ECONOMIC OUTLOOK
Slovakia recorded one of the fastest y-o-y growth rates in the Eurozone during the first three quarters of 2012, driven by booming sales from the car industry. Volkswagen launched the Up! city car in Slovakia during the year, and the Kia plant was also thriving. If demand in key export markets such as Germany remains positive, Slovakia will avoid the downturn seen in many other European countries. In order to meet Slovakia's commitment to reduce the deficit below 3% of the GDP by 2013, the government has approved tax increases and other fiscal consolidation measures. The latest changes in the labor code aim to strengthen the protection of employees and affect primarily temporary contractors, working hours and notice periods. The new code also strengthens the position of trade unions.
INVESTMENT MARKET
After a successful 2011, when approximately €556 million was transacted, we have experienced a major drop in investment activity. With just over €20 million transacted in two assets during 2012, the Slovak market was largely affected by the high level of uncertainty in the Eurozone and the low availability of debt. One of the major investment transactions on the Slovak real estate market was the sale of Europa Business Centre office complex in Banska Bystrica. Fixed investment in Slovakia is expected to fall back slightly in 2012, a trend that may continue into 2013.
We now see an increase in the activity of local vendors bringing some institutional products to the market. This is interestingly testing the appetite of both types of investors–local and international institutions. The main focus remains on grade-A office product in Bratislava and some industrial buildings located in the prime logistics hubs.
Prime yields in the office segment remained stable at 7.00%-7.25%. Prime yields outside the city center are recorded at 7.50% while secondary product trades from 8.50% upwards.
OFFICE MARKET
At the end of 2012 the total office stock in Bratislava stood at 1,508,000 million m². While in 2011 supply reached 68,000 m² within five new projects, in 2012 it dropped to four new projects totaling 57,400 m². The first green office building Bratislava Business Centre 1 Plus was finally delivered to the Bratislava market. The 2012 take-up amounted to 103,000 m², up from 99,000 m² in 2011. The number and size of transactions have remained at the same levels as in 2011. The biggest transactions in 2012 were Slovak Telekom with 14,000 m² and Siemens with 7,000 m². The vacancy rate has increased to 12.5 % at the end of 2012 as Orange moved to newly built Central and left 19,000 m² of vacant space in BBC IV. About 72,300 m² are expected to be delivered to the market, more than 50% of which are refurbishments.
The first green office building Bratislava Business Centre 1 Plus.RETAIL MARKET
The total modern retail stock in Slovakia increased to approximately 1.54 million m² in 2012. Modern retail stock in Bratislava totals approximately 538,000 m². The majority of the retail stock consists of space which was delivered to the market after 2000. The attractiveness of the regions outside of Bratislava has grown rapidly in recent years. At the end of H1 2012, the total modern retail stock in the Slovak regions reached 1 million m². Retailer demand for new retail space is relatively low, especially in areas with higher saturation and lower income. However, demand remains stable for prime retail space, both in Bratislava and in the regions. Approximately 100,000 m² of new supply was delivered to the Slovak market in 2012 through projects such as Central (36,000 m²), Europa Shopping Center Zvolen (12,000 m²), the extension of Avion shopping center and IKEA (current size of 103,000 m²), etc. However, expectations of new retail supply for 2013 are lower, as it is highly dependent on the economic situation.
INDUSTRIAL/LOGISTICS MARKET
The total industrial stock in Slovakia amounts to 1,160,832 m². Almost all new supply in 2012 was built speculatively. Last year the industrial sector reached its pre-crisis figure of supply with more than 100,000 m² delivered to the market. Developers focused mainly on central and eastern parts of the country. The units with the highest demand over the last year were the smaller sizes (5,000-10,000 m²). Recently there has been an increase in demand for retail warehousing and an increasing number of industrial properties for sale, while there is also significant demand for land. In 2013, approximately 65,000 m² of new industrial space is expected to be delivered in Slovakia (there were 36,400 m² under construction at the end of 2012). Vacancy will decrease slightly to ca. 6% due to potential leasing contracts in vacant premises. Prime yields should remain stable over the year, ranging between 8.5 and 8.75%.
About Jones Lang LaSalle Slovakia:
Jones Lang LaSalle is a financial and professional services firm specializing in real estate services and investment management. The Jones Lang LaSalle Slovakia was established in 2006. Currently, it provides services in the field of investment consultancy (capital markets), valuation, research, leasing of office and industrial space, tenant representation, sale of residential projects, project management as well as services in the field of property management.
