Mia Zecevic, CEO of Novaston – We are not giving up on projects through which we are transforming the real estate market
Mia Zecevic (Photo: Novaston)
The coronavirus pandemic has had an impact on all industries and the real estate market is not an exception. In the year which was supposed to break all records when it comes to the construction of apartments, business and logistics centers in the entire region, the companies faced an unexpected crisis and were forced to adapt their operations to the “new reality”.
We talked to Mia Zecevic, CEO of Novaston, about how this company responded to this global challenge and how the coronavirus crisis influenced the real estate market in Serbia, which sectors are the most jeopardized, but also which fields have the biggest potential for development.
eKapija: How has the crisis influenced your operations?
– Behind us is a truly challenging period whose consequences we are yet to feel and which will reflect not just on this year but on the next one as well. We have used the past few months to regroup, see where we are in the market, but also to launch new projects and establish new cooperations. Since its founding, our platform has been developing so as to be able to respond to various challenges and be equally successful in various segments, that is, fields of activity. From real estate management, through project management, technical maintenance, to marketing, primarily in the retail sector, we have managed to set solid foundations and to further expand our operations to the sector of office space and logistics.
The crisis that broke out in the meantime and affected all sectors, especially retail, has shown us that the key to success is in this diversity and ability to adapt. Our team was ready, we formed the crisis team on time, as we knew that only a good and organized management could protect long-term interests and minimize the losses. All this helped us successfully continue cooperating with nearly all the main investors in the market, such as IMMOFINANZ, NEPI Rockcastle, GTC, Ikea Serbia. We are also working on developing a new retail park in Pirot and we are proud of the cooperation with PM Plus, the exclusive partner of TOYO Tires, and Porsche SCG, the general importer for Volkswagen, Audi, SEAT and Porsche car brands in Serbia and Montenegro.
Our company Novaston Project Management cooperates on fit-out projects for the new PEPCO brand outlets, a European chain of discount stores which offers clothes for the entire family and household products. We have also continued cooperating with other international brands, such as LC Waikiki, Sport Vision, Gigatron, DM drogeire, which, I am free to say, are our traditional partners at this point. In addition to the development of retail projects, we are already working on developing new office locations, as well as locations for the development of production-logistics complexes. Thanks to our familiarity with the local market and the experience in working with international clients, we are able to make new “custom-made” concepts and models, which set us apart in these areas. We are in the phase of contracting projects which will considerably change the image of the office, retail and logistics sector in Serbia.
eKapija: What are Novaston`s plans for the upcoming period?
– Strategically speaking, the goal for the next period is to further expand the operations when it comes to the sectors of office space and logistics, keeping in mind that, according to the statistics, Belgrade is still on a lower level compared to other capitals in the region, observed by the number of square meters per 1,000 citizens in each asset class. That is why there`s been a considerable development in these sectors in the past period. Despite the crisis, there`s still a lot of room for expansion and development of business operations in these fields.
We are also continuing to expand in the region, after positioning in the Croatian market, where we are the strategic partner of Immofinanz in expanding the portfolio of the STOP SHOP retail park brand. In Croatia, we also cooperate with NEPI Rockcastle, the investor that bought Arena Centar with the parcel where they built the Arena Retail Park, and other foreign and local partners. We are also planning several projects in Bosnia and Herzegovina, Montenegro and the Kosovo territory.
An advantage of our company, which now has over 60 employees, is that we offer a full service in the sale and management of real estate, current and investment maintenance, projects of construction and equipping of modern office space. We are dedicated to the plan of remaining a recognizable brand and continuing the development of this service in the fields of office space and logistics, both in the local market and in the regional one.
eKapija: All indicators show that the real estate market is recovering quickly after the initial halt caused by the coronavirus pandemic. What is the current situation in the market?
– It was expected for a record to be set when it comes to the building of apartments, office and retail space and the logistics sector in 2020, both in Serbia and the entire Balkans, but the real estate industry, depending on the sector type, is currently facing stagnation and/or losses. The coronavirus pandemic crisis came suddenly and showed that everyone is equally jeopardized. When it comes to the residential sector, the purchasing power of the populace is expected to drop due to salary cuts and layoffs, so the Ministry of Finance and the NBS have adopted a new set of fiscal and monetary policy measures.
According to the report of the Republic Geodetic Authority, during the state of emergency in the Republic of Serbia, the real estate market was reduced by around 70% compared to the period before the state of emergency. The prices didn`t drop, there was a lower percentage of real estate bought with cash than before the state emergency, the percentage of the transaction of apartments compared to all other types of real estate increased and the transactions of agricultural and building land dropped.
The sale of residential facilities, compared to other kinds of facilities, is not larger than in the same period last year. The Serbian real estate market was worth slightly over EUR 255 million, which is half what it was in the same period last year. Most money was seen in the apartment market, around 60%. According to the number of real estate sales and purchase agreements that public notaries file through the eSalter system on a daily basis, we conclude that, compared to the beginning of the state of emergency, a considerable drop in the number of contracts was recorded, of up to 70-80%, and this trend was constant from late March to late April. Toward the end of April, there was a mild increase in the number of contracts filed daily and this trend continued until the end of the state of emergency.
eKapija: The sector of commercial real estate suffered a considerable blow, but also showed a great resilience to the crisis. How is the situation developing in that segment?
– With the implementation of extraordinary measures or state of emergency in countries, Serbia included, the retail sector was among the first to experience a sudden halt. Shopping centers, restaurants and most retail outlets were closed, and only food and drug stores and pharmacies worked, which caused great problems in maintaining business operations. At the beginning of the crisis, luxury brands, such as Armani, made masks and protective clothes, distilleries made disinfectants, Ferrari produced respirators... Many brands quickly turned to online sales, which they will most like continue in the post-pandemic period as well.
On the other hand, that people prefer shopping centers and retail parks became apparent when the measures were loosened and a high interest in visiting these centers, with all the safety and hygienic measures, was recorded. The new shopping center BEO opened this June in Zvezdara on 130,000 square meters of developed area. This summer, the Israeli BIG CEE Srbija also continued expanding and took over shares in the Airport City project, the Kuehne + Nagel logistics center and officially took over the Capitol Park in Rakovica, which it bought last year. In the developed world, especially in the USA, this industry is expected to suffer the greatest consequences, whereas Central and Eastern Europe will fare better.
Let me remind that, until the outbreak of Covid-19, Serbia had the greatest yield rate among the countries of the region, 8% for shopping centers and 8.5% for retail parks, whereas the yield rate for prime shopping centers in Croatia, Slovenia and Bulgaria was around 7%. Rent prices in shopping centers are around 23 euros per square meter, whereas in retail parks they are around 10 euros. Research has shown that there`s a need for several more shopping centers in Belgrade, but we should be careful when it comes to further expansion, because the economy is still adjusting to the epidemic.
eKapija: Are there any news when it comes to the office space sector?
– When it comes to office space, the sector has faced considerable losses on a global level. Until the crisis, the development of this sector in Serbia was very dynamic, with the vacancy rate at below 5% and rent prices at a record-setting low. Now, companies which can do so direct their employees to work from home. In the entire world, this has emptied hundreds of thousands of square meters of office space and left the owners in uncertainty when it comes to lease revenues for a long period of time. Some companies, especially in the IT sector, terminated office space rent contracts worth millions, whereas others are reducing the number of offices or moving out of big cities. There`s more and more talk about re-configuring office space, leaving behind the concept of “open space”. The belief is that the coronavirus pandemic will not directly and fully destroy the concept of working in traditional office spaces, but this global experiment of working from home will certainly have an impact on what offices will look like in the future.
eKapija: What are the experiences of Novaston from the past period when it comes to the logistics sector? How is the market recovering?
– In the first months, there were certain problems when it comes to the logistics sector. However, despite the changed and more difficult circumstances caused by the pandemic, it has shown the most resilience. The first transaction in the field of capital investments under the conditions of the coronavirus pandemic was registered in the sector of logistics-distribution capacities. One of the leading investors in real estate in Serbia, BIG CEE, a member of BIG Shopping Centers Israel, realized the acquisition of the logistics-distribution complex of the global leader in the provision of logistics services, the company Kuehne + Nagel in Serbia. Also, CTP, with which we cooperate, continues its strong expansion of industrial-logistics space in all parts of Serbia, even during the epidemic. We believe that there`s room in this sector for further development, which is something we saw even before the pandemic, and that is why we have strategically oriented to it with our future projects.
eKapija: In which market segment is there the greatest potential for development in the upcoming period?
– In the upcoming period, experts from the whole industry, especially in the domain of investments, evaluation, retail and office segments, will have to look at all the aspects of the crisis caused by the spreading of Covid-19. The economic consequences are globally felt through the reduced purchasing power of the populace, and measures such as social distancing and limits placed on the number of people per square meter indoors and outdoors, as well as reduced working hours, have made business operations more difficult.
Although it is often said that the real estate market reacts more slowly to changes, this crisis has shown that investors and owners of commercial real estate are open to adapting and cooperating in order to reduce the damage as much as possible. It is development, implementation of new technologies and a personal approach, quality teams with international experience that decides who is competitive and who stays on the market. A good example is the office space sector. Most companies who were technically able to do so accepted work from home for their employees, so what`s current globally at the moment are analyses of how office space will change after the pandemic. New concepts of shopping centers are considered, with potential specializations in mind. Companies must make important business decisions based on strategic planning, understanding the changes, analyzing the competition and international trends.