2012 Research Forcast Report Eastern Europe
Transcript of 2012 Research Forcast Report Eastern Europe
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8/21/2019 2012 Research Forcast Report Eastern Europe
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Accelerating success.
2012 Eastern Europe Real Estate Review
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Fluent inReal Estate
Almaty
Baku
Barcelona
Beijing
Berlin
BratislavaBrussels
Bucharest
Budapest
Frankfurt
Hong Kong
Istanbul
Kyiv
LondonMadrid
Moscow
New York
Paris
Prague
Shanghai
St Petersburg
Warsaw
Representative Transactions in 2011
Panattoni
Germany Management GmbH
Value Confidential
Development and lease of a 16,000 sq.m. logistics
centre located in Schwbisch Gmnd, Germany
Germany
Accession Fund Sicav
EUR 308,000,000
Refinancing of Accession Fund
sub-portfolio of 9 office buildings and 1 logistics park
located in Central and Eastern Europe
Poland, Czech Republic, Hungary, Romania
Heitman European Property
Partners IV
Value Confidential
Acquisition of an office building in Capital Partners
Metropolis mixed-use project located in Moscow
Russia
Li & Fung Limited
Value Confidential
Approximately 500,000 square foot office lease for
LF USAs new US headquarters
in the Empire State Building
USA
Unibail-Rodamco
EUR 475,000,000
Acquisition of GTCs 50% stake in the Galeria
Mokotow shopping centre located in Warsaw
Poland
UFG Real Estate
Value Confidential
Acquisition of two office buildings and
one shopping centre located in Moscow
Russia
Sahaviriya Steel Group Plc
USD 680,000,000
Acquisition of Tata Steels s teelmaking
plant located in Redcar, Teesside
United Kingdom
w w w . s a l a n s . c o m
Northwood Investors
EUR 300,000,000
Acquisition and financing of a 30,000 sq.m.
office building located in La Dfense
France
AIRE GmbH & Co. KGaA
Value Confidential
Sale of the 118,000 sq.m. APP logistics park
located in Bratislava
Slovakia
Tristan Capital Partners
AEW Europe
EUR 300,000,000
Acquisition from VGP N.V. of an 80% stake in
6 industrial parks located in the Prague region
Czech Republic
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CONTENTSREGIONAL 4
EXECUTIVE SUMMARY 4
ECONOMIC OVERVIEW 5
INVESTMENT OVERVIEW 6
OFFICE MARKET 7
INDUSTRIAL MARKET 8
RETAIL MARKET 9
ALBANIA 11EXECUTIVE SUMMARY 12
ECONOMIC OVERVIEW 13
OFFICE MARKET 14
RETAIL MARKET 15ALBANIA TAX SUMMARY 17
BULGARIA 18EXECUTIVE SUMMARY 19
ECONOMIC OVERVIEW 20
INVESTMENT OVERVIEW 21
INDUSTRIAL MARKET 22
OFFICE MARKET 24
RETAIL MARKET 26
RESIDENTIAL MARKET 28
BULGARIA - TAX SUMMARY 31
CROATIA 33EXECUTIVE SUMMARY 34
ECONOMIC OVERVIEW 35
INVESTMENT OVERVIEW 36
INDUSTRIAL MARKET 37
OFFICE MARKET 38
RETAIL MARKET 39
CROATIA TAX SUMMARY 42
CZECHREPUBLIC 44
EXECUTIVE SUMMARY 45
ECONOMIC OVERVIEW 46INVESTMENT MARKET 47
INDUSTRIAL MARKET 48
OFFICE MARKET 50
RETAIL MARKET 52
CZECH REPUBLIC LEGAL OVERVIEW 55
CZECH REPUBLIC TAX SUMMARY 56
GREECE 58EXECUTIVE SUMMARY 59
ECONOMIC OVERVIEW 60
INVESTMENT OVERVIEW 61
OFFICE MARKET 62
RETAIL MARKET 64
HUNGARY 66EXECUTIVE SUMMARY 67
ECONOMIC OVERVIEW 68
INVESTMENT MARKET 70
INDUSTRIAL MARKET 71
OFFICE MARKET 73RETAIL MARKET 75
HOTEL MARKET 77
HUNGARY LEGAL OVERVIEW 79
HUNGARY TAX SUMMARY 80
POLAND 83EXECUTIVE SUMMARY 84
ECONOMIC OVERVIEW 85
INVESTMENT MARKET 86
INDUSTRIAL MARKET 87
OFFICE MARKET 90
RETAIL MARKET 92
HOTEL MARKET 96LAND 99
POLAND LEGAL OVERVIEW 101
POLAND TAX SUMMARY 102
ROMANIA 105EXECUTIVE SUMMARY 106
ECONOMIC OVERVIEW 107
INVESTMENT MARKET 108
INDUSTRIAL MARKET 109
OFFICE MARKET 110
RETAIL MARKET SHOPPING CENTRES 111
RETAIL MARKET RETAIL PARKS 112RETAIL MARKET HIGH STREET 113
HOTEL MARKET 114
RESIDENTIAL MARKET 116
LAND MARKET 118
ROMANIA LEGAL OVERVIEW 121
ROMANIA TAX SUMMARY 123
RUSSIA MOSCOW 125EXECUTIVE SUMMARY 126
ECONOMIC OVERVIEW 127
INVESTMENT OVERVIEW 128
INDUSTRIAL MARKET 130
OFFICE MARKET 132
RETAIL MARKET 134
HOTEL MARKET 136
RUSSIA ST PETERSBURG 138INVESTMENT OVERVIEW 139
INDUSTRIAL MARKET 141
OFFICE MARKET 143RETAIL MARKET 145
HOTEL MARKET 147
LEGAL OVERVIEW 150
RUSSIA TAX SUMMARY 152
SERBIA 157EXECUTIVE SUMMARY 158
ECONOMIC OVERVIEW 159
OFFICE MARKET 160
RETAIL MARKET 162
RESIDENTIAL MARKET 164
SERBIA TAX SUMMARY 167
SLOVAKIA 168EXECUTIVE SUMMARY 169
ECONOMIC OVERVIEW 170
INVESTMENT OVERVIEW 171
INDUSTRIAL MARKET 172
OFFICE MARKET 173
RETAIL MARKET 174
SLOVAKIA LEGAL OVERVIEW 176
SLOVAKIA TAX SUMMARY 177
UKRAINE 180
EXECUTIVE SUMMARY 181ECONOMIC OVERVIEW 182
INVESTMENT OVERVIEW 183
INDUSTRIAL MARKET 184
OFFICE MARKET 186
RETAIL MARKET 188
HOTEL MARKET 190
UKRAINE LEGAL OVERVIEW 193
UKRAINE TAX SUMMARY 194
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RECENT TRENDS
Economy:The economy continued torecover with all markets positing positiveGDP growth over the year. By year-end,however, the impact of Europes sovereigndebt crisis started to drag on the economy,with growth stalling at year-end.
Investment:2011 marked the second-bestyear for the investment market in easternEurope as volumes exceeded 13 billion.Yields hardened over the first part of theyear before flattening out toward the end.
of H2 2011, with prime yields for officeassets property stabilising at ca. 6.5%,with prime retail assets down to 6.25%.
Offices:The office market was largely stableacross the major city markets in the region.New completions were down 25% on theprevious year, but gross take-up levelsincreased 40% y-o-y, denoting a increasein market activity from the demand side.That said, the majority of take-up comprisedrenewals and renegotiations with net take-uponly making up for 40% of total gross take-up.
Vacancy rates fell marginally, on average,with the greatest falls in Bucharest (20-26%),Belgrade (24-20%) and Moscow (12-10%).
Industrial:Although the take up was weaker inthe third quarter, the industrial market showssigns of recovery. The construction activityis very weak, but there are several projectswhich have been pre-leased to be signed.Due to lack of speculative developments thevacancy rate has recorded a decreasing trend.
Retail:The retail market in Slovakia comesalive but traders are still more cautious.
Decline in retail sales is caused by decreasingdisposable income and purchasing powerof inhabitants, increasing of unemploymentand insecurity in the labor market. In 2010Slovakia registered approximately 190,000 mincrease in area of shopping centres, thelargest increase in the last 20 years.
MARKET PROGNOSIS
Economy:We expect growth forecasts forthe year to be continually pared back overthe first half of 2012, but not to the extentwhich sees GDP growth turn into GDPdeclines. The mid-2012 position of the banksand the volume of liquidity in the Europeanmarket will be the critical driver of growthover the year. If the banks meet their testsuccessfully, we would expect some marketreprieve. Nevertheless there are severalstructural issues for Europe to contend withover the coming years which will place a
dampener on growth in Europe generally.
Investment:As for 2012, we expectinvestment turnover to fall back from 2011levels in response to contractions in economicgrowth and the availability of real estatedebt. We expect bank property lending/activity throughout 2012 to vary considerablyacross the region depending on location andproduct type but to mirror the trends seen in2011 with investment focussed on the mainmarkets of Poland and the Czech Republic.
Offices:Although half of the markets coveredin this report have a higher pipeline ofprojects on the go than completions recordedin 2011, the overriding feeling of caution inthe markets coupled with the need for highlevels of pre-lets to enable developmenstto move forward, is likely to minimise newcompletions in 2012. We see no majorfluctuation in rents over the year ahead, withonly Moscow showing signs of rental growth.
Industrial:Demand for industrial space isexpected to be increasing in 2011, whichwill result in lowering vacancy rate, current
vacancies are expected to be leased outby mid 2011. Development of new projectshould start in 2011 to satisfy the demandfor industrial premises, but developerswill continue to require signed pre-leaseagreements prior to start of constructions.
Retail:Demand is expected to be decreasinguntil the market stabilizes, which isgenerally expected to happen in 2011. Weexpect that the rents will stagnate. Rents ofretail premises in less attractive locationsand/or premises requiring significant
investment shall further decrease.
EXECUTIVE SUMMARY
Source: Colliers International
Source: Colliers International
Source: Colliers International
Source: Colliers International
OFFICE RENTS
RETAIL RENTS
INDUSTRIAL RENTS
INVESTMENT YIELDS
MARKET INDICATORS
Tirana
Sofia
KievPrague
St Petes
Zagreb
Bratislava
Athens
Belgrade
Budapest
Bucharest
Moscow
Warsaw
Tirana
Sofia
Kiev
Prague
St Petes
Zagreb
Bratislava
Athens
Belgrade
Budapest
Bucharest
Moscow
Warsaw
Sofia
Kiev
Prague
St PetesZagreb
Bratislava
Belgrade
Budapest
Bucharest
Moscow
Warsaw
Prague
Belgrade
Sofia
Bratislava
St Petes
Zagreb
Tirana
Warsaw
Athens
Moscow
Budapest
Kiev
Bucharest
RESEARCH & FORECAST REPORT | 2012 | EASTERN EUROPE | EXECUTIVE SUMMARY
IncreasingStableDecreasing
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SUMMARY
Confidence in Europes economic outlookdeteriorated to a 2-year low at the end of2011, as issues concerning Europes sovereigndebt crisis and the condition of Europesbanking sector dragged down the economy.
The situation was exacerbated by the inabilityof governments to agree on measuresto alleviate the crisis at the end of theyear and put the fundamental structuralchanges in place to ease market tension.At least the first two months of 2012 saw
the chances of stability improve as theGerman Bundestag agreed to the second130 billion rescue package for Athens byan overwhelming majority vote. That said,there is a great deal for Athens and Greeceto do over the coming months and yearsin order to avoid a disorderly default.
Despite this positive news, it has come alittle too late to prevent negative sentimentfrom embedding itself into the mindsets ofmany. Equally, German factory orders haddropped by more than they have in almost
three years which is a negative sign foreastern Europe. As almost every EasternEuropean economy has Germany as its majortrading partner, some more than others.
Subsequently we have seen economicforecasts pared back over the last fourmonths across Europe, reducing thegrowth forecasts for the majority ofeastern European economies in 2012.However, GDP forecasts for 2012 arepositive overall Greece aside - and remainabove average for Europe as a whole.
One of the most undesirable outputs of thecurrent European sovereign debt crisis hasbeen the recent withdrawal of bank lending.In particular the Austrian Banking Authority(ABA) decision in November 2011 to place amoratorium on any new lending in EasternEuropean markets, where banks run over a110% Loan Deposit Ratio (LDR) threshold,has created one of the biggest negativeimpacts across the region, especially incountries where Austrian banks dominateforeign lending. This is despite the fact thatthe Austrian banks are in relatively good
health, at least according to our analysis.
PROGNOSIS
The concern about the shift in lendingbehaviour does not simply impact real estatelending, it also impacts occupiers. Everybodybenefits from a properly functioning bankingmarket, without which businesses willstruggle to operate let alone grow andexpand. If continued access to the bankfunding they rely on - be it in the form oftrade credit, overdraft facilities or debt isdeficient, reductions in credit will in turncurtail demand for commercial space.
With this in mind, it is worth noting that theEuropean Banking Authority (EBA) re-capitalisation tests look to have been fairlywell met by the banks. Colliers estimate ofthe outstanding capital requirements of thebanks is ca. 20 billion, which equates to lessthan 1% of GDP for the countries concerned.This is not an insurmountable target.
While everyone waits for the dust to settle andthe EBA banks tests to be met by mid-year,however, new bank financing will be limitedacross the region. As a result, our outlook for
the year is somewhat bearish, although we doexpect things to improve in the second half ofthe year depending upon how well and howsoon banks meet their June EBA targets.
As we look further forward it is, however,worth reminding ourselves of the growthcapacity of eastern Europe in general. Overthe next two years economic growth inemerging markets worldwide easternEurope, Latina America and Asia (ex Japan)will lead world growth ahead of the moremature economies of western Europe, Japanand the USA. Eastern Europe still has a
lot to offer, and historically has been veryprofitable for banks, so the expectation isthat lenders will maintain lending operationsand eventually expand these over time. Insimple terms foreign banks cannot affordnot to be present in eastern Europe.
ECONOMIC OVERVIEW
GDP GROWTH 2012F (BY COUNTRY)(%)
GDP GROWTH EASTERN EUROPEVS. WORLD
4
3
2
1
0
-1
-2
-3
-4
Ukraine
Russia
ALbania
Serbia
EasternEurope
Poland
Bulgaria
EUMembers
Romania
Slovakia
Slovenia
CzechRepublic
Croatia
Hubgary
Grece
Key Country Figures: Rank by Pop SizeCountry Population US$ GDP
per capitaRussia 138,740,000 14,236Ukraine 45,888,000 3,575Poland 38,186,860 14,367Romania 21,904,551 9,371Greece 10,787,690 27,875Czech Rep 10,562,214 20,938Hungary 9,979,000 14,403Bulgaria 7,364,570 7,243Serbia 7,120,666 6,268Slovakia 5,440,078 18,899
Croatia 4,290,612 14,829Albania 3,195,000 4,131
Source: FocusEconomics/ IMF/ Colliers International
Source: IMF/ FocusEconomics/ Colliers International
Source: Focus Economics, Colliers International
15
10
5
0
-5
-10
2009
2010
2011
2012
2013
USA
Euro Area
Latin America
Japan
Asia (ex Japan)
Eastern Europe
RESEARCH & FORECAST REPORT | 2012 | EASTERN EUROPE | ECONOMIC OVERVIEW
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SUMMARY
A full analysis of all closed deals in 2011reinforces just what a strong year it was forthe investment market in Eastern Europe.
Over 13.2 billion worth of deals wereclosed across the *Eastern European region,even higher than the 12 billion initiallyunderstood to have transacted as a numberof deals got over the line in Poland andRussia during the last month of the year.This certifies 2011 as the second best yearfor investment volumes after 2007 when
ca. 18 billion worth of deals transacted.
The majority of deals were closed in thelarger more liquid markets of Russia,Poland and the Czech Republic whichaccounted for 75% of all transactions inthe region. The 4.2 million worth of dealstransacted in Moscow is the highest evervolume of deals in the Russian capital.
The CA Immo portfolio which transactedfor 1.5 billion in Q1 2011 accounted foraround 12% of the total investment pie, which
includes a number of assets in Poland, theCzech Republic, Hungary, Slovakia, Romaniaand the Ukraine. The remaining market sharecomprises deals in Hungary, Slovakia, theUkraine, Bulgaria, Romania and Croatia.
If we analyse deals by sector, it is clear tosee the extent to which retail dominated theinvestment landscape accounting for over onethird (36%) of all investment activity, which isclose to the sectors historical average. Officesfell behind, accounting for only 22% of alltransactions, which is lower than the marketnorm of closer to one third of the market.
That said, offices accounted for a highproportion of the assets within the multi-useportfolios which were traded, notably the CAImmo portfolio, but overall the office sectortraded lower than expected. In part this isthe result of low office completion ratesand pipelines over recent years. Equally,the lack of investment grade, high quality,sustainably rated stock in the sector couldbe to the detriment of its trading figures.
Interestingly development land takes a largershare of the market than normal. If we lookin more detail at the intended end-use of thisland, the largest part is for office development a sign that investors are forward purchasingdue to the lack of high quality, sustainableoffice stock in the market. Residential usealso forms a significant part of land acquiredfor development, particularly in Russia.
PROGNOSIS
As for 2012, we expect investment turnoverto fall back from 2011 levels in response to
contractions in economic growth and theavailability of real estate debt. We expectbank property lending/activity throughout2012 to vary considerably across the regiondepending on location and product typebut to mirror the trends seen in 2011 withinvestment focussed on the main marketsof Poland and the Czech Republic.
For the last eighteen months Colliers hashighlighted that 2012 would be the yearwhen distressed sales come to market,if at all. A combination of regulatory
and market pressure, plus changes tosenior management within the banks,could finally remove the pray and delaylegacy of the previous property boom.
This could be a great year for those waitingin the wings with equity seeking the rightopportunities. We also expect to see anincrease in hybrid forms of deal-making,such as an increase in joint venture (JVpartnerships), a softer form of managingthe need to sell via the use of alternativeforms of equity and mezzanine financing.This has already emerged in some
markets in the region such as Romania.
INVESTMENT OVERVIEWKey Investment Figures Eastern EuropeInvestment Turnover 13.4 BillionPrime Office Yields 6.50%Prime Retail Yields 6.25%Prime Industrial Yields 7.75%
INVESTMENT VOLUME OVER TIME( MILLION)
INVESTMENT VOLUME (BY COUNTRY)
INVESTMENT VOLUME (BY SECTOR)
2018161412
1086420
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
40%
20%
35%
22%
13%
9%
9%
7%4%
0%0%
14%
12%
5%
4%2%
1%1%
1%
Source: Colliers International
Source: Colliers International
Source: Colliers International
Source: Colliers International
Russia
Multi-Country
Ukraine
Romania
Poland
Hungary
Bulgaria
CzechRepublic
Slovakia
Croatia
Retail
Multi-use Portfolio
Hotel
Office
Development Land
Industrial
RESEARCH & FORECAST REPORT | 2012 | EASTERN EUROPE | INVESTMENT OVERVIEW
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SUPPLY
In total, the volume of 2011 office developmentcompletions for the eastern Europeanregion was 25% down on 2010 levels.Of the 2.049 million m which was built,almost half of this amount came out ofthe ground in Moscow (750,000 m ) andWarsaw (260,000 m). The remainingvolume of completions was quite evenlyspread across the other major city markets,led by Sofia (184,000 m), St. Petersburg(139,000 m) and Kiev (130,000 m).
Between 86,000-114,000 m was deliveredin each of Prague, Budapest, Bucharestand Athens. Only a minimal amount ofnew space emerged in Zagreb (40,000m ) and Bratislava (20,000 m). No newspace was completed in either Belgradeor Tirana. The main regional cittes ofPoland, however, combined to provide anadditional 138,000 m of new office space.
Year-on-year only three markets withnessedan increase in deliveries relative to 2010.They were Warsaw, Kiev and St. Petersburg.
DEMAND
Whilst new supply was down y-o-y grosstake-up actually increased by ca. 1.2 millionm. The majority of this increase was inMoscow which saw take-up rise by 460,000m followed by Poland with 392,000 m(225,000 m in Warswa and 167,000 min the regional cities). Therewere also bigincreases in Budapest (113,000 m) andPrague (111,000 m) which represented 40%and 52% y-o-y increases respectively.
Equally proportionate perspective Sofiasaw the largest increase at 253% y-o-y(86,000 m) followed by Zagreb at 100%y-o-y growth (20,000 m). There weredeclines in take-up for Athens (-18,000m ) and Bratislava (70,000 m).
Overall, despite take-up rising by 40% to4.315 million m only ca. 40% of this figurerepresents net take-up at 1.89 million m.
VACANCY/AVAILABILITY
In light of new completionsa added relative toactual net take-up figures there was limitedchange to overall vacancy and availablitylevls. The vacancy rate for Eastern Europeshowed almost no change (on average)falling by 0.6% overall. The biggest changesto vacancy rates across the region werein Bucharest, where vacancy fell from ca.21-16%, in Belgrade from ca. 24-20% andin Moscow and St Petersburg, where ratesfell from 12-10% and 17-14% respectively.
RENTS
Prime rents changed in eight of the thirteenmarkets across the region. Moscow witnessedthe highest rental increases of +8.48%,followed by Warsaw +5.12%, Bratislava+4.09% and Kiev +3.13%. Rents fell in Sofiaby -8.6%. -7.41% in Zagreb, -6.67% in Athensand a minimal -0.71% in St Petersburg.
PROGNOSIS
Although half of the markets covered in thisreport have a higher pipeline of projects on
the go than completions recorded in 2011, theoverriding feeling of caution in the marketscoupled with the need for high levels of pre-lets to enable developmenst to move forward,is likely to minimise new completions in 2012.
As a result, the mid-term balance of supplyand demand is likely to be kept in check withonly Sofia suffering from an over-supplyof stock in the market, even though a highproportion of this availability is situatedwithin a few, largely vacanct developments.In light of this we see no major fluctuationin rents over the year ahead, with only
Moscow showing signs of rental growth.
OFFICE MARKET2011 DEVELOPMENT COMPLETIONS
GROSS & NET TAKE-UP (M) 2011
VACANT STOCK Y-O-Y (M) 2010-2011
2011 MID-TERM AVAILABILITY(NUMBER OF YEARS)
800700600500400300200100
0
2 500
2 000
1 500
1 000
500
0
100
50
0
-50
-100-150
12
10
8
6
4
2
0
Moscow
Warsaw
Sofia
StPetes
Pola
ndRegional
Kiev
Bucharest
Prague
Budapest
Athens
Zagreb
Bratislava
Moscow
Warsaw
PolandRegiona
l
Budapest
Prague
Bucharest
Kiev
StPeters
Sofia
Bratislava
Athens
Zagreb
Belgrade
TIrana
Sofia
Bratislava
Zagreb
Kiev
Belgrade
Warsaw
Tirana
Budapest
Bucha-
rest
StPetes
Prague
Moscow
Warsaw
Bratislava
Moscow
Prague
Zagreb
Bucharest
Budapest
Kiev
StPetes
Sofia
Take-Up Net Take-Up
Source: Colliers International
Source: Colliers International
Source: Colliers International
Source: Colliers International
RESEARCH & FORECAST REPORT | 2012 | EASTERN EUROPE | OFFICE MARKET
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SUPPLY & DEMAND
The industrial/logistics market is the mostresponsive of all the sectors to changesin demand. Given the manufacturing/industrial driven nature of the majorityof eastern European economies it is alsothe first property sector to respond to anyuplift or decline in economic output. It isvery much a demand-driven real estatesector, particularly in eastern Europe.
In addition, the logistics sector also hasa significant influence on the demand for
logistics/warehousing space above andbeyond the typical organic needs of national-based occupiers. In particular, logisticsoperators which are active on a regionalpan-European scale are increasingly ableto shift their operations further east due toimprovements in infrastructure. The likelihoodthat consumer demand and manufacturinggrowth will increase at a faster rate in easternEurope, relative to western Europe, alsomeans that many parts of eastern Europewill become logical locations for major pan-European logistics and distribution operations.
For now however, three markets continue todominate the logistics landscape across theregion, namely Poland, Moscow and the CzechRepublic. Interestingly, however, there was asignificant difference in demand activity over2011 in these three markets, year-on-year:
There was very little change to take-up inMoscow which although growing by 50,000m, this only represents a 5% increase indemand, much in line with GDP growth Moscow logistics for now appears to be avery retail/consumer demand driven market.
Take-up in Poland grew vastly, increasingby 22% from 1.4 m million in 2010 to 1.8m million in 2011, driven by a combinationof manufacturing and consumer demand.
In the Czech Republic, however, take-upshrank by ca. 20%, falling from 980,000 min 2010 to 817,000 m in 2011. Interestingly,take-up in Slovakia grew for the first time in anumber of years by a significant 75%, risingto 205,700 m in 2011 from only 58,200 m in2010. Vacancy rates in Slovakia had fallen to
ca. 7.4% as of end 2010, making this marketan interesting prospect for developers.
VACANCY/AVAILABILITY
Markets can be grouped into three categoriesaccording to their vacancy rate. The lowvacancy group which support reneweddevelopment activity and some rentalincreases include Moscow, with a very lowvacancy rate of 1.2%, followed by Slovakia(5.27%), St Petersburg (6.5%) , theCzech Republic (7.7%) and Greece (9%).
At the other end of the scale, the tenantsmarkets, are Hungary and Bulgaria atvacancy levels of 20% and 24% respectively.
The middle ranking, more stable rentalmarkets are Croatia (11%), Poland(11.4%), Romania and Ukraine (17%).
RENTS
Rents rarely shift by any significant degreein the logistics sector, with the highestrents payable in the larger markets ofMoscow, St Petes and Poland, ranging from10.5 - 6 m/pcm, with rents in the smallermarkets ranging from 4-5 m/pcm.
PROGNOSIS
The fact that vacancy now stands at 5.27%in Slovakia suggests that the market hasbecome a popular market for occupiers. Thiscould be a sign that logistics operators aregradually diversifying south from a moresaturated Czech logistics market into newterritory, from where they can continue tosupport their pan-regional customer base.
As we wrote in last years report, althoughroad will remain the dominant form forthe distribution of goods across Europe,the shift from road to rail in particularsuggests that logistics providers andmanufacturers will be able to move to lowercost locations further south and east inEurope, notably those which are on themain rail grid. As global trade grows andthe main concentrations reach capacity,this may happen sooner rather than later.
INDUSTRIAL MARKET2011 STOCK LEVELS (THOUSANDS)
TAKE-UP VS. VACANCY
2011 INDUSTRIAL PRIME RENTS(M2/PCM)
8
7
6
5
4
3
2
1
0
2.0
1.5
1.0
0.5
0
12
10
8
6
4
2
0
18%16%14%12%10%8%6%4%2%0%
50%
40%
30%
20%
10%
0%
Moscow
Greece
Poland
Hungary
Bulgaria
Cze
chRepublic
Slivakia
Ukraine
StPetes
Romania
Croatia
Poland
Moscow
CzechRepublic
Ukraine
Slovakia
StPetes
Romania
Croatia
Greece
Hungary
Bulgaria
Slovakia
Hungary
Bulgaria
CzechRepublic
Romania
Greece
Croatia
Ukraine
Poland
StPetes
Moscow
Source: Colliers International
Source: Colliers International
Source: Colliers International
Total Stocky-o-y (%)
Take-UpVacancy Rate
RESEARCH & FORECAST REPORT | 2012 | EASTERN EUROPE | INDUSTRIAL MARKET
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SUPPLY
The shopping centre stock in eastern Europeincreased by 862,110 m in 2011 and wasmainly driven by completions in Warsaw(272,000 m), St. Petersburg (199,670m) and Moscow (117,740 m). The othermarkets contributed to the remaining 30%of these new completions, aside fromBelgrade and Prague where no new retailshopping centres were added over the year.
Leaving Prague and Belgrade aside,proportionately the majority of the eastern
European capitals stocked up their marketsby a minimal 2-5%. Only four marketswitnessed an increase of their total shoppingcentre stock of around 10% or higher, withWarsaw posting the highest increase in supply(20.33%), followed by Tirana (16.16%), St.Peteresburg (9.61%) and Athens (9.23%).
Nevertheless, Moscow (3,704,410 m) andSt. Petersburg (2,077,000 m) remain thedominant markets by size, followed by Warsaw(1,338,000 m) and Budapest (1,58,956 m).
DEMANDThe major demand trends seen in 2011 aredominated by the impact of the financial crisis,with limited growth in retailer demand. Whilstthis is a common theme, there was a strongdegree of diversity. In Warsaw and Zagreb, forexample, international brands entered thesemarkets for the first time, illustrating theirtrust in the growth of these trading areas.
On the other hand, some of the othereastern European capitals struggledwith decreasing demand, such as in
Budapest and Tirana where a numberof existing players exited the market.
There was a general shift from a stronghigh street focus to relocate stores toshopping centres, depending on thesegment of the retailer, as luxury brandsstill prefer prime high street locations.
In the more mature locations, such asPrague, despite a lack of new space beingbuilt a number of major shopping centresare going through refurbishment plans,some including store expansions. Themodifications are being put in place in orderto improve the market offer of the shoppingcentres to match consumer demand andretain their market position. There is aincreasing threat to shopping centres fromthe growth in e-retailing, which has begunthe penetrate the Czech retail market.
In terms of retail demand categories, thesegment showing the strongest growthbelonged to food retailers, which eitherconsolidated or grew in all the major cities.
RENTS
The y-o-y changes in the prime rents forshopping centres differ strongly, with Kievshowing the highest increase in rents of(+)17.4%, predominantly due to virtually zerovacancy in the market. At the other end ofthe scale is Athens, which unsurprisinglysaw rents fall by 50% over the year.
The following cities also experienced adrop in prime rents, notably Sofia with adecrease of (-)15.63% followed by Warsaw(-13.92%) and Bratislava (-8.57%).
The remaining markets saw no, orlittle change in prime rents.
PROGNOSIS
Overall a 15% increase in retail shoppingcentre stock is planned for deliveryacross the region, but with significantvariations. Sofia, Kiev and Zagreb will see
the largest increase, proportionately, butas the detailed analysis of each markethighlights there is a high probability thatthe majority of new space planned forcompletion in 2012 will be delayed until theeconomic situation in Europe stabilises.
RETAIL MARKET2011 RETAIL STOCK (MILLION M2)
2011 RETAIL PRIME RENTS M2/PCM /Y-O-Y CHANGE IN RENTS
TOTAL SHOPPING CENTRE PIPELINE(THOUSAND M2)
250
200
150
100
50
0
4
3
2
1
0
600
500
400
300
200
100
0
50%
25%
0%
-25%
-50%
60%
40%
20%
0%
Moscow
Kiev
StPetes
Prague
Warsaw
Bucharest
Budapest
Belgrade
Bratislava
Tiarna
Sofia
Athens
Zagreb
Source: Colliers International
Source: Colliers International
Source: Colliers International
TraditionalSpecialized
20102011y-o-y
Pipeline% Increase in stock
Moscow
Sofia
StPetes
Kiev
Bratislava
Zagreb
Bucharest
Budapest
Warsaw
Prague
Belgrade
Athens
Tirana
Moscow
StPetes
Budapest
Warsaw
Bucharest
Prague
Kiev
Sofia
Zagreb
Bratislava
Athens
Tirana
Belgrade
RESEARCH & FORECAST REPORT | 2012 | EASTERN EUROPE | RETAIL MARKET
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512 offices in
61 countries on6 continentsUnited States: 125Canada: 38Latin America: 18Asia Pacific: 214EMEA: 117
$1.5 billion in annual revenue
978.6 million square feet undermanagement
Over 12,500 professionals
The information contained herein has been obtainedfrom sources deemed reliable. While every reasonableeffort has been made to ensure it s accuracy, we cannotguarantee it.No responsibility is assumed for any inaccuracies.Readers are encouraged to consult theirprofessional advisors prior to acting on anyof the material contained in this report.
COLLIERS RESEARCH
Colliers Research Services Group is recognised as a knowledge leader in the commercialreal estate industry, providing clients with valuable market intelligence to supportbusiness decisions. Colliers research analysts provide multi-level support across allproperty types, ranging from data collection to comprehensive market analysis.
Across the CEE-SEE-Russia region of EMEA, Colliers researchers regularly collect and updatedata on key real estate metrics, set to consistent definitions. This information is constantlymanaged using databases, enabling staff to readily produce analysis on key regional marketsincluding supply, demand, absorption, pricing and transaction data on capital markets and theoffice, industrial and retail sector. In most CEE-SEE-Russian markets, the office definitionsused are consistent with those set out by the CEE Research Forum an umbrella group, ofwhich Colliers is a founding member - established to ensure consistent research methodologiesare used, bringing greater transparency and reliability to the analysis of real estate markets inthe region. Definitions of the key metrics used in our regular reports are highlighted below.
KEY METRIC DEFINITIONS
Prime Headline Capital Value (derived):This is a calculation of market value derived
from the annual prime headline rent divided by the prime (net initial) yield.Prime Net Initial Yield:The yield an investor is prepared to pay to buy a Grade A building,fully-let to high quality tenants at an open market rental value in a prime location.Lease terms should be commensurate with the market. As a calculation Net InitialYield = first years net income/purchase price (prior to deducting fees and taxes).
Prime Headline Rent:Represents the top open-market tier of rent that could be expectedfor a unit of standard size commensurate with demand, of the highest quality andspecification in the best location in the market at the survey date. This should reflectthe level at which relevant transactions are being completed at the time but need notbe exactly identical to any of them, particularly if deal flow is very limited or madeup of unusual one-off deals. If there are no relevant transactions during the surveyperiod, the quoted figure will be more hypothetical, based on expert opinion of marketconditions, but the same criteria on building size and specification will apply.
Prime Net Effective Rent:Prime Net Effective Rent is the lowest rent payable, based ona calculation of the Prime Headline Rent, less the monetary equivalent of the highest ofeither the rent-free period or fit-out contribution available at the time of the survey date.
Average Headline Rent:Average Headline Rent represents the average open-market tier ofrent that could be expected for a unit of standard size commensurate with demand, based ona blend of Grade A and B space across a range of locations in the market at the survey date.
Total Competitive Stock:Includes the gross leasable floor space in all A and B class buildings.
Space Under Active Construction:Represents the total amount of gross leasable f loorspace of properties where construction has commenced on a new development or inexisting properties where a major refurbishment/renovation is ongoing at the survey date.
Space Under Construction Inactive:Represents the total amount of gross leasable floor
space of properties where construction had started/where a major refurbishment/renovationwas ongoing, but activity has since stopped for a period of three months or longer.
Vacant Space:The total gross leasable floor space in existing properties that meet theCompetitive Stock definition, which is physically vacant and being actively marketedat the survey date. Space should be available for immediate occupation.
Take-up: In our calculation of take-up, gross take-up accounts for all occupationalmarket activity including renegotiations , renewals and sale-and-leasebacks. Net take-up includes new leases and pre-leases only, although it will often include relocations.
Damian Harrington, MRICS; MScRegional Director - Research & ConsultingCEE Investment ServicesEastern Europe Regional Team
Colliers InternationalGalerie MysakVodickova 710/31
Prague 1, 11000Czech Republic
TEL +420 226 537 624
FAX +420 226 013 579
EMAIL [email protected]
Juliane Priesemeister, MScRegional Research AnalystCEE Investment Services | Eastern EuropeDIR +420 226 537 655MOB +420 739 009 945EMAIL [email protected]
RESEARCH & FORECAST REPORT | 2012 | EASTERN EUROPE |
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RESEARCH & FORECAST REPORT | 2012 | ALBANIA
ALBANIA
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RESEARCH & FORECAST REPORT | 2012 | ALBANIA | EXECUTIVE SUMMARY
EXECUTIVE SUMMARYRECENT TRENDS
Economy:The Albanian economy grewat a slower pace in 2011 than forecast bythe government and the banks. Accordingto INSTAT, by the end of 2011, the inflationrate reached its lowest point in the lastdecade, a reflection of the economysadjustment to lower levels of demand.
Office:The vacancy rate decreased slightlyto 10% in H2 2011, in comparison to the firsthalf of the year. Rental rates remained highbut stable especially in the main business
towers. Office demand stayed strong,but high rental prices pushed businessesto look for alternative solutions such asrelocating to more affordable premise.
Retail:Activity prevailed in the retail sectorin H2 2011. In November, 41,200 m2wereadded to the traditional shopping centrestock with the opening of Tiran East Gate,the largest shopping centre in Albania. Onthe other hand, the well known DIY Germanchain, Praktiker, closed its only presence inAlbania thereby decreasing the specialized
shopping centre stock by 11,000 m2
. The retailmarket experienced a slight decrease in thevacancy rate (in Q2 2011) which reached10.7%. Rental prices remained constantand decreased in secondary locations. Highstreet and secondary stores reported a dropin retail sales and high turnover of shops.
MARKET PROGNOSIS
Economy:Based on the latest IMF forecast,Albanias economy is expected to growfaster than its neighbouring countries in2012. The expected 3.5% growth rate ishealthy taking into consideration the crisisand problems in the European economy.
Office:The delay of the construction ofTirana Business Park will postpone thepre-announced increase in office stockwhich will eventually impact office rentalprices that are expected to remain stable or
slightly decrease in the business centres.
Retail:New demand was absorbed bythe opening of TEG in Q4 2011. Thus, nosignificant increase in demand is foreseenin 2012, with activity driven by renewalsand one-off transactions. Due to thesignificant increase of retail stock, weexpect a slight decrease in both shoppingcentre and high street rental prices.
TRENDS 2012
IncreasingStableDecreasing
GDP GROWTH
PRIMEOFFICE RENTS
PRIME SC
RETAIL RENTS
TRANSACTION
VOLUMES
PRIME
YIELDS
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RESEARCH & FORECAST REPORT | 2012 | ALBANIA | ECONOMIC OVERVIEW
SUMMARY
According to the latest IMF World EconomicOutlook, Albanians economic real growthslowed down while reaching an estimated2.5% in 2011 compared to 3.5% registeredin 2010, meaning Albania ranks highlyamong SEE countries, sharing secondposition with Bulgaria. In terms of quarterlyfigures, there was a 1.8% increase inQ3 2011 in comparison to Q2 2011.
Based on the latest data (Q3 2011) fromthe national statistical office (INSTAT),
the industries that experienced highergrowth rates in comparison to Q3 2010included: Transport (19.7%), trade (6.2%),industry (4.8%) and construction (0.3%).On the other hand, industries with negativegrowth included: other services (-3.3%),postal and communication (-0.5 %).
According to INSTAT, the 2011 inflation ratewas 1.7% compared to a 1.9% rate in 2010.The prices of goods and services followedthe decline of overall national economicactivities. The index group of goods titled
transport registered the highest priceincrease at 5.4%, followed by health (4.2%)and alcoholic beverages and tobacco (3.4%).
Albanias modest economic growthhad a positive impact on the countrysunemployment rate, which has continuouslydecreased since 2009. According to the IMFsestimation, in 2011 the unemployment ratewas 11.5% which is 1% lower than 2010 and1.6% lower than 2009s unemployment rate.
Investments as a percentage of GDPcontinued trending downward, but at lower
rates of decline witnessed between 2009and 2010. In 2011, the investment/GDP ratiowas estimated at 25% versus 25.9% (2010)and 29% (2009). It should be mentionedhere that the peak in investments wasmainly caused by the public investment thatresulted from the general election in 2009.
The latest data on foreign direct investment(FDI), published by the Bank of Albania,showed that by the end of Q3 2011, FDIaccounted for 430 million, or 52% ofthe 2010 FDI total. No major investmentsor privatisation occurred in Q4 2011.On a quarterly basis, Q1 2011 registeredthe lowest FDI levels at 42 million incomparison to FDI levels in Q2 and Q3 2011.
PROGNOSIS
According to the IMF, Albaniaseconomic growth is expected to
grow at a projected rate of 3.5%.
The IMF predicts a stronger ratio ofinvestments to GDP at an increaseof 0.7% which will bring the totalinvestments to a GDP ratio of 25.7%.
The unemployment rate is expectedto decrease again in 2012.
ECONOMIC OVERVIEW
CPI, GDP & UNEMPLOYMENT
2007
2008
2009
2010
2011
16
14
12
10
8
64
2
0
CPI
Unemployment
Real GDP
FDI ANNUALLY (IN MILLION EURO)
900800700600500400300200100
0
2008
2009
2010
2011*
Source: INSTAT, IMF`s WEO, October 2011
Source: Bank of Albania, INSTAT
Key Economic Figures2010 2011 2012
GDP % 3.50 2.50 3.50CPI % 3.60 3.90 3.55Unemployment % 12.50 11.50 11.00
Economic Make-upSector GDP LabourAgriculture 21.00% 58.00%
Industry 19.00% 23.00%
Services 60.00% 19.00%
Population 3 195 000Top 3 Cities 616 784 19.30%
Tirana 421 286 13.19%
Duress 115 550 3.62%
Vlore 79 948 2.50%
Source: IMF/CIA World Fact Book/FocusEconomics
Source: IMF/CIA World Fact Book/FocusEconomics
Source: IMF/CIA World Fact Book/FocusEconomics
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SUPPLY
The Tirana office market is composedof 13 Grade A, B+ and B office buildingswhich were developed over the past 15years. Several businesses have taken torenting space in converted offices housedin residential buildings as there is a lackof office space with quality amenities ataffordable rental rates in the Tirana market.
Despite the expectation of new officedevelopments, the total office stock in Tiranaremains unchanged at 63,400 m2GLA.
No new supply was added to the officeinventory in H2 2011. The most recent officedevelopment occurred back in H2 2009.
Approximately 54% of total office stock(34,300 m2) was classified as Grade A officespace, while the remainder (29,100 m2)was a mix of both, Grade B+ and Grade B.
The development pipeline totaled 26,600m2, out of which only 9,000 m2of officespace was actively under construction.
DEMANDIn 2011, several businesses consideredrelocation. These tenants were lookingfor alternative office space in built-to-suitdevelopments or in converted office spacein residential buildings with lower rents.
Interest for office space from foreigncompanies focused on outer citylocations due to the areas affordablerental rates and ample parking space.
In H2 2011, the quantity of subleased office
space increased, particularly in primelocations that had vacancy rates close to 0%.
VACANCY/AVAILABILITY
Office vacancy rates decreased to 10%(6,300 m2) in H2 2011, down from 11%(7,000 m2) in H1 2011. The decrease wasattributed to the take-up of Grade A officespace down to 4,830 m2in H2 2011 comparedto 5,430 m2in the previous half of 2011.
Vacancy rates in the city centre registeredat 10% during H2 2011 whereas vacancyrates in the inner city equalled 7.8%.
RENTS
In H2 2011, the rental rates in most Tiranaoffice buildings remained constant at H1 2011levels and saw only minimal fluctuations.
Prime headline rents in the city centreand inner city registered 24.5 m2/pcm and 17 m2/pcm respectively.Rents for buildings in prime locationsexperienced a slight increase in 2011.
PROGNOSIS
No Grade A or Grade B office buildings
will come to market in 2012. Thus, it isexpected that the vacancy rates will decreaseslightly mirroring natural office demand.
Monthly average rental rates will remainunchanged in 2012, but may experiencea slight decrease in business centresthat have higher vacancy rates given thetrend to occupy office space in outer citylocations. For lower quality offices locatedat the Tirana-Durres highway, prices areexpected to decrease due to renewalsand new stock entering that area.
OFFICE MARKET
RESEARCH & FORECAST REPORT | 2012 | ALBANIA | OFFICE MARKET
CHANGE IN STOCK OVER TIME(THOUSAND)
TOTAL STOCK/ NEW COMPLETIONS BYLOCATION (THOUSAND)
70
60
50
4030
20
10
0
60
5040
30
20
10
0
2005
2006
2007
2008
2009
2010
H12011
H22011
2007
2008
2009H1
2009H2
2010H1
2010H2
2011H1
2011H2
Stock CIty Center
Completions CityCenter
Stock Inner City
Completions Inner City
Source: Colliers International Research
Source: Colliers International Research
Source: Colliers International
Key Office Figures - TiranaTotal Stock 63,400 m2
Take-up 10,260 m2
Vacancy 10%Prime Headline Rent 24.5 m2/ pcmAverage Headline Rent 15.5 m2/ pcm
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OVERVIEW
The retail market saw the addition of thelargest shopping centre, Tirana East Gate(TEG), increasing the traditional shoppingcentre stock to 158,000 m2 in H2 2011.
The new supply was rapidly occupied bynew brands entering the market such asCarrefour, the second largest retail chainin the world, Greeces largest toy retailerJumbo Kids and Sprider that used theopening to enter the Albanian market.
SUPPLY
During H2 2011, with the opening ofTiranas East Gate, 41,200 m2was addedto the retail inventory in Tirana therebyincreasing the total traditional shoppingcentre stock to 158,000 m2. Additionallyduring H2 2011, the German DIY chain,Praktiker, closed its business in Albania,thus decreasing the specialised shoppingcentre stock by 11,000 m2, leaving the GLAof specialised retail space to 28,900 m2.
6,300 m2 of retail space was under
construction in the country.
DEMAND
Limited consumer purchasing power, coupledwith the opening of Tirana East Gate shoppingcentre had a direct impact on street retailers,resulting in a sales decrease of 20% to30% in comparison to retail sales in H22010 and thereby moved the demand fromhigh streets towards shopping centres.
Nevertheless tenants still prefer highstreets as a target location althoughthey are now actively demanding spacein traditional shopping centres.
RENTS/VACANCY
In H2 2011, rental rates in the retail sectordecreased, particularly in secondary retaillocations with higher vacancy rates.
Prime headline rents in traditionalshopping centres were 33 m2/pcm and45 m2/pcm in high street locations.
The total vacancy rate in traditional shoppingcentre stock remained low, between0.1% in premium locations and 10.7% insecondary retail streets as of H2 2011.
PROGNOSIS
The opening of Tirana East Gatewill affect the vacancy rates of retailproperties in the city which are expectedto increase slightly in the upcoming yearespecially in secondary locations.
New demand has already been absorbedby the opening of TEG in Q4 2011. Thus,no significant increase in demand isforeseen in 2012 and will only be driven byrenewals or one-off transactions tenants.
Rental rates in both high street and shoppingcentres are expected to remain stable withminor fluctuations for selective deals.
RETAIL MARKET
RESEARCH & FORECAST REPORT | 2012 | ALBANIA | RETAIL MARKET
CHANGE IN STOCK/ NEW SUPPLYOVER TIME (THOUSAND)180160140
120100806040200
2006
2007
2008
2009H1
2009H2
2010H1
2010H2
2011H1
120H2
New Development Completion Stock
Total Traditional Stock
Source: Colliers International Research
TOTAL SHOPPING CENTRE STOCK- TIRANA (THOUSAND)200180160140120100806040200
2005
2006
2007
2008
2009
2010
H12011
H2
2011
Specialized SC
Traditional SC
Source: Colliers International Research
TOTAL TRADITIONALSTOCK/ VACANCY RATE (THOUSAND)180160140120100806040200
16%14%12%10%8%6%4%2%0%
H1200
9
H2200
9
H1201
0
H2201
0
H12011
H22011
Total SC
Vacancy
Source: Colliers International Research
Source: Colliers International
Key Retail Figures TiranaTotal Shopping CentreStock
186,900m
Prime Headline SC Rent 33 m2/pcmPrime HeadlineHigh Street Rent
45 m2/pcm
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RESEARCH & FORECAST REPORT | 2012 | ALBANIA
512 offices in
61 countries on6 continentsUnited States: 125Canada: 38Latin America: 18Asia Pacific: 214EMEA: 117
$1.5 billion in annual revenue
978.6 million square feet undermanagement
Over 12,500 professionals
The information contained herein hasbeen obtained from sources deemedreliable. While every reasonable efforthas been made to ensure its accuracy,we cannot guarantee it.No responsibility is assumed forany inaccuracies. Readers areencouraged to consult their professionaladvisors prior to acting on any of thematerial contained in this report.
ALBANIA:
Lira Mura
Colliers InternationalSky Tower, Suite 141Rr, Deshmoret e 4 ShkurtitTiranaAlbania
TEL +355 42 400 471EMAIL [email protected]
COLLIERS RESEARCH
Colliers Research Services Group is recognised as a knowledge leader in the commercialreal estate industry, providing clients with valuable market intelligence to supportbusiness decisions. Colliers research analysts provide multi-level support across allproperty types, ranging from data collection to comprehensive market analysis.
Across the CEE-SEE-Russia region of EMEA, Colliers researchers regularly collect and updatedata on key real estate metrics, set to consistent definitions. This information is constantlymanaged using databases, enabling staff to readily produce analysis on key regional marketsincluding supply, demand, absorption, pricing and transaction data on capital markets and theoffice, industrial and retail sector. In most CEE-SEE-Russian markets, the office definitionsused are consistent with those set out by the CEE Research Forum an umbrella group, ofwhich Colliers is a founding member - established to ensure consistent research methodologiesare used, bringing greater transparency and reliability to the analysis of real estate markets inthe region. Definitions of the key metrics used in our regular reports are highlighted below.
KEY METRIC DEFINITIONS
Prime Headline Capital Value (derived):This is a calculation of market value derived
from the annual prime headline rent divided by the prime (net initial) yield.Prime Net Initial Yield:The yield an investor is prepared to pay to buy a Grade A building,fully-let to high quality tenants at an open market rental value in a prime location.Lease terms should be commensurate with the market. As a calculation Net InitialYield = first years net income/purchase price (prior to deducting fees and taxes).
Prime Headline Rent:Represents the top open-market tier of rent that could be expectedfor a unit of standard size commensurate with demand, of the highest quality andspecification in the best location in the market at the survey date. This should reflectthe level at which relevant transactions are being completed at the time but need notbe exactly identical to any of them, particularly if deal flow is very limited or madeup of unusual one-off deals. If there are no relevant transactions during the surveyperiod, the quoted figure will be more hypothetical, based on expert opinion of marketconditions, but the same criteria on building size and specification will apply.
Prime Net Effective Rent:Prime Net Effective Rent is the lowest rent payable, based ona calculation of the Prime Headline Rent, less the monetary equivalent of the highest ofeither the rent-free period or fit-out contribution available at the time of the survey date.
Average Headline Rent:Average Headline Rent represents the average open-market tier ofrent that could be expected for a unit of standard size commensurate with demand, based ona blend of Grade A and B space across a range of locations in the market at the survey date.
Total Competitive Stock:Includes the gross leasable floor space in all A and B class buildings.
Space Under Active Construction:Represents the total amount of gross leasable f loorspace of properties where construction has commenced on a new development or inexisting properties where a major refurbishment/renovation is ongoing at the survey date.
Space Under Construction Inactive:Represents the total amount of gross leasable floor
space of properties where construction had started/where a major refurbishment/renovationwas ongoing, but activity has since stopped for a period of three months or longer.
Vacant Space:The total gross leasable floor space in existing properties that meet theCompetitive Stock definition, which is physically vacant and being actively marketedat the survey date. Space should be available for immediate occupation.
Take-up: In our calculation of take-up, gross take-up accounts for all occupationalmarket activity including renegotiations , renewals and sale-and-leasebacks. Net take-up includes new leases and pre-leases only, although it will often include relocations.
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CORPORATE INCOME TAXAND CAPITAL GAINS
From 1 January 2008, corporations conductingbusiness in Albania are subject to corporateincome tax at a flat rate at 10%. Corporateincome tax is applied to the accountingprofit after adjustments for tax purposes.
Capital gains from the sale of real estateare included in the taxable income of theentity and taxed at the 10% rate. The saleof real estate by individuals is subject topersonal income tax at a 10% rate on the
capital gain generated (0.5% over the saleprice in case of sale of agricultural land).
Since 1992, Albania has entered intoagreements with several countries foravoidance of double taxation. As at 1 January2012, 32 double tax treaties with differentcountries are in force. A general rule imposedby the tax treaties is that the right to taxthe capital gains is conferred to the state ofresidence of the seller. However, a number ofdouble tax treaties provide a special regimefor capital gains if the shares being sold derivemore than 50% of their value directly or
indirectly from real estate. In addition, capitalgains are taxed in Albania in case a foreignentity or a foreign individual transfers the directownership over real estate situated in Albania.
Tax Depreciation
Entities may set depreciation rates for assetsin accordance with their accounting policies,while under the provisions of the Law onIncome Tax, maximum annual rates allowedfor tax purposes are specified accordingto a separate tax depreciation schedule.
Land is not depreciated for tax purposes.
The solid buildings, including investmentproperties, facilities, transmitting devices,machinery and production equipmentwhich are fixed at the building site aredepreciated according to the declining balancemethod at a depreciation rate of 5%.
Certain assets incorporated to a buildingcan be treated as separate movable assetsfor tax purposes and therefore can bedepreciated over a shorter period.
Tax Losses
Tax losses can be carried forward over three
tax periods. They can be offset against thepositive financial result after tax adjustmentfor the respective tax period according to thefirst loss before the last one principle. A taxloss cannot be carried forward if the ownership
of stock capital or voting rights of a personchanges more than 25% in number or value.
Thin Capitalisation
The thin capitalisation rules apply in Albania ifa companys liabilities exceed four times theamount of its equity (excluding short-termloans). In such a case, the interest paid on theexceeded amount is not tax deductible. Thethin capitalisation restrictions do not applyto banks, insurance and leasing companies.In addition, the interest paid exceeding theaverage annual interest rate of loans publishedby the Bank of Albania is not tax deductible.
WITHHOLDING TAX
The standard Albanian withholding tax rate is10%. The withholding tax rate can be reducedby double tax treaties to which Albania is party.
Dividends
Withholding tax on dividends at 10% rateapplies on all dividends paid by Albaniancompanies unless a respective double tax treatystates otherwise. No withholding tax applies ifdividends are paid to a tax resident company orpartnership subject to corporate income tax in
Albania. In addition, the income generated fromdividends is not included in the taxable incomeof the tax resident company or partnership.
Interest and Royalties
Withholding tax at 10% rate applies tointerest and royalties paid by Albaniancompanies unless a respective doubletax treaty states otherwise.
REAL ESTATE TAX
Individuals and legal entities that own realestate property in Albania are subject to taxon real estate. Local taxes on real estateconsist of the real estate tax on buildingsand real estate tax on agricultural land. Forreal estate tax on buildings, the tax baseis the area of the buildings measured in asquare metres for each floor of the buildingowned (for real estate tax on agriculturalland, the tax base is the area of agriculturalland measured in hectares) and it variesdepending on the district where the buildingis located. Buildings owned by the state andlocal governmental authorities as well as byreligious institutions are exempt from this tax.
REAL ESTATE TRANSFER TAX
The tax is applicable in case of transfer ofownership right on buildings and other realestate properties. The tax is payable by theentity that transfers the ownership of the
real estate. The tax on ownership transfer ofbuildings is levied on each square metre andvaries from ALL 100 to ALL 2, 000, dependingon the district where the real estate islocated. The tax on ownership transfer of realestate other than buildings is 2% of the saleprice. The tax is not applicable to individualssubject to personal income tax in Albania.
Donors of real estate property to governmentalauthorities, religious institutions or not-for-profit organizations are exempt fromthis tax. The tax should be paid by theseller of immovable property before the
transfer of the real estate is registeredwith the Real Estate Register.
VALUE ADDED TAX (VAT)
A supply of land and a lease of landare considered VAT exempt supply inAlbania. The supply of buildings (exceptthe supply of construction works) is anexempt supply. The lease of a building isan exempt supply except for these cases:
renting for not longer than two months
staying in hotels or vacation resorts.
In addition, based on the by-laws issuedby the Minister of Finance, entities orindividuals may opt (upon the fulfilment ofcertain conditions) to categorise their leasesupply of buildings as a taxable supply.
FOR MORE INFORMATION ON REAL ESTATE
SERVICES IN ALBANIA,PLEASE CONTACT:
Arkadiusz MierzejewskiPartner
KPMG in AlbaniaBlvd. Deshmoret e Kombit,Twin towers Buildings,Tower 1, Floor 13, Ap A1-A4Tirana, Albania
T: +355 4 2274 524+355 4 2274 534
ALBANIA TAX SUMMARY
RESEARCH & FORECAST REPORT | 2012 | ALBANIA | TAX SUMMARY
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RESEARCH & FORECAST REPORT | 2012 | BULGARIA
BULGARIA
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RESEARCH & FORECAST REPORT | 2012 | BULGARIA | EXECUTIVE SUMMARY
RECENT TRENDS
Economy:Bulgaria showedsigns of improvement, economicgrowth and stability in 2011.
Industrial:The total stock of speculativelogistics and industrial space in Sofiaexpanded by 8% in 2011, whereas newdeliveries accounted for approximately40,000 m2. Demand was driven mainlyby food and non-food retail chains, 3PLlogistics operators and distributors ofpharmaceutical products. A new trend
emerged where international automotive andelectronics companies have chosen Bulgariaas a production outsourcing destination.
Office: The inventory of office space in Sofiaincreased by 12% during H2 2011. Absorptionfor 2011 is estimated at 120,000 m2. As aresult of competitive rental pricing, morecompanies relocated to higher-class officespace or to locations with better accessibilityand attractiveness. Approximately 300,000m2of office stock, which represents 19%of total office space in Sofia, meet Grade A
standards. This stock is concentrated in 16contemporary office projects in the capitalcity. High-quality office space can alsobe found in suburban locations, as well asin the Central Business District (CBD).
Retail:The retail property market remainedunchanged in 2011 as far as new openingswere concerned. New supply was dominatedby three schemes under construction: SofiaRing Mall, Paradise Centre and BulgariaMall. Cumulatively, the three projects willcome on market in Sofia in 2012/2013representing approximately 180,000 m2GLA.
However, the retail schemes with a deliverytimeframe of 2012/ 2013 are facing severalchallenges such as determining the structureand appropriate retail mix of tenants.
MARKET PROGNOSIS
Economy:The economic situation will remainrelatively stable in 2012, with mild economicgrowth driven by stronger Bulgarian exports.
Industrial:Bulgaria will continue to attractinternational companies and developas an industrial outsourcing destinationthanks to its EU membership. Similarly,Bulgarias industrial sector benefitsfrom having very low taxes comparedto other European countries, low overallcosts, and a good geographic location.
Office:No new major projects areexpected to start construction in 2012.The vacancy rate will decrease and netabsorption is expected to increase inpremium Grade A office premises.
Retail:Third Wave shopping centreswith targeted opening dates in 2012 and2013, will continue to differentiate theirtenant mix and offering in contrast totraditional retail functions. Internationaldiscount operators in fashion, DIY and
the sporting good segment are planningto expand in Bulgaria. Food retailers willcontinue their expansion mainly by openingconvenience formats in key locations.
EXECUTIVE SUMMARY
TRENDS 2012
IncreasingStableDecreasing
GDP GROWTH
PRIMEOFFICE RENTS
PRIME SC
RETAIL RENTSTRANSACTION
VOLUMES
PRIME
YIELDS
PRIME INDUSTRIAL RENTS
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RESEARCH & FORECAST REPORT | 2012 | BULGARIA | ECONOMIC OVERVIEW
SUMMARY
Bulgaria has fallen victim to the contractionin the Eurozone economy which hasnegatively impacted the countrys exports.Close to 60% of Bulgarias exports dependon Eurozone demand. As the economiesof some of Bulgarias trading partnersimprove, particularly Germany, so toowill the health of the local market.
Imports may benefit from pent up householdsavings banked earlier in the financialcrisis. Likewise, government efforts to curb
and reduce the countrys current accountdeficit will also be a key success factorin the improvement of the economy.
Bulgarias prudent financial policieswhich have brought a certain level ofstability to the market put the country ina more stable position to weather anyfurther potential Eurozone disruptions.
Government funding requirements arenot expected to grow significantly overthe next four years. It is also worthy
to note the level of domestic savingswhich will serve to further reduce anyimmediate need for government funding.
ECONOMIC OVERVIEW
KEY MACRO ECONOMICS INDICATORS
EXTERNAL TRADE PERFORMANCE
15%
10%
5%
0%
-5%-10%
30%
20%
10%
0%
-10%
-20%-30%
-40%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Gross domestic product, constant pricesInflation, average consumer pricesUnemployment rate
Change in Volume of ExportsChange in Volume of ImportsCurrent Account Balance as % of GDP
Source: IMF; Colliers International
Source: IMF WEO 9/11
Key Economic Figures2010 2011 2012
GDP % 0.15% 2.50% 2.30%CPI % 3.04% 3.75% 2.94%Unemployment % 10.30% 10.17% 9.49%
Economic Make-upSector GDP LabourAgriculture 5% 7%
Industry 30% 35%
Services 65% 58%
Population 7 364 570Top 3 Cities 1 964 614 26.68%Sofia 1 291 591 17.54%Plovdiv 338 153 4.59%Varna 334 870 4.55%
Source: IMF/CIA World Fact Book/FocusEconomics
Source: IMF/CIA World Fact Book/FocusEconomics
Source: IMF/CIA World Fact Book/FocusEconomics
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SUMMARY
In 2011, Bulgarias real estate investmenttransactions reached 186 million, theirhighest level to date since 2008.
High turnover was achieved dueto an improvement of loans terms,the greater availability of stockand the stabilisation of rents.
The real estate assets most in demand forinvestment reasons included retail big-boxesand offices. In Sofia, the Mall of Sofias
transaction represented approximately 55%of total investment volumes for 2011.
Buyers did face some challenges sourcinginvestment grade properties due to ashortage of stable income-generatingassets in the Bulgarian market.
PROGNOSIS
Interest from investors will remain inpart due to the overall macroeconomicstability of the country. However, due to ashortage of sizeable and stable income-generating assets, turnover in 2012 isnot expected to exceed 2011 levels.
Yields are expected to remain stable orincrease slightly in 2012. As of Jan 2012,there were signs of deteriorating loan terms.However margins between interest rates andyields remain sizeable (300 to 350bps) and
with rents at their lowest levels, 2012 shouldprove to be a wise time for investment.
INVESTMENT OVERVIEW
RESEARCH & FORECAST REPORT | 2012 | BULGARIA | INVESTMENT OVERVIEW
INVESTMENT VOLUME (IN MILLION)600
500
400
300
200
100
0
2006
2007
2008
2009
2010
2011
Source: Colliers International
Key Investment Figures BulgariaInvestment Turnover 186 mPrime Office Yields 9%Prime Retail Yields 9%Prime Industrial Yields 11%
Source: Colliers International
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RESEARCH & FORECAST REPORT | 2012 | BULGARIA | INDUSTRIAL MARKET
SUPPLY
The total stock of speculative logistics andindustrial space in Sofia expanded by 8%in 2011 as new completions accounted forapproximately 40,000 m2. These figuresinclude speculative and build-to-suit projects,as well as premises offered for rent bythird-party logistics providers (3PL). Thelargest project that was completed in 2011was a logistic complex in Obelia, adding13,000 m2to the total industrial stock.
The construction pipeline for industrial space
remained unchanged during H2 2011. No newspeculative projects started. Those underconstruction are expected to increase thestock of industrial buildings by approximately12,900 m2. Due to market conditions investorsare mainly considering build-to-suit projects,and are avoiding speculative development.
International food chains in Bulgariagenerally prefer to build their ownindustrial space according to theirspecific business requirements, ratherthan renting existing space.
T-Market leased their first logistics buildingduring H2 2011 in the area of Elin Pelin,occupying 7,000 m2. The area around ElinPelin has continued to attract internationalcompanies as a suitable destination forbuild-to-suit projects due to its proximityto the two major highways in Bulgaria.
There was an increase in 3PL activityduring H2 2011, mainly due to the increasedoutsourcing of logistics services. Moreand more companies are inclined tooutsource their distribution activities,
mainly due to the inherent cost savings.
The major difference between Sofiaand the rest of the country is that in thecountry the dominant type of premisesare production facilities, whereas in Sofia,warehouse and logistics facilities makeup the majority of industrial stock.
Some of the most developed industrialzones in the country are located in the areaaround Plovdiv due to its central location andthe proximity to the Trakia highway. Theseindustrial zones provide attractive conditionsto companies for establishing production,warehousing and logistics centres. Thearea continues to develop, as many of theexisting build-to-suit and owner-occupiedprojects are expanding. Varna and Bourgasare also notable industrial hubs in Bulgaria.For example, Logistic Park Varna continuesto attract new tenants and its new building,
A6, has reached more than 50% occupancy.
Due to geographic factors such as proximityto the Danube and being a short distanceto Bucharest, Ruse is likely to becomethe next industrial hub in the country.The first step has already been takenwith the completion of Logistic Park Rusecomprising 13,850 m2of warehouse space.
DEMAND
Demand during H2 2011 was driven mainlyby food and non-food retailers, 3PL logistics
operators and distributors of pharmaceuticalproducts. Generally, the majority of tenantinquiries have been for logistics andindustrial space in Sofia and Varna. Theaverage size of requested warehouse inSofia was between 800 m2to 1,000 m 2,while in Varna it was about 500 m2.
Industrial demand from internationalautomotive and electronics companies, whohave chosen Bulgaria as an outsourcingdestination for production has increased.For example, the Bulgarian-Chineseautomotive factory in Lovech, which
has already started production, and isexpected to produce 1,000 cars per year.ALC, a privately owned South-Africancompany, specialising in manufacturingand exporting exclusive automotive leatherinterior components to the middle andluxury automotive sectors, has outsourcedproduction in the region of Musachevo,occupying 6,000 m2of industrial space.
INDUSTRIAL MARKET
CHANGE IN STOCK OVER TIME(MILLION M2)3.0
2.5
2.0
1.5
1.0
0.5
0.0
H12008
H22008
H12009
H22009
H12010
H22010
H12011
H22011
IncPipeline
Source: Colliers International
Key Industrial Figures SofiaTotal Stock 1,629,790 m2
Take-up 13,000 m2
Vacancy 24%Prime Headline Rent 4 m2/pcm
Source: Colliers International
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RESEARCH & FORECAST REPORT | 2012 | BULGARIA | INDUSTRIAL MARKET
VACANCY/AVAILABILITY
The vacancy rate in the industrial marketincreased slightly in H2 2011 to 24%. Thisincrease is mainly due to higher percentagesof available owner-occupied sublease space.The net absorption on the logistics market forspeculative space was 20,000 m2in H2 2011.
RENTS
Rental levels stabilised during H2 2011. Primeasking rents in Sofia remained at 4 m2/ pcm.
PROGNOSIS
Bulgaria will continue to attract internationalcompanies and develop itself as anindustrial out-sourcing destination, thanksto its EU membership, attractive tax rates,low costs and the competitive geographiclocation. These factors will continue tofacilitate the development of the industrialand logistic market in the country.
Rents are expected to remainstable during 2012.VACANCY RATE
PRIME HEADLINE RENT (/M2)
30%
25%
20%
15%
10%
5%
0%
109876543210
H12008
H22008
H12009
H22009
H12010
H22010
H12011
H22011
H12008
H22008
H12009
H22009
H12010
H22010
H12011
H22011
AVERAGE ASKING RENTS FORCONTEMPORARY LOGISTICS SPACE(/ M2/ PCM)
Market Sofia Plovdiv Varna RoussePrimeRents
4 3 3.8 3.5
SecondaryRents
2.5 1.8 2 2
Source: Colliers International
Source: Colliers International
Source: Colliers International
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SUPPLY
The inventory of office space in Sofiaincreased by 12% during H2 2011 so thatthe total stock of Grade A and Grade Boffice premises is now 1,538,640 m2.
In terms of a geographic breakdown,13% or approximately 200,000 m2of thetotal office stock for lease is located inSofias Central Business District (CBD),while 68% or 1,047,535 m2, is locatedin the suburban areas of the capital.
Grade A office space represents 300,000m2, or 19% of overall stock. This stock isdistributed among 16 contemporary officeprojects and is located in the capital.
High-quality premises appeared in bothsuburban areas, as well as in the CBD. Newsuburban projects were built along maintraffic routes in Sofia in order to provideexcellent accessibility. One such exampleincludes the Sopharma Business Towerslocated on Dragan Tsankov Boulevard,which added 23,000 m2to the stock of
contemporary Grade A office space in Sofia.Other developments completed during H22011 were The Needle, located in the CBD(2,500 m2), Vertigo and Astral businesscentres, whose combined area totaled 20,000m2of office space in the suburban area.
Currently, approximately 300,000 m2of officespace is under construction in the pipeline.70% of the future supply will be located inthe suburban areas of the city, and only afew of them will meet Grade A standards.Compared to the construction pipeline at theend of 2010, the 2011 number has decreased
by half due to completed projects. No newoffice premises entered the pipeline in 2011.
DEMAND
In 2011, absorption totaled 120,000 m2.Major deals done included the acquisitionof building E of the European Trade centreby Piraeus bank. Likewise, SopharmaCompany moved to Sopharma BusinessTowers, taking-up approximately 19,000m2of office space. Serdika Offices onSitnyakovo Boulevard continued to attractnew tenants, such as Osram, Triumphand Boehringer. The insurance companyGeneralli Bulgaria Holding moved intoTwins Tower located on Nikola Gabrovski
Boulevard thereby absorbing 2,272 m2.
As a result of competitive rental prices, morecompanies were able to relocate and trade-upto higher-class office spaces or locationswith better accessibility and attractiveness.
Multinational companies from thepharmaceutical and IT industries remainedthe main drivers of demand. Companiesin these industries had both the financialmeans and real estate strategy whichfocused on occupying high-quality office
premises to support their core businesses.
Tenants seeking office space have becomemore knowledgeable and selectivewith regards to real estate leasing andpurchasing. Companies realised theimportance of selecting accessible locationsfor its workforce, the impact space has onimproved working environments, the benefitof property management services and theimprovement of on-site or near by amenities.The majority of office occupiers prefer tolease office space rather than to buy.
Demand for offices of less than 200 m2and more than 2,000 m2is limited.
OFFICE MARKET
RESEARCH & FORECAST REPORT | 2012 | BULGARIA | OFFICE MARKET
CHANGE IN STOCK OVER TIME(MILLION M2)
ANNUALISED TAKE-UP MID-YEAR BASIS (THOUSAND M2)
3.0
2.5
2.0
1.51.0
0.5
0.0
150
100
50
0
H12008
H22008
H12009
H22009
H12010
H22010
H12011
H22011
IncPipeline
H12008
H22008
H12009
H22009
H12010
H22010
H12011
H22011
Source: Colliers International Bulgaria
Source: Colliers International Bulgaria
Source: Colliers International
Key Office Figures SofiaTotal Stock 1,538,640 m2
Take-up 120,000 m2
Vacancy 25%Prime Headline Rent 11 m2/pcm
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RESEARCH & FORECAST REPORT | 2012 | BULGARIA | OFFICE MARKET
VACANCY/AVAILABILITY
Overall, office vacancy has increasedslightly from 356,779 m2during H1 2011to 387,828 m2in H2. In percentage terms,the 2011 vacancy rate totaled 25.2% inSofia. In the Broad Centre, the vacancyrate decreased to approximately 19%, asno new office projects came on marketlast year and absorption increased.
The vacancy in the CBD has slightlyincreased, amounting to 36,374 m2,mainly due to the completion of new
projects. In the suburban area, thevacancy level remained unchanged.
Vacancy rates are anticipated to remainstable or even decrease in 2012. This is aresult of the diminishing supply of premium,Grade A office projects which meet theneeds of multinational companies. At thesame time, demand is expected to increase.
RENTS
Rental rates in the city vary dependingon the location and the quality of theoffice. In the last three years, rents havefollowed a downward trend as officeinventory increased. However, averageasking rents remained unchanged duringthe year except for those in CBD projects,where a slight decrease of 1 m2/pcmwas registered with Grade A buildings. Inthe Broad Centre and suburban areas, therents remained stable throughout 2011.
PROGNOSIS
No major new office projects areexpected to be completed in 2012,and no major new office premises areanticipated to start construction.
Vacancy levels will decrease in 2012 andnet absorption is expected to increase mainlyfor premium Grade A office buildings.
Rents will remain stable or evenincrease, but only for quality officespace, deserving of a premium price.
RENT AND VACANCY MARKETINDICATORS/m2
35
30
25
20
15
10
5
0
30%
25%
20%
15%
10%
5%
0
Prime Headline RentAverage Headline RentVacancy Rate
H12008
H22008
H12009
H22009
H12010
H22010
H12011
H22011
Source: Colliers International Bulgaria
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RESEARCH & FORECAST REPORT | 2012 | BULGARIA | RETAIL MARKET
SUPPLY
The Sofia retail property market remainedunchanged in 2011 as far as new openingsare concerned. This compares starklyto previous years when Bulgaria sawtwelve new shopping centres open.
That said, the first IKEA hypermarket inSofia (30,000 m2total built-up area) tookplace in September 2011. The big-box retailsegment remained the most active player inthe retail market during 2011. In particular,discount retailers capitalised on opportunities
to proceed with expansion plans. Whencomparing with the discount retailing sector inthe rest of Europe, it is evident that Bulgariais still in its early stages, and significantdevelopment can be anticipated on thisfront, not only in the food segment, but alsoin fashion, sports and DIY. While the majorplayers in the non-food sectors are yet toopen their first flagship stores, food discountretailers have already started to positionthemselves across the market. For example,Lidl opened 10 new stores during H2 2011.
DEMAND2011 demand came mostly from food retailers,which continued to expand their businessesin convenience formats. A major factordriving food retailer expansion is the highpercentage spent on food and non-alcoholicbeverages in consumer expenditures. Thetotal expenditure per household memberduring Q3 2011 (BGN 917) increased by 8.6%in relation to the same quarter of 2010.
Several international retailers also entered themarket, including the British brand Peacock,
Patrizia Pepe, Pimkie, Calvin Klein and Quizthrough local or regional franchisees.
VACANCY
The average vacancy level at H2 2011 inthe shopping malls in Sofia was around6%. This represented a slight increasefrom H1 2011, when the average vacancylevel was 4%. The Mall, Serdika centre andthe Mall of Sofia enjoyed stability with avacancy level in the range of 2% to 3%. Theremaining operational malls registered highervacancy rates, and in some cases, vacancy
rates in double digits (Sky City Centre).
The vacancy rates of retail projects insecondary cities varies depending on theirmarket positioning, achieved market shareand local spending power of the community.Projects with well-conceived concepts,a proper tenant mix and well-performingproperty management teams, enjoy lowvacancy rates of around 4%, while othermalls continue to look for better positioningand continue to absorb vacancy slowly.
HIGH STREET
During the last couple of years, the extension
of Sofias second metro line, combined witha crippling recession, has changed the highstreet retail landscape. The vacancy rateon Sofias high street registered 5%, whilereplacements decreased from 12% to 8%on a half-year basis. Vitosha Boulevard sawa vacancy rate of 10% and a replacementrate of 10%. The boulevard is expected tostart a gradual recovery with the completionof the new metro radius in July 2012 aswell as the opening of the archaeologicalfindings of the ancient city of Serdika. Therecovery of the high street back to its primary
function as a destination for shopping,culture and socialising will be centred aroundproviding customers with an attractive mixof fashion retailers, convenience stores,places for food and beverages and leisure.
The High Streets in Varna, Plovdiv andBourgas proved to be quite steady duringthe past six months. Aside from a slightmovement among occupiers, the levelof vacancy and replacements remainedsimilar to over the year. Varna registered7% vacancy and 11% replacements. Thesituation in Plovdiv is stable with only 3%
vacancy and 4% replacements, while Bourgashad 2% vacancy and 12% replacements.
RETAIL MARKET
40%
35%
30%
25%
20%
15%
10%
5%
0%
Foodsandnon-alcoholicbeverages
AlcoholicBeveragesandtobacco
Clotjingandfootwear
Housing,water,electricity,gasandotherfuels
Furnishingandmaintenanceofthehouse
Health
Trabsport
Communication
Recereation,cultureandeducation
Miscellanousgoodsandservices
Taxes
Socialinsurancecontributions
Otherexpenditure
INVESTMENT VOLUME (IN MILLION)
Q3 2010
Q3 2011
Source: Colliers International
Source: NSI Bulgaria
Key Retail Figures SofiaTotal ShoppingCentre Stock
619,974 m2
Prime Headline SCRent
32 m2/pcm
Prime HeadlineHigh Street Rent
40 m2/pcm
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RESEARCH & FORECAST REPORT | 2012 | BULGARIA | RETAIL MARKET
RENTS
Rental levels in shopping centres andmalls remained relatively stable duringthe second half of 2011. Rents varieddepending on the type of retail facility andits location. Large shopping centres in Sofia,commanded rents around 32 m2/pcm,while shopping centres in secondary citiessaw rents range from 20-22 m2/pcm.
High street rents decreased by approximately27% in Sophia. The downward trendhas partially been a result of the retail