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Serbia Real Estate Market View

Tamara Kostadinovic • 1/17/2023
In 2022, the real estate market in Serbia experienced a record demand for office, logistics and residential space, moreover, it is expected that this growth trend continues in 2023. 

The demand for office space in Belgrade doubled during 2022, compared to the previous year, being a reason why investors are continuing strong development activity in the office segment, with more than 200,000 sq m GLA currently under construction. Remote work has spread in companies in which the workers are proved to be more creative when working from different locations, whereas in other companies are bringing back workers to offices, as they believe that working from home is no longer as productive.

When looking at the industrial and logistics market, it is not expected that the crisis as a consequence of the Russian-Ukrainian conflict will have stronger impact on the construction of industrial and logistic facilities. As the trend of nearshoring is present at the moment globally, where companies are changing their business strategies, due to the collapse of the supply chain during the COVID-19 pandemic, which is the reason why they are moving their production capacities from the Far East to Western Europe - which is a great opportunity for the region and Serbia. At the moment, in addition to already present Czech CTP Group, one of the largest industrial developers in Central Europe, Serbian market witnessed the recent entrance of VGP Group, Belgium-based developer of logistics and industrial parks across Europe, who is aiming to develop a large industrial park for speculative purposes in Belgrade’s industrial zone Dobanovci, as well as Slovakian Besico Group, who is planning to develop an industrial park in Nova Pazova, north of Belgrade.

The inflation and the increased inflow of foreigners (around 100,000) as a consequence of the Russian-Ukrainian crisis, have led to an additional pressure on the growth of prices of apartments, making this year a record-breaking year when it comes to the number of sold apartments and the amount of money spent on purchasing, as well as to the price of rented apartments. In 2023, banks should be expected to be somewhat stricter regarding loan approval, whereas the existing loans could become more expensive due to the growth of Euribor. However, no significant impact on residential demand is expected, since that 70% of the apartments are bought from own funds, out of 20,000 apartments that are sold in Belgrade annually.

27 Oct 2022

Economic growth in Serbia was on a healthy level, mostly due to the achieved macroeconomic and financial stability, adopted economic policy measures during the pandemic, which minimised the decline in GDP in 2020. However, looking ahead the high inflation and tightening monetary policy will put the pressure on the Serbian economy. The National bank of Serbia continues to increase interest rates in an attempt to restrain the historically high inflation. Namely, in September 2022, the NBS increased the key policy rate by 0.5 pp to 3.5%, while in October the key rate was increased to the level of 4%. After peaking in August, when overall inflation stood at 13.2%, the inflation rate is projected to return to the target tolerance band in H1 2024, instead of H2 2023, as previously forecasted. In Q2 2022, GDP growth stood at 3.9%, with domestic demand remaining to be the main source of growth, while Serbian economy is expected to grow by 3.5-4.5% this year. Slowdown in economic activity is expected by the end of 2022 and at the beginning of 2023, due to the increasing tension related to the Ukraine conflict and increase in the prices of energy and food. 

The total office stock in Belgrade reached 1.123 million sq m at the end of Q3 2022, with around 47,000 sq m being completed in 2022. In addition, Belgrade hopes to deliver over 200,000 sq m of new office space by the end of 2023. A part of this future supply already has end users. More specifically, over 30% of the stock under construction has already been committed, while app. 15% is under negotiation or reserved. Year-to-date leasing activity amounted to 170,000 sq m and has already exceeded the total volume for 2021 demonstrating the dynamism in this property segment, resulting in the further drop of vacancy rate to the level of 3.29%, reaching historical minimum.

In Q3 2022, Belgrade retail supply reached the level of 580,000 sq m, out of which seven formats are considered to be modern western style shopping centres, totalling approximately 307,000 sq m GLA (53%). Although the buyers and tourists returned to main pedestrian zones in Belgrade, which had a significant rebound in footfall traffic, still, there is an increasing trend of relocation of retailers to new shopping centres or other retail schemes, since they record a higher footfall. In order to remain relevant and meet the involving consumers’ needs, retailers started to use different omnichannel models, such as BOPIS (buy online, pick up in store), selling on the social platforms, launching an online store, etc. Customer experience became essential, and landlords are trying to follow the global trends and improve offer by providing additional benefits to consumers.


25 Aug 2021

A global slowdown caused by the COVID-19 pandemic had a less severe impact on Serbia than initially projected. After a decline of 1.0% in 2020, according to the Statistical Office of the Republic of Serbia, GDP increased by 1.7% in Q1 y/y, reaching the pre-crisis level one quarter earlier than estimated. The growth was driven by construction and industry, while the service sector also made a positive contribution, despite the prolonged negative effect of the pandemic. 

Strong development activity continued in Q2 2021, when two new Class A office buildings were completed, bringing the completions to the level of 46,500 sq m, which has led to the increase of the total modern stock to the level of app. 1,064,000 sq m of GLA. Moreover, construction activity is very high, over 200,000 sq m of office space is expected to be completed by the end of the 2022 as per the current investors’ plans. Additionally, so far, the largest investment transaction in the office market was recorded in Q2 this year. Namely, GTC has decided to sell its portfolio of office space in Belgrade to the Hungarian investor Indotek Group. The agreement will cover the sale of 11 buildings within 5 business parks (Green Heart, FortyOne, Belgrade Business Centre, 19 Avenue and GTC House) totalling 121,700 sqm GLA with high occupancy rates, located in the New Belgrade CBD. This sale represents one of the largest real estate transactions in the last 5 years on the CEE market. 

After the increase of the total modern retail stock in 2020 for 136,000 sq m of GLA, due to the opening of two western-type shopping centres Galerija and Beo Shopping centre, new openings are expected in late 2021 and in 2022 which will bring to the market additional 40,000 sq m of GLA. As of beginning of the year, retailers were active, as key retail formats experienced the tenants’ reshuffling in order to improve the offer. When it comes to rental levels retailers apply different pricing strategies, which means the introduction of rents that directly depend on turnover for new leases, the period of non-payment of service charges as a means of lowering effective rents. In 2021, it is expected that further pressure will be put on the rent levels, if the situation and measures related to the operation of retail market continue. Additionally, the interest for Serbian retail market still grows, as the number of investment transactions steadily rises. In June 2021, BIG Shopping centres has signed the final agreement on purchasing two retail formats, Plaza Kragujevac shopping centre of 22,000 sq m and Krusevac retail park of nearly 9,000 sq m. The total value of acquisition is €61 million. 

In line with the forecasts of economic development in 2021 and the recovery period from COVID-19, the industrial and logistics sector in Serbia is flourishing with an increase in the number of domestic and foreign investors developing logistics and industrial facilities for speculative purposes, but also for their own needs. As of the beginning of 2021, nearly 220,000 sq m of new space was completed, when it comes to the future supply, currently over 960,000 sq m is being developed, predominantly for speculative purposes. The largest complex currently under construction is Shandong Linglong Tyre production park which upon completion should cover nearly 394,000 sq m. The demand for industrial space in H1 2021 was mostly driven by the wholesale, logistics and distribution centres’ tenants, which is in accordance with the rise of e-commerce and retail online sales.


02 June 2021

Despite the crisis caused by the COVID-19 pandemic, Serbia’s total annual GDP in 2020 decreased by only 1.0%, when compared to the previous year. Looking ahead, as Serbia’s economy does not rely significantly on high-contact intensive sectors such as tourism, which was hit hard by the pandemic, so IMF projected real GDP growth of 5% in 2021. 

In 2020, construction activity was high in all segments of the market in Belgrade. The office market witnessed delivery of nearly 100,000 sq m of office space in Belgrade, and the trend should continue in 2021, as per current investors plans, over 100,000 sq m of office space is expected to be completed by the end of the year. The retail market construction activity was also high, only in Belgrade the retail market stock was enriched with two western type shopping centres totalling 136,000 GLA. 

Additionally, in April 2021, Delta Planet Nis, the first western-style shopping centre was opened in the city of Nis, the third largest city in Serbia, enriching its retail offer with an additional 30,000 sq m of GLA. When it comes to the industrial market, Belgrade and industrial zones in close proximity also experienced high construction activity, the overall annual deliveries exceeded 140,000 sq m, while additionally, a certain number of old schemes had been acquired and refurbished into modern industrial facilities.


26 January 2021

The situation with COVID-19 has improved since the middle of December, but the measures implemented by the Government are still in force, as the figures are still not low enough to see a further reduction of the measures. The schools are operating in the same mode as they did at the beginning of the school year in September 2020. The vaccination of the population begun on 11 January, but first in line are medical professionals and senior citizens. 

Despite the pandemic, all segments of the real estate market upheld their regular dynamic. The office segment saw completion of three small-scale projects, totalling 12,000 sq m, in the second half of the year.  

As the stores were open from 09:00 to 20:00, the retail sector was still active and allowed normal shopping during the holiday season. The ban on a gathering of more than five people is still in force, so there were no organised New Year celebrations, which had an impact on the F&B and hotel sector. 

When it comes to the residential sector in 2020, the volume of sales transactions slightly compressed. As per most recent official data from the Statistical Office of the Republic of Serbia, 16,270 residential units were sold in Belgrade, which represents decrease of 13% in comparison with the previous year, as direct consequence of coronavirus lockdown in Belgrade in March and April of 2020.  


9 December 2020

In the last month, the COVID-19 pandemic situation has been continuously deteriorating, and the Government has introduced several measures to slow down the spread of coronavirus. As of 4 December, new measures have been introduced, including the weekend closure of all shops, malls, children's play spaces, restaurants etc, although supermarkets, pharmacies and petrol stations will operate normally, while cinemas and theatres may open every day until 17.00. The lock-down measures which were in force from mid-March until the beginning of May, have not yet been re-introduced, as authorities are trying to calm the pandemic without rigorous measures, in order to reduce the impact on the economy.

Despite the pandemic, the real estate sector remained very active, construction activity continued both on commercial and infrastructural projects in Serbia as construction sites stayed operational, as well as new ones opening. 

Looking at the office segment, Israeli investor Afi Europe has commenced construction works on its new Class A office tower as part of its Belgrade Skyline project. Once completed, the tower should comprise 30,000 sq m GLA of office space. 

The retail sector is also active: on 30 October, Belgrade witnessed the opening of the largest shopping mall in the country, as the part of the Belgrade Waterfront project, Galerija Shopping Mall features 93,000 sq m of GLA. 


27 October 2020

After a relatively quiet period during August and September, during which the situation in the country has been almost back to normal, since mid-October, the COVID-19 pandemic in Serbia has been worsening, but is still under control and no new precautionary measures have been introduced by the authorities.

Despite the contraction of GDP, the inflation remains low and stable, allowing the National Bank of Serbia to lower its policy rate to 1.25% in June 2020. The crisis caused by the COVID-19 pandemic pushed the NBS’ projection of economic growth down to -1.5% in 2020, yet long term GDP contraction is not projected. 

Looking at the office segment, during Q3 2020, three small-scale projects were completed, totalling 12,000 sq m. As of beginning of the year, development completions exceeded 52,000 sq m. This has led to the increase of the total modern stock to the level of 970,000 sq m of GLA. After the third quarter of 2020, the total take-up amounts to approximately 65,000 sq m, being only 8% lower as compared to the same period in 2019, and 2019 was the strongest year in terms of take up in the last 10 years.  

As of mid-May, the retail market began recovery, however the number of infected cases slowed down the activities in second half of June. Since end of July, the market notes a positive trend again, still it certainly takes time to understand how this situation will influence the prices and rents. At the moment rental levels remained stable. Furthermore, as the COVID-19 pandemic slowed down, cinemas reopened on 1 September.

During the previous period, construction activity continued on both commercial and infrastructural projects in Serbia as the construction sites remained operational despite the current situation. Investors’ expansion appetite for both manufacturing and logistics facilities in Serbia over the previous period was confirmed with the largest logistics investment transaction in Serbia, which occurred in the period of pandemic. Namely, Israeli investor BIG CEE acquired a logistics and distribution complex of 17,000 sq m, which is in a long-term lease by Kuehne Nagel, the deal was concluded by our Investment and Capital Markets team. 


3 August 2020

Due to the positive performance in January and February, the economy was not strongly affected by the coronavirus pandemic in the first quarter of 2020, despite the contraction in March. The economy grew by approximately 5% in Q1, recording a positive growth rate for the 22nd consecutive quarter. At the beginning of May 2020, the Serbian Government lifted the state of emergency and curfew, which were adopted to reduce transmission of COVID-19, however the number of patients infected with coronavirus increased significantly in Serbia as of second half of June. The economic downturn should be significant in Q2 2020, while, as projected, the economy will witness the accelerated recovery as of Q3, with adopted measures introduced by the Government.

Despite the lockdown in the previous period, construction activity continued in Serbia as the construction sites remained operational. Therefore, Belgrade saw the completions of three office buildings, all representing the expansion of existing office complexes. Namely, Israeli AFI Europe has completed the tenth office building of 12,000 sq m of GLA within Airport City Belgrade Business Park, GTC has completed the last building within GTC Green Heart office complex, which now comprises 46,000 sq m of GLA, while Belgrade got the second office tower, Usce 2, which was developed by the local company MPC. The second quarter completions amount to 40,000 sq m, which brought the total Belgrade office stock to the level of nearly 960,000 sq m of GLA.

The retail market that suffered a great deal during pandemic period is coming back to normal with reopening of the shopping malls as of 8 May. In terms of new developments, Belgrade retail offer was recently enriched with the opening of MPC’s BEO Shopping Center in Zvezdara Municipality, 43,000 sq m-large retail scheme offers more than 150 domestic and international brands to the customers, while the German brand Peek & Cloppenburg opened its first store in Serbia within this mall. Belgrade modern retail stock currently totals 440,000 sq m of GLA.


25 June 2020

At the beginning of May 2020, the Serbian Government lifted the State of Emergency and curfew, which were adopted to reduce transmission of COVID-19. It is too early yet to estimate precisely forthcoming effects as the pandemic of COVID-19 will certainly have an impact on the Serbian economy. It appears that we will witness consecutive declines in global and regional GDP in the current and next quarter of 2020.  

As a result of relaxation of the measures, companies are slowly regaining their usual operational mode. Some companies are still postponing the return to their offices until September, particularly the ICT sector and international companies.  

For the office market the year 2020 started off with great momentum continuing from 2016-onwards, with high occupancy demand, low vacancy levels, strong development activity and overall solid market fundamentals. As a consequence of the current situation, leasing activity slowed down as of beginning of March, which caused a decrease in the total take up for cca 45% as compared to Q1 2019.  Since lockdowns were lifted and the current situation is becoming more relaxed, the demand has already picked up, additionally a number of deals that were put on hold have been reactivated. 

The retail market that suffered a great deal during this period is returning to normal with reopening of the shopping malls as of 8 May. It is expected that activities within sector will additionally normalise with announced opening of cinemas as of 1 July. 

The past few years were marked by the influx of international investors who recognised the numerous opportunities that Belgrade and Serbia can offer, while the already present investors showed their interest in long-term investments. With the relaxations of the measures the industrial and logistics market is also reviving with opening of a few new opportunities. 

During the previous period, construction activity continued on both commercial and infrastructural projects in Serbia as the construction sites remained operational despite the current situation, however some scheduled completions could be delayed or postponed.


28 May 2020

The real estate market is clearly exposed to the current situation, property types which depend on social contact and human interaction, such as the hospitality and retail segment are more exposed, while the other property types such as office, industrial and residential are more resilient but not immune. 

By the end of Q1 2020, the impact of the global slowdown on the back of the COVID-19 pandemic became also visible in the Belgrade office market and the market activity narrowed, causing the drop in the overall demand. In order to alleviate the situation, most landlords are trying to identify tailor-made solutions for tenants based on the numerous factors, which are favourable for both landlords and tenants. At the moment, there is no significant impact on the headline rents, having in mind that the investors are applying a different pricing strategy. 

As a result of lockdown measures, retailers turned to flexible omni-channel retail models, in order to recompense the revenue from their physical stores and to ensure that commerce keeps going. The high-street was also affected, since the main pedestrian zones depend significantly on the high footfall and attract mostly tourists. When it comes to the rental levels, the previous period was marked by difficult and complex negotiations between tenants and landlords regarding rental payments. However, there were no interruptions in construction activity on the retail market, yet previous ongoing projects are slightly postponed. 

Although the industrial and logistics market in Serbia is clearly exposed to the effects of the global pandemic crisis, market fundamentals were very strong prior to the COVID-19 crisis. Moreover, the pandemic is underlining the importance of supply chains and logistics, and the sector is prepared to rapidly respond to the post pandemic recovery.


21 May 2020

The real estate market is clearly exposed to the COVID-19 situation, still certain property types are more exposed than others. The Serbian property market enters 2020 on a solid basis, bearing in mind the continuation of the strong performance which started back in late-2016 and continued onwards.  

Near-term demand in the office segment will be rather limited until the situation is resolved. It is expected that large companies will be careful in relocation of their premises or expansion activities, while small and medium-sized companies are likely to experience higher financial liquidity risks.  

Shopping centre landlords are also analysing the current situation as per the newly introduced governmental measures to close all shopping centres in Serbia. Most shopping centre landlords are trying to meet tailor-made solutions in line with the retailer’s particular industry, which will be favourable for both landlords and tenants. Although retail is affected the most, it is expected to be the first segment to lead the recovery of the market. 

Limited market conditions in which the retailers operate may result in the reduced demand for warehouse space at least in the short-term, although this is the sector to be the most resilient to the current situation. Rental levels may also come under increased pressure in all commercial segments as leasing activity compresses. Bearing in mind that setting up of a production facility is a lengthy process and represents a strategic decision of a company, we say that Serbia is still a favourable choice for international factories that had showed their interest in Serbia before the pandemic. 


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