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Serbia MarketBeat

Tamara Kostadinovic • 12/17/2021

Office Space, Belgrade 

As a result of macroeconomic and financial stability, growth momentum, and economic measures taken, a greater GDP decline in 2020 has been prevented, and favourable outlook has been preserved. The pre-crisis level was accomplished already in Q1 2021 while in Q2 2021 GDP growth reached 13.7% y/y i.e 1.3% in comparison with the previous quarter. Growth was driven by strong growth in industry and construction as well as recovery in service sectors. Due to the positive outcome in the first six months of 2021 NBS revised its GDP growth projection for 2021 from 6.0% to 6.5%.

Office Supply & Demand 

The third quarter of 2021 lacks any new development s meaning that the stock remains at the level of 1,064,471 sq m of GLA, whereas the speculative office stock of Class A and Class B buildings equals 805,000 sq m (76%) while the largest share of modern office supply is situated in New Belgrade’s CBD (74%). The office stock in Belgrade is on a continuous rise and further development will continue in the following period In line with the above mentioned, more than 160,000 sq m of office space is currently under construction, while an additional 70,000 sq m is under refurbishment, ready to become a part od modern office stock.

Strong pipeline show s that developers are confident of a strong revival in office leasing activity which is evident in the previous two quarters Namely, the office leasing momentum has returned to pre pandemic levels as the Belgrade’s office absorption stood at 33 500 in the period July September 2021 up by 40% YoY New leases accounted for nearly 55 of all transactions in Q3 while the total amount of pre lets was on a high level of 35% considering the number of ongoing projects The overall demand in the first three quarter s of 2021 amounts to 93,850 sq m.

Office Rents & Vacancy 

The asking rental values remained at the same level as in the previous period, for Class A office buildings varying between EUR 15-17/sq m/month, while the asking rents for Class B office stock amount to around EUR 11-13/sq m/month Prime yields vary between 8.00- 8.75%.

Amid strong occupier activity and lack of new deliveries, the vacancy rate has continued its downward trend since the second quarter of 2021 and decreased from 8.54% to 7.76% at the end of Q3 2021. Further decrease of vacancy rate is expected by the end of 2021 having in mind that majority of pipeline projects are set for completion during 2022.

Retail Property Belgrade

After a strong development cycle in retail segment in the previous period, development activity has slowed down in Q3 2021 with no new completions.

Retail Supply & Demand

After a strong development cycle in retail segment in the previous period, development activity has slowed down in Q3 2021 with no new completions In the period 2017-2021 app 275,000 sq m of modern retail space was delivered to the Belgrade retail market, including 4 western type shopping centres, 4 retail parks and 1 neighbourhood mall. Currently, two schemes are under construction which will enlarge retail supply in the capital for additional 40,000 sq m. Namely, West 65 Mall is ready for the opening by the end of November 2021 while the extension of Swedish IKEA, Retail Park Ava, is planned for 2022 Strong take up in retail segment was recorded in Q3 amounting to nearly 22,000 sq m, mostly thanks to pre leases within West 65 Mall.

Retail Pricing

Even though retail was affected the most by ongoing health crisis, which caused decrease of footfall and income difficulties, as well as risk of new lockdown, strong appetite for retail properties continued and new transactions occurred in second half of 2021. During summer 2021 BIG Shopping centres continued its expansion on Serbian retail market by acquiring two retail formats, Plaza Kragujevac shopping centre of 22,000 sq m and Krusevac retail park of nearly 9,000 sq m. The total value of acquisition is EUR 61 million In addition, Delta City, one of the most popular shopping centres in Belgrade, was sold to Athos Group in September 2021. The fully occupied scheme of 30,000 sq m of GLA was acquired for EUR 115 million from Hyprop Investments Limited and Homestead Group The total investment volume in retail segment in 2021 reached EUR 186 million.

Industrial Property, Belgrade 

A global slowdown caused by COVID-19 pandemic had a less severe impact on Serbia as compared to most European countries. In line with the forecasts of economic development in 2021 and the recovery period from COVID-19 the industrial and logistics sector in Serbia is flourishing with an increase in the number of domestic and foreign investors developing logistics and industrial facilities for speculative purposes, but also for their own needs. Therefore, the total supply of modern industrial space in Belgrade and its vicinity exceeds 2.2 million sq m at the end of H1 2021.

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