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2011 Colliers real estate review » CoUNtrYSerbia Dear Friends and Partners, the last year has proven to be challenging for all of us. All of the real estate market segments suffered, each in their own manner. Although the messages we receive from banks, investors as well as the government are encouraging, 2011 will continue to be a year of caution but a slow and definite recovery. Maja Sahbaz As a result of all this change, the one thing we can say is that the market managing director is a lot more sophisticated than it was 2 – 3 years ago. Some difficult colliers international serbia lessons were learned, and among them the most important one would beAddress 115D Mihajla Pupina Blvd. that the market has shifted towards tenants and buyers. 11070 New Belgrade, SerbiaPhone +381 11 313 99 55 it will continue to take an innovative and sophisticated approach toEmail Maja.Sahbaz@Colliers.com achieve successful and sustainable real estate solutions, tapping into local and global experience. We hope to continue to accelerate your success. Best regards, Maja SahbazP. 2 | CollieRS inteRnAtionAl Research: Firstname.Lastname@Colliers.com
2011 Colliers real estate review » serBia ECONOMIC OVERVIEW KEY ECONOMIC FIGURES SUMMARY PROGNOSIS Metric 2010E 2011F After a sharp decline in GDP in 2009 Serbia’s GDP growth should be more GDP Growth 1.5% 2.5% (-3.1%), Serbia began to show some robust in 2011 than in 2010, with Industrial Production -0.5% 5.0% positive signs economically, with three UniCredit bank forecasting GDP growth Unemployment 20.0% 19.5% consecutive positive growth quarters of 2.7% in 2011. Inflation 10.3% 7.5% (Q1: +.03%, Q2: +.08%, Q3: +1.6%, qoq Retail Sales -1.1% n/a seasonally adjusted). Consumer prices will continue to Public Deficit -4.8% -4.0% experience upward pressure, the target Source: NBS, Raiffesen Bank, Colliers Research Estimated GDP in 2010 was €29.7 of 4.5% (± 1.5%) set by the National Bank Bln, 1.5% above the previous year. Due will likely be difficult to achieve with to the significant drop in GDP in 2009, UniCredit Bank projecting an inflation this brings Serbia’s GDP just above its rate of 7.5%. 2007 figures. GDP, INDUSTRIAL OUTPUT & UNEMPLOYMENT 25% The Serbian Dinar (RSD) is expected 20% Production and export trends have to continue to depreciate during 2011, 15% 10% improved in 2010, with industrial with some analysts projecting the 5% production in the first 11 months of 2010 exchange rate against the Euro as high 0% -5% increasing 3.2% compared with the as 117 RDS. Source: NBS, Raiﬀeisen Bank -10% Colliers Research same period in 2009. -15% The “Serbian post-crisis economic | | | | | | 2007 2008 2009 2010 2011F 2012F ▬ GDP Growth ▬ Industrial Output ▬ Unemployment Unemployment figures remained growth and development model week in 2010, in October reaching 19.2%. 2011 – 2020” study should act as the basis for the government’s economic Consumer prices have grown beyond strategy. The document calls for more FDI (EUR BN.) 2.5 the National Bank’s target of 6.0% (±2%), focus on investment and imports as the Source: UniCredit Bank 2 increasing 10.3% yoy for the period historical reliance on privatizations and 1.5 January – December. foreign direct investment may be drying 1 up. 0.5 The Belgrade Stock Exchange has 0 | | | | | been plagued by poor performance and Telekom Srbija, Serbia’s fixed phone 2008 2009 2010 2011F 2012F extremely low turnover, the two main line operator is likely to be privatized in indices, Belex 15 and Belexline, fell 1.8% 2011, with major players in the and 2.2% in 2010 respectively. Total telecommunications industry interested turnover on the exchange was only in acquiring the state-run company. The €222 Mln. sale is expected to generate at least €1 Bln in revenues to the country, significantly boosting FDI in 2011 compared to 2010.Research: Mirjana.Mandic@Colliers.com CollieRS inteRnAtionAl | P. 3
2011 Colliers real estate review » serBia OFFICE MARKET KEY OFFICE FIGURES SUPPLY In terms of deal size, the majority of Metric Measure demand (70% of requests) was for Despite the construction slowdown Total Stock (A and B) 658,419 Sqm GLA experienced by the Belgrade office premises up to 500 Sqm. The remaining Vacancy (A and B) 24.24% 30% of requests were for larger market during 2010, the total stock of Prime Headline Rent €16/Sqm/month Class A and B office space increased by footplates of 1,000 Sqm and above. Source: Colliers International 76,100 Sqm. By year-end it stood at 658,419 Sqm. VACANCY / AVAILABILITY The vacancy rate increased to Of this, Class A stock comprises 24,24% by end 2010, which equates to 414,503 Sqm GLA an increase of 22.5% 159,633 Sqm. Class A vacancy increased ADDITIONS TO OFFICE STOCK IN BELGRADE70,000 compared to 2009. The total stock of compared to the previous year, driven in60,000 Source: Colliers International Class B space remained the same as in large part by additions to stock, while50,00040,000 2009 – at 243,916 Sqm. Class B vacancy decreased.30,00020,000 New Class A buildings delivered to By type, there was 105,222 Sqm of 10,000 0 | | | | | the market in the second half 2010 vacant Class A – a vacancy rate of H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 included the Dexy Co office building of 25.4%. Class B vacant space account for 9,056 Sqm, located in New Belgrade. 54,111 Sqm – a vacancy rate of 22.3%. Other significant additions to stock included two buildings (Belville Office RENTS Building 1 – 8,089 Sqm GLA and Belville Although rents for all types of officeKEY LEASE TRANSACTIONS Office Building 2 – 15,302 Sqm GLA) space experienced a decrease, there Tenant Size (Sqm) Project Location which opened within the University was a greater fall in Class A rents, due to Findomestic New bank 2,500 Napred Block 26 Belgrade village on Jurija Gagarina Street, in New the higher level of new additions. Prime Belgrade Belgrade. headline rents by year-end fell to €16 Medico Uno 1,000 Pancevo Warehouse per Sqm. In general, headline rents for Cardiovasular New Hospital 1,250 Block 24 Belgrade DEMAND Class A space vary from €13 to €16 Numanovic 1,950 Garden Center Zemun Encouraged by somewhat lower Sqm/pcm. Class B rents remained Furniture rental levels, numerous companies steady at ca. €13.5 Sqm/pcm. started their search for new business premises in 2010. These tenants came In cases where the whole building is from a range of business sectors offered for rent, with sizes ranging from VACANT SPACE IN BELGRADE180,000 including finance and insurance, 1,000 to 2,500 Sqm, prime headline160,000 Source: Colliers International engineering, architecture and rents range from €10 to €12 Sqm/pcm.140,000 construction; IT, media and publishing120,000 and retaling. Among the companies PROGNOSIS100,00080,000 seeking space were Findomestic Bank, Over 50,000 Sqm of space is on60,000 KBC Securities, Meridian Balkans, track to be delivered to the market in40,000 SunGard, Reuters, Beneton, and others. 2011. This comprises of primarly Class A20,000 stock, delivered by a few key 0 Local and foreign government developments. The buildings expected to | | | | | | Q1 2008 Q2 2008 Q1 2009 Q2 2009 Q1 2010 Q2 2010 ▬ Class A ▬ Class B ▬ Overall institutions and embassies were also have a big impact on the market are the active players in the market. The B23 office building by Verano, Australian Embassy took 800 Sqm in the comprising 35,000 Sqm including state “19th Avenue” office building in New of the art systems. Another interesting Belgrade, and the Flight Control Agency new project is Tri lista Duvana by MPC of Serbia took up 1,200 Sqm in the “M Holding (8,200 Sqm GLA) in one of the Invest” building also in New Belgrade. top business location in Belgrade’s CBD. This will create significant competition amongst developers/owners for grade A tenants, putting further downward pressure on class A rents.P. 4 | CollieRS inteRnAtionAl Research: Mirjana.Mandic@Colliers.com
2011 Colliers real estate review » serBia RETAIL MARKET KEY RETAIL FIGURES GENERAL OVERVIEW Traditional shopping center stock only Metric Measure The Serbian retail market took further increased by 5,130 Sqm (3.3%) in 2010, Prime High Street Rents €110/Sqm/month steps toward reaching greater maturity reaching 155,530 Sqm. This was driven Prime SC Rents €60/Sqm/month in terms of its overall retail offering, by the opening of a new neighborhood SC Stock 155,530 Sqm converging more closely with shopping center in the latter half of 2010 Source: Colliers Research neighboring SEE countries Bulgaria and — Point Centar in Kaludjerica. The center Croatia. consists of approx. 5,000 Sqm GLA. Tenants include local brands sutch as Belgrade and Novi Sad remain at the Fitex, OFY Toys, Brankodex, Atrattivo, forefront of the country’s retail Diopta, and consumer electronic store SHOPPING CENTER STOCK IN BELGRADE180,000 development as local and international — Technomarket. Source: Colliers Research160,000140,000 retail chains have continued to expand.120,000100,000 More recently, however, retailers have Outlet center stock remained the 80,000 chosen to venture outside of these two same over the year, with no new 60,000 40,000 big markets into the secondary cities of deliveries expected until H2 2011 through 20,000 0 | | | | | | | Serbia. the opening of Fashion House Outlet 2005 2006 2007 2008 2009 2010 2011F Center in Indjija. An improvement in retail turnover was experienced, albeit to a small extent, DEMAND in the last quarter of 2010. This growth Due to continuous unfavorable market trend is expected to continue in 2011. conditions, the demand for retail units RENTAL LEVELS IN BELGRADE €120 continued to decrease in the latter half of €100 SUPPLY 2010. This created a scenario of lower €80 Total retail supply in Belgrade rents and easier lease terms for €60 increased by 24,000 Sqm in 2010, renegotiations. €40 predominantly driven by the growth of €20 retail parks and outlets, including the This resulted in new market entries €0 | | | new Tempo Center and Hiper Cort. as well as expansions – Burberry Prime SC Prime High Prime Street Outlet opened its first store in Terazije in April, A new Tempo Center, comprising followed by Emporio Armani which 9,000 Sqm, opened in Kragujevac in opened in October. KFC expanded to November 2010. This represents the first Novi Sad and a new location in Belgrade phase of “Delta Retail Park.” Phase two near Studentski trg. will include DIY and other stores scheduled for opening in spring 2011. High street units are traditionally the most sought-after retail type for new Hiper Cort (15,000 Sqm) was sold to market entries in Belgrade – exemplified DIS in last quarter of 2010. This is by fashion brand Peacocks opened its expected to mark the expansion of DIS first store in the primary shopping area markets which are mostly located in of Terazije. Crabtree & Evelyn opened Central Serbia with more supermarkets their first store in Cika Ljubina Street. expected to be opened in Belgrade in 2011. That said, several new market entries in 2010 were, however, made through shopping centers – examples include natural cosmetics brand, Lush, shoes retailer Nine West and Diva jewelry.Research: Mirjana.Mandic@Colliers.com CollieRS inteRnAtionAl | P. 5
2011 Colliers real estate review » serBia RETAIL MARKETNEW MARKET ENTRANTS OR DEVELOPMENTS VACANCY & RENTS Big CEE, an Israeli company, plans toTenant Size (Sqm) Project Developer The vacancy rate in the large, existing develop a new retail park in the vicinityEmporio Armani 270 Terazije High Street modern international-style shopping of Novi Sad – some 4 km away from theQuiz 180 Usce MPC centers – Delta and Usce – remained at city. This project will feature 30,000Nine West 100 Usce MPC 0%. Such shopping centers maintained Sqm of GLA and 1,500 parking spaces.Lush 44 Usce MPC high asking rents although some retailers The building process is expected toDiva 40 Usce MPC did renegotiate terms to reflect difficult commence during 2011 with completion conditions. set for 2012. Prime High street rents continued to PROGNOSISREPRESENTATIVE PIPELINE PROJECTS IN SERBIA be strong at €110 per Sqm. Asking rents The Serbian retail market experiencedGLA Project Type Investor Location at the lower end of the scale, for larger its biggest expansion during 2007 – 2009, Shopping ABD/Astrom Old town18,500 Rajiceva Center Belgrade units can be €40 – 50 per Sqm lower. although it still lags behind more Shopping Novi Dom Vozdov ac, developed regional capitals on a Sqm per6,500 Pasino Brdo Center a.d. Belgrade Peripheral retail areas experienced an capita basis. While the potential is there, Pancevo Retail Retail8,000 Park/IInd phase Park Aviv Arlon Pancevo increase in the vacancy rate. Interest in this depends on Serbia’s ability to Fashion House these locations is mostly generated by generate economic growth and stability, Outlet Center Outlet GVA/Black15,000 Belgrade/Ist Center Oak Indjija local retailers, service providers and which is looking ever more promising. phase banks interested in expanding their network. Rental levels in these areas Based on planned and committed range from €15 – 25 per Sqm. developments, the retail offer in Serbia is clearly growing and improving. With this PIPELINE change comes more choice for retailers The retail market in Belgrade will considering Serbia/Belgrade as their feature several new, large shopping market entry point. Although most center commencements and completions retailers choose Belgrade to start in 2011. building their network, Mr. Bricolage and TKC opted for other cities and are The Pasino brdo neighborhood planning their Belgrade expansion in shopping center, anchored by Roda 2011. market, is expected to have their big opening in the beginning of 2011. The A continued improvement in retail second phase of Pancevo Retail Park turnover, albeit it moderate in 2011, will featuring 8,000 Sqm GLA, as well as the help bring more retailers to the market. second phase of Delta Park in Kragujevac are both expected for delivery during 2011. Fashion House Outlet Center Belgrade, located between Belgrade and Novi Sad in Indjija Retail Park; will feature 15,000 Sqm in phase one and is scheduled for completion in 2011. In terms of commencements, Rajiceva shopping center — the first shopping center development in the downtown area comprising 18,500 Sqm GLA is expected to start in Q1 2011. Completion is scheduled for 2012.P. 6 | CollieRS inteRnAtionAl Research: Mirjana.Mandic@Colliers.com
2011 Colliers real estate review » serBia RESIDENTIAL MARKETRESIDENTIAL SUPPLY IN SERBIA (No. of units) OVERVIEW prices of new developments are stillTenant 2008 2009 Index The Serbian residential market achieved in the municipalities of StariSerbia 17,967 17,408 -3.1% activity continued on a downward trend Grad, then Savski Venac, New BelgradeBelgrade 7,306 5,759 -21.1% in 2010. In particular, average sales and Vracar.Novi Sad 1,946 2,186 +12.3% prices decreased and constructionNis 1,000 1,016 +1.6% activity was lower significantly than in RENTSKragujevac 419 532 +26.9% previous years. This is most prevalent in In the second half of 2010, net rentalSubotica 472 409 -13.3% Belgrade, which is traditionally the most levels remained similar to the first half ofSource: Statistical Office of Republic of Serbia active residential market. 2010. Traditionally the most attractive area for renting is Senjak, followed by SUPPLY Dedinje and Stari Grad. In the second The Serbian market witnessed a half of 2010 demand for apartments inAVG. RANGE OF PRICES FOR NEW DEVELOPMENTS continued decrease in the number of Stari Grad (old town) increasedMunicipality Belgrade building permits issued in 2010. On considerably. There was also an increaseVoždovac €1,500 – 1,700 (VAT included) average there was a 20% decreased in in demand for apartments in Vracar.Vračar €2,300 – 2,500 (VAT included) building permits issued in 2010 when Demand for New Belgrade showed aZvezdara €1,650 – 1,850 (VAT included) compared to 2009. In Belgrade, this is a marked decrease.Zemun €1,200 – 1,400 (VAT included) continuation of the trend set in 2009New Belgrade €1,900 – 2,200 (VAT included) when the market experienced a 21.1% Average rental levels Sqm/pcm inPalilula €1,700 – 1,900 (VAT included) decrease in the delivery residential units Belgrade’s most popular municipalitiesStari Grad €3,000 – 3,300 (VAT included) compared to 2008. range from €6–12. Rents differ byČukarica €2,000 – 2,300 (VAT included) location – from the top of the market,Savski Venac €2,300 – 2,700 (VAT included) PIPELINE such as Senjak (€9 – 12), to the lower endSource: Colliers International Several major developments have of the market such as Banovo Brdo been announced to be delivered through (€6 – 8). the phasing of developments over the next 3 years. The most notable FORECAST PRICE DECREASE TREND IN BELGRADE -0.12 developments include large scale Sales prices are expected to decline -0.10 Source: Colliers International complexes such as West 65 (GBA: in the short term, before stabilising in the -0.08 47,500 Sqm) in New Belgrade, Golf 8 second half of 2011. It is expected that -0.06 (GBA: 15,172 Sqm) in Banovo brdo, Basal the apartments constructed by the -0.04 complex (GBA: 7,500 M2) and 4. Juli Government will have influence on the -0.02 Government complex (GBA: 271,252 mid- to low-class market. This should 0 | | | | | | | | | Sqm) in New Belgrade. Besides New result in a slight price reduction of Belgrade, which traditionally offers the similarly targeted projects in order to be a d c de ac ar la un ra na ric ra lilu ac da ov ra m iG Ve ka Ze Vr ez lg Pa zd Cu ar Be Zv ki Vo largest possibilities for development, more competitive. St vs w Sa Ne major developments will also take place in other major municipalities. At present a discrepancy in prices among similar projects in similarRENTAL LEVELS DEMAND AND SALES PRICE locations still exists. Colliers expectsArea Average Rent (€/Sqm/pcm) Sales prices dropped a further 5% in greater transparency and sophisticationSavski Venac (Senjak) 9 – 12 the second half of 2010, meaning prices on the market to emerge in future soSavski Venac (Dedinje) 9 – 11 have dropped by some 15 – 20% in the prices are more closely correlated toVracar 8 – 12 last two years as demand remains location, size and the quality of a givenStari Grad 8 – 11 muted. project.New Belgrade 7 – 10Vozdovac 7–9 In the last 12 months the largestCukarica (Banovo Brdo) 6–8 decreases occured in the municipality ofSource: Colliers International Cukarica (cca. 10%), followed by Stari Grad (cca. 8.25%), Savski Venac (cca. 7.25%), New Belgrade (n/a %), Vozdovac (cca. 6.75%), Vracar (cca. 6.15%), Palilula (cca. 5.55%), Zemun (cca. 5.35%) and Zvezdara (cca. 3.75%). The highest salesResearch: Mirjana.Mandic@Colliers.com CollieRS inteRnAtionAl | P. 7