancing of
supply and demand levels, and therefore a possibility for a moderate
rent increase in 2012.
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.
It is important to note that existing companies in the market have
announced new investments in 2011, such as “US Steel Serbia” (EUR
51 million), “Gazprom Neft” (EUR 450 million), “Fiat” (EUR 600
million), etc. Also, many new foreign companies showed interest for
investing in Serbia. Potential investors are mainly from the
automotive and textile industry.
If these announced investments realized in the announced amount in
2011-2012, the industrial & logistics market will witness a significant
improvement. However, following the previous path of development
we are not expecting considerable changes on the market in the next
6 months. The announced new investments will set the stage for
economic and employment growth, which will drive the
development of industrial & logistics sector in 2012-2013.
21. Residential Market & Trends Outlook | 19
Following modest activity during 2010, weak
economic and household conditions depress further
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.
New measure of the National Bank of Serbia to
increase the mandatory deposits for housing loans to
20% will adversely affect the demand in the second
half of the year. In the short term, the demand and
transaction volumes are not expected to recover
leading the way to another price correction.
Supply
Residential development completions in Belgrade decreased for 12%,
falling from 5,759 apartments in 2009 to 5,048 in 2010. Compared to
previous two years, many new projects are announced and presented
to the public, with expected completion in 2012-2013. However,
development of the economic situation during the year will certainly
determine whether such projects will be implemented within the
prescribed deadlines.
A visible decline in number of completions in 2010 and reduced
number of issued building permits in 2009-2010 period, indicate that
the overall annual delivery in 2011 will be similar with possibility of
lower growth.
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)
and Savski Venac (29% decrease).
Number of constructed apartments in Serbia & Belgrade
Source: Statistical Office of the Republic of Serbia
0
4,000
8,000
12,000
16,000
20,000
2004 2005 2006 2007 2008 2009 2010
16,388 16,417
18,162
19,049 19,815 19,103 18,648
4,977
7,292 7,379 7,601 7,306
5,759 5,048
Numberofapartments
Serbia Belgrade
Number of constructed apartments in Belgrade municipalities
Source: Statistical Office of the Republic of Serbia
0
400
800
1,200
1,600
2,000
1,966
935
364
600
293
432
171 152 77 55
714
558
1,011
276
659
313
504
121
214
196 237
959
Numberofapartments
2009 2010
Structure of new apartments in Serbia, June 2011
Source: Statistical Office of the Republic of Serbia
26%
38%
26%
11%
Studio & 1 bdr
2 bdr
3 bdr
4 bdr & larger
Residential
Market & Trends
1H2011
22. Real Estate Market & Trends Outlook | 20
Many new developments are predominantly small in size with 10-20
apartments on average, lower to mid quality and smaller structure
(30-45 sq m). The structure of new apartments remained almost
unchanged.
2010 statistics confirm a decline in number of issued building permits
of 24% in Belgrade and 25% in Serbia, as a consequence of reduced
demand as well as the introduction of the new Law on Urban
Planning and Development in September 2009. Slower decline
continued in 2011 with 600 permits issued in Serbia in the period
January-April, which is a drop of 9% compared to the same period
last year. It is expected that the number of issued building permits
and building starts will be slightly higher in Q3 2011.
Source: Statistical Office of the Republic of Serbia
Residential construction permits issued in Serbia & Belgrade
0
2,000
4,000
2006 2007 2008 2009 2010 I-IV 2011
2,129
3,113
3,281
2,901
2,184
600566 649 741 620
471
Numberofpermits
Serbia Belgrade
Residential construction permits issued in Belgrade municipalities
Source: Statistical Office of the Republic of Serbia
0
50
100
150 134
78
23 20 23 24
21 17 9 4
110
60
27
21
32
18
5 7 3 7
Numberofpermits
2009 2010
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
project “Metropolitan” in Palilula was delivered with 80 apartments.
In Zvezdara area, two projects were completed during the first 6
months. The “Prestige” and “Exclusive” projects delivered new
18,000 sq m of residential space.
We expect further market adjustments in 2011 in terms of supply and
prices. However, the real impact of the crisis on the supply will be
seen during 2011 and we expect that many announced projects will
be delayed as a consequence of unstable demand. The expected
supply in Belgrade is estimated at app. 5,500 units in 2011.
Despite a slight recovery of demand during 2010, the increase in
unemployment registered in Q4 2010 and Q1 2011, and the increased
number of people with the problem of servicing their borrowing
liabilities will keep the demand restricted. A new measure of the
National Bank of Serbia to increase the mandatory deposits for
housing loans to 20% will negatively impact the majority of potential
buyers.
Demand
Economy instability and rising unemployment have an effect on
delaying home purchases, further depressing the medium term
confidence of potential homebuyers. Lower affordability of
mortgages together with the new measures of the National Bank will
further hinder transactions.
Positive market signs recorded through 2010 were short-lived.
According to the statistics, the number of housing loans approved by
the banks in Serbia in the first half of 2011 was reduced by 18%
compared to the same period last year. The total number of
approved loans in 1H 2011 is 3,986.
The number of residential transactions in Belgrade is reduced again,
despite more favorable prices. Most of the active demand was
focused on smaller, mid-end apartments, while the demand for
larger and more luxurious units was significantly reduced. The
similar situation can be also reflected on rental market. The demand
for affordable housing is likely to rise slowly especially for the
government financed program of residential construction.
Economy instability and pressure on limited disposable income
continue to dissuade potential buyers from entering the market.
Pending any significant macroeconomic developments prices can
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
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.
Pricing
Following a considerable fall, housing prices show relative stability.
The average price decline in the last 30 months is between 25-35%.
The price decline is slowed in 2H 2010, but continued in the first six
months of 2011 with an average correction of 3-4%.
23. Real Estate Market & Trends Outlook | 21
The highest price correction has occurred in the case of low to mid
quality apartments in suburban locations, but a visible correction is
obvious for the apartments in central locations, as well as high-end
projects. In the mid-market segment the highest recorded decrease
was in New Belgrade.
Asking prices for mid quality projects depend mainly on
municipality and micro location, and vary between EUR 1,300 – 1,900
per sq m. High quality development prices are on average EUR 2,200
– 3,000 per sq m.
It should be noted that these price levels rely on the existing offer.
Most of developers/sellers still prefer to keep higher asking prices,
but are more flexible when negotiating with clients. Therefore, the
effective price for a closed transaction can be up to 10-15% lower.
Rental market has also experienced downward trend of demand and
prices. The rent levels have decreased for approximately 30-35%
since the beginning of the crisis. A considerable rent reduction is
especially noted in the mid-market segment and in the segment of
luxury rental homes. Rental decline continued in 1H 2011 and the
average price decrease is 7-8%.
Average asking prices in Belgrade municipalities
Source: LeRoy Research
2,250 2,200 2,300
1,900
1,500 1,525
1,400 1,400
500
1,000
1,500
2,000
2,500
3,000
3,500
EUR/sqm
min max average
Average asking rents in Belgrade municipalities
Source: LeRoy Research
8.3 8.3
10.0
7.3
6.5
3.0
6.0
9.0
12.0
15.0
Downtown Vracar Dedinje New Belgrade Zvezdara
EUR/sqm
min max average
Developed & Under Construction
Several larger projects currently under construction are expected to
be delivered during 2012-2013 period. Most of the developments are
designed for mid-market buyers.
The government strategy for reviving the residential market and
boosting the construction sector includes development of
government financed residential complexes that will meet demand
for the affordable housing. The location is in the area of Vozdovac
(ex military base “4. July”) with the development potential of 4,578
units. The construction of the first phase commenced in February
2011. The first stage is due for completion in spring 2012 and will
bring 1,800 apartments, while 2,235 apartments will have been
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
for other buyers the price will be EUR 1,290 per sq m plus VAT.
The preparation works for another large project (mixed use) in block
65, New Belgrade started in March 2011. “West 65” complex will
have an area of 150,000 sq m and will contain 514 apartments and 100
retail units. The first stage of construction should begin soon, while
the entire residential part should have been developed by 2014. The
apartments will be offered to mid-market buyers and the investor of
this project is the company PSP Farman.
Construction of the residential project “Marmil Land” in Vracar area
started in March 2011. The complex will have 3 lamellas with the
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
Inzenjering.
The residential complex “Alpha City” started with construction in
May 2011 in Zivka Davidovica Street, Zvezdara. The complex will
contain 7 lamellas with 299 apartments. The ground floor is intended
for business units. The investor of this project is the company
International Alpha Construction and the expected date of
completion is the end of 2012 or the beginning of 2013.
Project Location
Size (Sqm
of GBA)
No of
units
Deadline
Maxima Center - I stage New Belgrade 16,000 2H 2010
Maxima Center - II stage New Belgrade 6,000 1H 2011
Metropolitan Palilula 15,000 80 1H 2011
Exclusive Zvezdara 9,000 99 1H 2011
Prestige* Zvezdara 44,000 550 2011-2013
Koling Zeland Dedinje 11,500 73 2012
Maxima Center - III stage*** New Belgrade 20,000 84 2012
Marmil Land Vracar 18,000 159 2012-2013
West 65 New Belgrade 150,000 514 2014
Alpha City Zvezdara 32,000 299 2012-2013
Golf 8** Banovo Brdo 19,000 153 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
130
24. Real Estate Market & Trends Outlook | 22
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.
25. Real Estate Market & Trends Outlook | 23
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