MAY 2023 CSEE NEWS ARE HERE!

ROMANIA ● With scheduled retail deliveries of around 260,000 sqm across Romania, this year may turn out to have the heaviest pipeline calendar since 2011, which would add to the existing stock of more than 4.1 million sqm.
● The average office fit-out costs in Romania rose by around 20-30% in 2022 due to a combination of supply chain pressures and higher materials’ costs, which saw companies paying an average of €820 per sqm of office space.
● The modern office stock in regional Romanian cities is set to reach around 1.3 million sqm in the next five years if the planned projects spanning 275,000 sqm will be delivered in this period.

● Is the Romanian Residential construction market cooling down? This question is quite often asked both by those looking to buy a home and by those building homes. The former are hoping for prices to come down, while the latter are worried that prices will come down. Whereas a definitive answer cannot be given.
● Romania has one of the lowest volumes of housing loans as a share of GDP, being for instance six times lower than Poland in absolute terms.

SEE THE FULL NEWS ON ROMANIA HERE.

HUNGARY ● In 2022, non-residential construction works were launched at a value of more than HUF 1800 billion, the highest amount so far.
● December was the weakest month in 2022 in terms of sales and loans taken out to buy homes, local brokerage firm Duna House (DH) reports.
● Investors prefer sustainability to be measured in the case of commercial buildings too. Therefore new detailed rules will be elaborated and a so-called green passport for properties will be introduced

SEE ALL THE INFORMATION ON HUNGARY HERE.

SERBIA A huge rise in the number of sold apartments can be interpreted in many different ways, but Cordon believes that it is a reflection of the confidence the investment buyers have in apartments as a safe investment.  In that sense, the absolute majority of investment buyers probably do not believe that this rental market is sustainable, but rather see this situation as an opportunity to increase their return on investment for the next several years while foreign citizens are here, while they are not concerned that they will be able to find a tenant later, even at a lesser rent, or resell the apartment at a small profit.

No statistical evidence exists from the past 15 years where apartment sale prices have gone down (on the market level, not individual projects) nor has there been an extended stretch of time where the rental market has recorded a difficult period, so that could be the explanation for the confidence in apartments as a safe investment.

SEE THE WHOLE NEWS ON SERBIA HERE.

SLOVAKIA ● As for the Industrial asset class, in 2022 demand was driven, as in previous years, predominately by automotive, 3PL and e-commerce (although e-commerce started cooling off in the second half of the year). On the other hand, speculative development is offset by built-to-suit projects rendered by tight project financing conditions, high inflation, and the uncertainty surrounding the economy in the upcoming year. Consequently, industrial space under construction in Q4 shrinks to 261,400 with only one-third pre-leased.

Rents remained under upward pressure caused by persisting elevated inflation, input and energy costs. Accordingly, headline rents in all submarkets rose by at least 20-30 cents/sqm notably in Trenčin and East Slovakia, as well as prime rent, which hit €4.40/sqm/month and we expect its progressive growth in H1 2023. Concerning financing and other factors, we saw an increase in prime yield by 25 bps to 5.50% reflecting the overall shift of the cycle in 2022. Although further growth will go side by side with other real estate segments, rising yields are partially offset by the high indexation of rents and the increase in market rents, especially in the industrial sector. Therefore, landlords prefer longer rental contracts.

In 2022 total gross and net take-up in the Office asset class reached levels of 163,800 sqm and 118,900 sqm respectively. However, both figures still ended slightly below the average of the last 5 years, underlining the growing tension in the market. Completion of NIDO2 was postponed to the next quarter, therefore only 2 buildings were delivered to the office market this year – Omnia BC in Q1 with an area of 11,160 sqm and Lake Side 02 in Q3 with 14,000 sqm.

As for the Retail asset class, overall retail park projects dominate both this year’s new supply and future retail development with limited space for larger retail schemes due to high saturation. In the fourth quarter, we saw several completions – one shopping centre Siko in Košice, brand new retail parks in Nitra, Kysucké Nové Mesto and Zvolen as well as 2 extensions of existing retail parks in Trnava and Zvolen. Thus, more than 34,000 sqm of retail space was added to stock in Q4 and 2022’s new supply accumulated to 66,700 sqm. 

SEE THE WHOLE NEWS ON SLOVAKIA HERE.

BULGARIA ●  The Bulgarian commercial property market in 2023 will maintain activity around last year’s levels. Main buyers are again expected to be local investors with sufficient funds or being able to obtain favourable credit terms.

●  Retailers that have been actively expanding over the past few years will continue to do so in 2023. This is especially valid for companies, positioned in the discount segment. Retail parks will keep growing in number and geographical coverage nationwide. In 2023 the market is expected to enter a saturation phase. Consumption will be facing pressure from still-high inflation, rising interest rates, and general price increases. In the second half of 2022 a total of 10 retail parks opened at 10 different locations in the country – Pernik Plaza, Via SEVER (Plovdiv), Retail Park Haskovo, Retail Park Sliven, Karlovo Way Park, Holiday Park (Pazardzhik), Mondo Park (Dobrich), as well as 3 projects in Dimitrovgrad, Smolyan, and Razlog. Occupancy in shopping centres in Sofia remains high following the strong consumer activity.

●  Industrial demand was split by sector as follows: 53% was driven by FMCG companies, followed by e–commerce (13%), logistics and 3PL (12%) and electronics (8%). The remaining 14% is spread across the manufacturing, construction, retail, distribution and pharmacy sectors. Compared to previous periods, there has been a significant increase in demand from FMCG and retailers, which have traditionally had a smaller share relative to logistics operators.

SEE THE FULL UPDATE ON BULGARIA HERE.

CZECH REPUBLIC ●  The Czech government wants to involve the Czech National Development Bank (NRB) in the construction of affordable rental housing. The cabinet is also planning to amend the law on the State Fund for Investment Support (SFPI), which supports housing development in the Czech Republic. This is to support the government’s commitment that up to 10,000 extra rental flats could be built per year by the end of the parliamentary term. The Czech Press Agency (CTK) quotes the updated programme statement of the cabinet.

High inflation brings something that has not been seen in Czechia for a long time – a halt in the growth of residential property prices, especially flats. Prices of older flats are even falling. Frozen demand will soon hit construction companies. The housing market has slowed down considerably, and players are waiting for further economic development.

Despite significantly lower prices than in the capital, markets for offices in Brno and Ostrava are struggling with rising vacancies. Other regional markets, however, now offer opportunities for developers, investors or serviced office providers, thanks to the potential of the Hub & Spoke concept. The latter centres around a strategy where companies reduce the size of the main office and then supplement it with smaller spaces in different locations. Alongside that, there is the Flex & Core office space usage concept, which combines a smaller main office with a membership of one or more co-working centres.

SEE THE FULL UPDATE ON CZECHIA HERE.

CROATIAThe composition of Croatia’s construction output is changing. While the residential segment may soon experience a slowdown, health-related construction – public and private renovations and new builds alike – is seeing a considerable boom.

According to the Bureau, the value of completed construction work carried out by business entities in Croatia with 20 or more employees increased by 12.9% in 2022 compared to 2021, while the value of new orders increased by 27.1%.

SEE THE WHOLE NEWS ON CROATIA HERE.

POLAND ● The estimated value of transactions in the Polish institutional rental market exceeded €1.8 billion at the end of 2022, most of which were contracts for projects under development (forward contracts). Experts expect that high real estate prices and the declining availability of mortgages will generate increased demand for apartment rentals in the coming years, and thus attract new investments to this market segment.

● Institutional investors in Poland currently offer more than 11,600 rental units, of which more than 40 per cent are located in Warsaw. In addition, another 4,400 apartments in the PRS segment are under construction in the capital, and projects under construction throughout Poland now include more than 10,000 units.

By the end of December 2022, more than 4.4 million sqm (+42% y/y) of new space was completed, corresponding with strong activity by tenants, who leased nearly 6.7 million sqm (-9 y/y). Another 3.4 million sqm is under construction (-25% y/y), which promises to surpass the 30 million sqm mark in 2023.

SEE THE WHOLE NEWS ON POLAND HERE.

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