The financial services company, JLL, which specializes in servicing property sector and the related property investment management, has written a report assessing the situation in the industrial, office and retail property market in Serbia, Croatia, Slovenia, and Bulgaria.
The Serbian market has shown a steady growth of the non-residential real estate segment across the country, and not only in its capital city.
During the first half of the year, construction activity remained focused on secondary cities, which have noted the completion of several new facilities mainly for owner occupation purposes. In the Q2 of 2016, investors were mostly focusing on the Belgrade area. The market in this area has been dominated by production companies. This trend will continue since the demand will be fueled by production and distribution companies. In the medium term, the expectation is that the market will be influenced more by the expansion in areas like sales and logistics.
Substantial investments have been made in Novi Sad with the view of developing the infrastructure in the industrial area, including the construction of new, large-scale production plants. German company Dr. Oetker has opened its first facility in the country, in Simanovci, totalling over 8,000 sqm. The facility includes 4,500 sqm of production area, around 2,000 sqm of warehouse and 1,500 sqm of administrative area. As for the recent completions in secondary cities, Geox has opened a new production facility in the Banuševac free zone near Vranje. Company PTC Germany has opened a new production hall in Smederevo, totalling over 4,000 sqm. Furthermore, Tigar Tyres has opened a production facility worth €215 million. Construction of the Mei Ta production facility for car and motorcycle parts in Barič, Obrenovac has commenced. This is an investment of around €60 million, and will be developed in two phases. The construction of a Lidl logistic centre on 20ha of land along the Belgrade – Subotica highway in Nova Pazova has started. The overall size of the facility will be around 78,500 sqm and will be developed in four phases. The first phase will include the construction of warehouse space with administrative area.
During the first half of 2016, prime rental levels have remained stable ranging from €4.0 – €5.0 sq m/month. In addition, rents for less attractive schemes range from €1.5 – €3.0 sq m/month.
The situation in the office real estate has remained stable as a result of the various ongoing projects, some of which are in the final stages of development. Since the beginning of the year, Belgrade’s office market has witnessed the completion of the first building within Airport city phase IV. Its investors, Africa Israel and Tidhar Construction, have already started construction of the second building, while the overall phase IV will have 4 buildings totalling over 80,000 sqm. In addition, Navigator Business Centre by MPC Properties is another modern project located in the CBD area which will add 14,600 sqm at the end of the third quarter. The complex will also include a kindergarten, café and restaurant. Another significant project which has recently commenced is Sirius Offices by Immorent Singidunum. Its construction will be carried out in two phases with the first phase totalling over 18,500 sq m and the second, 12,500 sqm.
With the current market conditions and low availability of modern office premises, the vacancy level remained at the same level during the second quarter, at 3.8%. Available premises in Class A office buildings have noted a slight drop and stood at 2.3%, while class B office buildings noted a slight increase and stood at 5.6%. Occupiers remain eager for new office development reflecting in high occupancy rates in modern assets prior to their construction start.
During the second quarter of 2016, market activity was driven by net take-up activity, underpinned by relocation, new leases and the expansion of existing occupiers. Additionally, not significantly less, the renewal of contracts contributed for 43% of overall take-up activity. Traditionally, the majority of activity occurred in New Belgrade, known as the Central Business District. The most active sectors were professional services, followed by IT and consumer goods. With the current market conditions and low availability of modern office premises, the vacancy level remained at the same level during the second quarter, at 3.8%. Available premises in Class A office buildings have noted a slight drop and stood at 2.3%, while class B office buildings noted a slight increase and stood at 5.6%. Occupiers remain eager for new office development reflecting in high occupancy rates in modern assets prior to their construction start.
During the first half of 2016, headline rents have remained stable, ranging from €15 – €17 sq m/month. During the same period, rental levels for B Class office premises in New Belgrade were in the range of €9 – €11 sq m/month and €10 – €12 sq m/month in the downtown area. Rents for office premises in wider New Belgrade area are up to €11 sq m/month, and modern office premises in the downtown area do not exceed €16 sq m/month. Landlords continue to offer incentives including rent free periods, fit-out contributions and additional free parking spaces.
Since early 2016, there has been an increase in the number of business parks in various secondary cities across the country.
After the opening of Shoppi by MPC Properties in Subotica in Q1, Stop Shop retail park in Niš by Immofinanz has been delivered, totalling over 13,000 sq m. Soon after, the investor opened another Stop Shop in Valjevo, spread over 6,100 sqm.
MPC Properties have started the construction of another retail park in Borča, with completion scheduled for the last quarter of 2016. Construction of shopping centres is also on rise, with several schemes under construction in Belgrade. Rajićeva shopping centre (15,300 sqm) by Ashtrom group is under construction, with various brands having already secured their locations in the centre. In addition, GTC has also announced the construction start of Ada Mall for late 2016.
Further shopping centre development activity is also expected in other cities. South African Investment fund NEPI has acquired a land plot in Novi Sad with plans to develop a regional shopping centre. The construction of the first IKEA department store in Belgrade has commenced. The scheme will total over 30,000 sq m and presents an investment of €70 million. The completion is scheduled for 2017.
In addition, leading Greek toy chain Jumbo has opened its first store in Super Vero supermarket, totalling over 2,800 sqm.
From the beginning of 2016, average rents in prime shopping centres in Belgrade have remained stable, ranging between €25 – €27 sq m/month. Retail units within prime shopping centres, sized between 100 – 200 sq m, stand at €60 sq m/month, while rents for such units in high street locations remained at €80 sq m/month.
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