Source: AG Nekretnine | Sunday, 07.06.2009.| 14:33
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(AG Real Estate) Real estates - Challenges and future of Serbian retail market

The influence of global financial crisis on further retail market development in Serbia is already evident. Having in mind the indisputable needs for all types and kinds of real estates, the question arises: how will this impact reflect in the local market, especially when it comes to further retail development in Serbia.

We were the witnesses how financial crisis, which started at the end of 2007 in the USA, soon, spilled over to the European and other global markets, surprising even biggest pessimists in matter of spreading speed and impact causes. It all began with a sharp fall of real estate prices in the USA followed by default in mortgage payments, consequence of inadequately insured loans as a protection to the creditors, which underestimated the importance of the indemnity needed for such vast lending. The losses started to multiply and they began to affect an increasing number of participants on the global financial markets and, in addition to the real estate business, other industry branches (especially auto industry) also faced with the slump which first led to the GDP slowdown and then to recession in many countries. The most developed countries soon reached a consensus implying that the situation could be over-passed through pumping additional funds into the economies through various channels and in different forms, as well as with some other restrictive but also stimulating measurements.

Serbian government also took steps in order to maintain financial market liquidity, although Serbian financial sector didn’t experienced initial loses which were described above. The participants on the Serbian financial market were not directly involved in the financial transactions related similar to those which causes financial crisis in the developed countries. On the other way, it is a well known fact that Serbian economic stabilization and growth in recent years was mostly depended, not on the country’s growth in production, but on foreign funds and direct investments, which number seriously declined nowadays. What happened is that funds available to Serbia declined due to the developed markets’ illiquidity. Loan instruments were the first that felt the impact, both from the banks whose founders are in developed countries as well as those taken by Serbian companies directly from foreign banks. In odder words, loans are almost impossible to get and became more expensive with high interest rates. Furthermore, the inflow of direct foreign investments is decreased or at least slowed down, with foreign investors being more cautious when deciding on investing in Serbia. Also, excess spending will not be able to cover by foreign investments and funds anymore, so the government is faced to decrease the spending in an organized way, in order to prevent drastic inflation and devaluation of the national currency. All this will, doubtless, lead to employment cuts, decrease in household income, inflation increase and less purchase power, which is directly related to the real estate industry, especially retail sector. Prognosis – not good.

Although Real Estate industry in Serbia suffered no radical changes due to World financial crises yet, real impact with its consequences is still to come, as described above. Current situation would be best described as following; what started will be finished, all the rest is postponed. In odder words, in a short term period, development activity will be at least slowed down, but on a mid and long term period, Serbia will maintain the most interesting emerging market for real estate development, especially in retail sector.

Situation in Belgrade

Belgrade, as a capital city with almost two million inhabitants, offers a great potential to the retail developments. Due to the sudden recognition of the Belgrade market potential among the local and foreign shopping center’s operators, the market competition is about to rise on the mid-term period, positioning retail real estate as currently most effective market segment in real estate industry. Still, Belgrade has the lowest stock of shopping centers in the SEE (population/stock ratio) with around 230,000 sq m of GBA, because major retail concept is still to be found as shops and outlets in main pedestrian and shopping streets – Knez Mihailova and Terazije Street and Kralja Aleksandra Boulevard. Although shopping habits and concepts are quickly changing, just few adequate shopping center concept is to be found in the capital – Merkator, Delta City and Zira Shopping mall as most representative, with impressive vacancy rate close to 0% as a proof of unused Belgrade potential. Also, big expectance in retail development is waiting for completion of RK “Beograd” department store chain refurbishment, with 230,000 sq m of space around Serbia and approx. 76,000 sq m of retail space in Belgrade top locations. This chain was bought by Verano/MIG Group in 2007, and by now, they’ve opened 3 units in Belgrade; at Dusanovac municipality, Zemun municipality and Terazije Street. List of major shopping centers are listed below:

On the other hand, Belgrade faced a real boom in development of retail Big-Boxes concept, reaching total stock of around 110,000 sq m, with major retailers listed below:

Although the effects of the crises are becoming more and more obvious in Serbia, rental prices are stable in Belgrade, with recorded down – fall of some 10% for secondary streets and hypermarkets, so now the asking price for secondary streets, like Kralja Aleksandra Boulevard, ranges from EUR 40 – 100 per sq m/month and for hypermarket ranges from EUR 7 – 10 per sq m/month. On the other hand, rental levels for shopping malls are stable and ranges from EUR 20 – 80 per sq m/month and finally, more expensive locations represents high streets, like Knez Mihailova and Terazije Street, with rents from EUR 120 to even 200 per sq m/month. Best example on overpriced rents as well as selling prices is sale of “Jugoexport” outlet in 2007, area of 361 sq m for unbelievably EUR 15 million, or EUR 42,000 per sqm?!

Major opening for 2009 is Usce Shopping Mall, with GBA area of 130,000 sq m, which will increase total shopping mall stock and presence of new international brands on our market. This will also increase competition on the market, which will still not be enough to satisfy the need for new developments on other Belgrade locations and for decrease of rents. Present market situation can be therefore characterized as controlled market environment where a low number of shopping center projects can dictate their own terms/conditions of tenant’s entrance and rent levels. This project will be also the only one of its kind developed in years to come, for that other announced projects are currently postponed or delayed, such as Plaza Centers in Visnjica and Kneza Milosa Street, Delta Planet at Autokomanda, Immocenter in Cerak municipality, Old Mlin project near Belgrade’s fair etc.

In other Serbian cities situation is similar; great demand for all retail concepts, lack of international well-known retailers, brands and typical shopping mall concepts.

Novi Sad

Novi Sad, as second largest city in Serbia, records growth in retail development in recent years and represents most interesting for investors after Belgrade. Biggest shopping center in Novi Sad is Mercator, opened in 2007, area of 36,000 sq m and is only shopping mall concept in Novi Sad, but there are also Big-Box concepts, such as Rodic (16,500 sqm), Merkur (9,600 sq), Metro (5,800 sqm), Agrokor (4,500 sqm) and Tus (3,000 sqm). Rents are highest at high street locations, ranging from EUR 40 – 100 per sq m/month, while at shopping centers these levels range from EUR 20 – 60 per sq m/month. Announced shopping mall projects in Novi Sad are Park City, area of 12,000 sq m from investor Vondel Capital and shopping center in industrial zone, area of 39,000 sq m announced from the investor Ocean Atlantic Int.


After Zastava Automobili signed partnership with FIAT Group in 2008, Kragujevac became more interesting for investors. City authorities quickly developed investment initiative strategy, mostly through establishing industrial zones in order to attract foreign investors to satisfy shopping needs for around 200,000 inhabitants. Retailers like Mercator (30,000 sq m) and Metro (10,000 sq m) already developed their facilities. Announced projects for city of Kragujevac are shopping mall with area of 60,000 sq m which will be developed by Austrian company Supernova, but the biggest project which already started construction is Plaza Shopping Mall area of 80,000 sqm, by Israeli Plaza Company.


Advantage of it geographic position and closeness to the border with Hungary, Croatia and Romania, Subotica to become one of the most interesting areas for retail development. Unlike other cities, in comparing with the population, Subotica has quite developed retail system, with constructed units like Idea (4,500 sq m), Rodic (12,000 sq m), KTC Subotica (6,000 sq m), Tus (3,000 sqm) and Galleria shopping center as typical shopping mall concept with area of 11,000 sq m. Biggest project in Subotica is construction of GTC Shopping mall area of 60,000 sq m, which is announced to be completed in 2010.


The biggest city on the south of Serbia is Nis with population of 250,000 inhabitants. That is one of the most undeveloped regarding modern retail concept outlets. Biggest and only shopping center in Nis is Mercator with area of 32,000 sqm, which brought to the south of Serbia many well known international brands, while presence of retail Big-Box concept is more, but again, not enough developed with Metro (6,200 sq m) and Tempo (10,000 sq m) outlets. Biggest investment that is under construction is Nis Shopping Center development, with area of 16,000 sqm by MPC Properties and TPC shopping center area of 11,000 sq m located in main pedestrian Obrenovica Street. Rents ranges from EUR 30 – 80 per sq m/month in high street locations, while in shopping centers these levels ranges from EUR 15 – 50 per sq m/month, which presents an increase of some 10% comparing last year.

Instead of conclusion

As seen from above, in past 3 years Serbia faced a real retail development boom, as both domestic and foreign investors indentified our country as most emerging market in SEE, with main characteristic of great demand, low vacancy rates and stable rents. Serbian authorities also identified this real estate sector as important factor in economy stabilization and growth, for that they enable great number of new working places and causes fall in goods prices, which is of essentially importance for low purchasing power of Serbian household, especially in smaller cities . Almost every city in Serbia has developed new industrial zones as first step in stimulating investors for entering the market. Also, long expected real estate Laws and regulations are to be adopted in this year, which will imply on favoring investor rights on construction land, ownership types, construction permits issuing conditions and deadlines. But, will it be enough to overpass the global financial market crises? Are these measurements came a little bit too late? In my opinion, it will irrevocably come to the slowdown in real estate development, especially in retail sector, as all participants on the financial market in Serbia will be more cautious in approving loans, which will be more and more unfavorable to the developers. On the other hand, many tenants will determinate their lease contracts, especially in smaller cities and especially less known and developed brands, which will lead to growth in vacancy rates and to slight down – fall in rents. These are all the reasons why many announced projects will wait for better times, especially new retailers which have announcing their entrance quite for some time, like IKEA, SPAR, OBI etc. But, on the mid-term period, Serbia and especially Belgrade will remain a great opportunity for retailers. Especially for those which doesn’t look at the crises as danger but as an opportunity.

Srđan Runjevac

Valuation Adviser

Danos & Associates Serbia

In alliance with BNP Paribas RE

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