Despite nationwide testing and lockdowns, test positivity rate and the number of hospitalized patients surged at the turn of the year given heightened mobility of population during the holidays. As COVID-19 continues to trigger unprecedented Government response, the business environment must navigate through this unique playing field. According to the estimate of the National Bank of Slovakia, Slovakia’s GDP fell 5.7% last year, while according to the estimate of the European Central Bank, the GDP of euro area as a whole fell 7.3%. The third quarter has seen a real GDP drop of 2.4% and a similar sentiment is expected at the year end. After an excellent third quarter, production, exports and turnovers fell slightly month-on-month. The adopted anti-pandemic measures have reflected in employment as well as in wages, the growth of which slowed down. Liquidity shortfalls in the private sector were sought to be replaced by external sources of finance which were more accessible due to the monetary policy measures and Government guarantees.
Office
The year closed with the highest leasing activity in the last six quarters, reaching 65,400 sq m. While quarterly gross take-up grew by 5.5% year-on-year, total take-up in 2020 declined by almost 12% compared to 2019, reaching 175,900 sq m. Net take-up share was 72%, with consumer goods, professional services and public sector having the biggest share on net demand. Net absorption was positive, reaching more than 5,700 sq m.
Total commercial real estate investment amounted to EUR 502 million in 2020, a year-on-year decrease of 27%. The office sector reached a total transaction volume of EUR 183 million this year, and we expect an increase in investor interest in this segment upon the successful lease of several upcoming projects. Prime office yield increased in the first three quarters of 2020 by 50 basis points but remained at these levels since, with a neutral short-term outlook. Prime headline rent at 17 EUR / sq m / month has not changed during 2020 as landlords increasingly use rent free periods, fit-out contributions and other incentives to attract new tenants.
Retail
As the nationwide lockdown measures extended, further demand slump continued looming over struggling retailers. These unenviable circumstances have reflected in the overall turnovers of retailers, which recorded a month-on-month decrease of 2.0% in November, according to the Statistical Office of the Slovak Republic. Even December did not provide them with the much-needed rebound in consumption, as evidenced by the month-on-month decline in consumer prices, mainly prices for food, clothing, transport and furniture.
While the impact of vaccination on Slovak retail will be generally positive and stabilizing, we cannot count on a major shift in the consumer behaviour of the population.
Retail property development saw a slowdown in 2020, expanding Slovakia’s shopping centre stock by less than 70-thousand sq m; a number that includes Novum Prešov, which only opened about one third of its retail areas in 2020. However, we record a strong development and investment pipeline planned for 2021.
Total commercial real estate investment amounted to EUR 502 million in 2020, a year-on-year decrease of 27%. The retail market was hit hardest this year by a decline in mobility and a consequent decline in turnovers of shopping centres.
Industrial
Total industrial stock grew by 8% year on year as the adoption of online shopping accelerated the built to suit development for e-commerce companies seeking to expand their distribution centres. Although there were no major completions in the fourth quarter, the total leasable space under construction was more than 190 000 sq m. Vacancy rate decreased by 0.43 percentage points to 8.33% mainly due to the rising absorption in the Bratislava Region. Net absorption in Slovakia reached 11 800 sq m. Total quarterly take up recorded a 143% year on year growth, reaching 154 400 sq m. Overall, gross take up in 2020 recorded a 16% growth compared to the year before reaching 494 700 sq m. The outlook for industrial property remains positive since it remains the most liquid segment of real estate in Slovakia.
Total commercial real estate investment amounted to EUR 502 million in 2020 a year on year decrease of 27%. Industrial real estate was the most attractive sector for investors with a share of approximately 49% of total investment volume. Prime industrial yield narrowed by 20 basis points to 6.00% while maintaining the prime rent of 4 EUR/sq m/month, although we expect a strong upward pressure on rents in the coming year.
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