In anticipations
of having the great capital crisis finally over, various market and state economy
surveys are being made throughout the world in order to get leastwise valiant
indications of the beginning of its end. When Europe is concerned, trends at
real estate market are monitored exceptionally carefully since this sector,
along with the automobile industry, has been hit in the greatest extent and
most severely.
Therefore, it is
no wonder that frequent specialized reports have been trying, via comparisons
and analyses of numerous parameters over a previous period, to point out to the situation competently and highlight
the expectations for the forthcoming period.
The article
below is, so to say, a consequence of two facts. At the beginning of the
summer, King Sturge published their European property market survey stating
projections of expectations for real estate development until the end of 2009.
Another fact refers to winning the prestigious award Consultant Agent of the
Year in South-Eastern Europe as a recognition for their professional work
presented on 23 April 2009 in Bucharest, in organization of Europaproprerty
South-Eastern Europe.
This
text is the comment on the study with a selection of data for office space and
specialized industry space markets in several major cities of Europe and Serbia
i.e. Belgrade.
In 2009, the Eurozone
has been facing a severe GDP drop amounting to 4.7% on an average and representing
a post-war record. Almost all
economies in Europe are currently facing recession indicators. The most
unpleasant predictions refer to the German economy which has experienced a decline indicator of 6.3%, followed by Italy with -5.2% and France with -3.1%.
Taking into account stable and continual growth indicators over the recent
years, a slowdown of further decline is expected until the end of this year,
however still not in the extent sufficient to prevent the conclusive recession
indicators for this year.
Projections for
the Central and Eastern Europe created over the recent few months still suggest
the conclusion that their prospects till the end of the year will be
recessional. With an average 5-6% annual growth typical of the last 5 years,
these economies face a sharp recession turnaround this year. Currently Russia
and Hungary are still experiencing poor predictions, but the overall East European
output is expected to equal this year’s final decline at the rate of -3%, similar
to that expected in the West European countries.
Office Markets
Concerning the
office space in Europe, that type of real estate market has faced the weakest
demand ever coinciding with the rental downward trajectory over the second
quarter of the year. The rents in London continue to slide, although the decline
rate has slowed down lately. In comparison to Paris and Amsterdam with the fall
of -10% and -12% respectively, London holds out very well. Brussels, Milan and
Copenhagen fared somewhat better compared with Paris and Amsterdam, registering
changeable indicators with rents expected to stabilise for the rest of this
year.
Further decline
of rents in the CEE region continues to suffer huge pressure due to subdued
demand in the first half of the year. Warsaw has been particularly badly
affected with rents falling by as much as 27% since mid 2008. Moscow is also seeing rents adjustment on a year-on-year
level of as much as -42%.
Rents in two
cities of the CEE region, Zagreb and Sofia, extremely resist the declining
trend, if one can say so. Zagreb has held 204 Euros/m2 on the
year-on-year level whilst Sofia is the only one to register any office space
rents growth. Some bigger rental corrections on the office space market can
occur till the end of the year, but the downward trend is still expected even in
the course of the following year 2010, and possibly beyond. As Britain was the
first into the downturn, it is likely to see the first positive signals, too.
Basically, in
regard of investments the European office space market has continued to see corrections
in pricing combined with low levels of transactions. However, a shy sign of
improvement can be seen here. Positive yield indicator for the leading office
premises at West End and in the City has slightly increased being the only one
ever since the Q1 period. Yields in Helsinki have also shown recovery for the
first time since the end of last year. The European spread of yields ranges
from the lowest at 5 per cent points in Copenhagen stable over the last quarter
and the highest currently in Moscow with yields shifting out to 14 per cent
points.
Prime Industrial Markets
Despite some
signs of modest growth in activities in the European industrial markets, there
continues to be a lower occupier demand in comparison to the last year. This has
translated into either stable or falling prime rents in the second quarter
2009.
The most significant rents decline occurred in Moscow which
fell by 25% to 75 Euros/ m2, Copenhagen down by 22% to 60 Euros/ m2,
Dublin declining by 16% to 97 Euros/ m2 and Sofia down by 10% at 54
Euros/ m2. Clearly, not all markets are moving together in this current
cycle.
Rental prospects over the next six months or longer are
generally slightly better for prime industrial rents for offices, with most
cities expecting little or no rental change over the forthcoming period, rather
than falls.
Investments in the industrial sector appear to have picked
up, although they still remain at a very low level. London is the only city where
the prime industry yields have decreased. In Dublin, Madrid, Helsinki and Oslo
the yields were unchanged and are expected to hold, except in Helsinki which is
expected to see an increase in H2 2009.
Serbia – Belgrade
Concerning Serbia, Belgrade is still the key indicator of the real estate
development. Class A office space is still under pressure of the declining
rental trend particularly having in mind that a number of new Class A office
facilities have been completed over the recent years. Vacancy space rate is
currently above 18% and no recovery of this indicator is expected for another 6
months. In any case, what is interesting at the moment is the difference
between Class A and B office rental price in comparison to Class C rents,
showing vacancy rate increase for the office space of poorer quality and
equipment.
As far as the
sector of industry and logistics centers is concerned, rental rates are still
strong with very slight downward adjustments, but with an increased pressure in
that direction. Anyhow, demand of prospective tenants, particularly of the
international ones, has been reduced.
Investment
sector (in this domain) has not been very active during the last 6 months.
Price levels have not dropped significantly. Fewer sellers are forced to sell
finished projects and currently
there is a subdued need of the second owners to sell their industrial projects
in the early phase of project cycles.
Europaproperty South-Eastern Europe Award
International property consultants King Sturge was awarded
the title of the Agency of the Year for that category at the fourth annual
EuropaProperty South-Eastern Europe Real Estate Awards for 2009 held at the SAS
Radisson Hotel in Bucharest at the end of April. This award supports the
achievements of the leading real estate professionals in the region of South-Eastern
Europe. At the prestigious awards ceremony on 23 April 2009, that attracted 300
guests, it was annouced that King Sturge beat stiff competition to
claim the top prize ’’Agency of the Year in South East Europe’’ for the
forthcoming year.
The nominees were judged and assessed according to their
overall market contribution, quality of rendered services, market innovations,
commercial success, leadership role and
market penetration, what excelled ’’King Sturge’’ in particular in front of the
competition.
’’We are delighted that especially in difficult times for
the economy and the business environment, our professional work is acknowledged
and respected among our clients and our peers’’, Jens Moller Madsen, Managing
Director of King Sturge Croatia and Serbia welcomed the
award.
Otherwise, King Sturge has been present in
South Eastern Europe for over 10 years creating long term relationships with
numerous international and domestic clients. The company operates in the region
via the offices in Budapest (Hungary), Bucharest (Romania), Zagreb and Split
(Croatia), Belgrade (Serbia) and Sofia (Bulgaria).
Srđan Vujičić, Managing director
King Sturge Belgrade
srdjan.vujicic@kingsturge.com
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