Cushman & Wakefield MarketBeat reports analyse quarterly Slovak Republic commercial property activity across office, retail and industrial real estate sectors including supply, demand and pricing trends at the market and submarket levels.
Slovakia’s economy has been hit by the domestic, as well as international restrictive measures which have been implemented to minimize the impact of the coronavirus pandemic on public health. According to Oxford Economics data, Slovakia’s real GDP should see a year-over-year drop in all four quarters of 2020. Prices should continue to rise, although by a smaller rate. The trough of the economic activity was reached in Q2 and most of the economy should now be in a recovery phase, including domestic demand, private sector revenues, industrial production, exports and retail sales. Due to a relatively mild course of the pandemic, Slovakia enjoyed one of the fastest reopenings of the economy in the world. The sentiment in private sector has grown less tense as evidenced by the month-over-month increase in industrial turnovers, construction output and real estate activities (based on the Statistical Office of the Slovak Republic data).
The office property stock saw the first completions since Q4 2019, delivering around 48,000 sq m of class A offices. This includes the competitive projects of Nivy Tower by HB Reavis and Einpark Offices by Corwin. As part of the new supply is speculative, we see an increase in overall vacancy rate in the Bratislava office market, reaching 9.82%. On the other hand, the Bratislava IV district has seen a decrease in vacancy rate as a new tenant from public sector moves into Westend Plazza by JTRE. There are currently 11 buildings under construction, totaling 174,000 sq m. Most of this stock (126,000 sq m) is in central business district (CBD). Additional 63,400 sq m of office stock should be added in 2020 and only 26,400 sq m should be delivered in 2021 as developers respond to coronavirus crisis by postponing planned supply.
Prime rent remained at 17.00 EUR/sq m/month and is achievable in city centre and CBD. Prime yield saw a minor increase of 0.15% to 5.75%.
As of the end of the second quarter, the footfall of most shopping centres was around 60 - 80% compared to the period before the COVID-19 pandemic, while individual operations were able to achieve 50 - 200% of turnovers from the beginning of the year, depending on the sector. Termination of leases has so far occurred mainly for tenants who had a weak financial situation before the pandemic or small retailers and F&B concepts. These businesses reported their turnovers dropping to 30% of pre-COVID levels, on average.
Prime shopping centre rent has remained stable at 65 EUR/sq m/month in the second quarter. Prime shopping centre yield saw a minor quarter-over-quarter increase of 0.10%.
The industrial real estate sector remains the least affected commercial real estate sector in Slovakia. Rent forgiveness is rather the exception, especially in the area of logistics and distribution. In the second quarter, we record a solid leasing activity reaching almost 120,000 sq m of industrial space. The majority of gross take-up occurred in Bratislava and Western Slovakia regions and the most demand came from distribution, specifically in the e-commerce companies. Although all take-up fell under net demand, the net absorption was essentially flat in the second quarter.
In the industrial real estate market, we record stable price levels across all submarkets. Prime logistics rent remains resilient at 4 EUR/sq m/month. Prime logistics yield is stable at 6.25%.
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