Slovak Banks are missing out on their country's recovery because of their hesitant approach to retail real estate financing. As a result developers are turning to banks outside the country for financing, and money which could be used to fuel the Slovak economy is being lost to the country.
Laurie Farmer speaking at the International Council of Shopping Centers' Slovak National Committee first retail real estate conference.
This was the opinion of Laurie Farmer, Managing Director of development consultancy Spiller Farmer Spol, speaking at the International Council of Shopping Centers (ICSC's) Slovak National Committee first retail real estate conference, held last week at the Radisson SAS Hotel in Bratislava.
As the global trade association of the shopping center industry, with more than 60,000 members, ICSC National Committees support members in their own countries, providing connections and business opportunities as well as unique access to retail organizations and intelligence from across the world.
The ICSC Slovak Committee conference, chaired by Marek Kalma of Penta Investments, attracted more than 100 retailers, developers and investors to the one-day high-level conference, where they debated with local and international experts from the retail real estate industry.
In Slovakia, the most pressing issue for developers is securing finance, and according to Laurie Farmer, Slovak banks are creating unnecessary obstacles for development companies, including asking for as much as 70% of a new retail center to be pre-leased.
"This is almost impossible, especially in the current economic circumstances where some retailers are not trading as well as expected," he said.
However the banks cannot sustain this lack of financing. "Banks have to make money, and they won't if they don't lend," said Laurie.
Slovak banks may be maintaining their conservative approach for now, but developers are finding a more positive attitude over the border as banks in neighboring Austria are cashing in, more willing to take advantages of the retail development opportunities still available in Slovakia.
Marek said: "Slovak shopping centers are in the fortunate position of having few vacancies at the moment, mostly because of the low level of retail space currently available in the country. We have a population of close to six million, and currently around 140 Square Meters of retail space per 1000 population, lower than countries such as Hungary, Poland Croatia. As a result there are strong opportunities to increase retail space in the country."
Slovakia dipped into recession in the first quarter of 2009 largely due to a drop in external demand for its automotive industry, which makes up more than 20% of its manufacturing output. The global economic downturn meant the postponement of some proposed shopping center developments, and some weaker projects have been abandoned.
However, the introduction of the Euro at the beginning of 2009 has brought more stability, according to Robert Prega, Chief Economist at the Slovakian Tatra Banka, who