Croatia Real Estate Report Q3 2011
Business Monitor International, May 2011, Pages: 60
Croatia’s commercial real estate sector has stabilised, but the outlook remains very flat at this stage, and as such lags most property sectors in Eastern European, which have begun to show signs of recovery. The commercial real estate sector has failed to rebound as the economic recovery in Croatia continues to be very muted and primarily export-driven.
Economic Outlook:
The industrial sector, which significantly affects demand for industrial sector space, remains weak. Indeed, the industrial production index in Croatia fell by 4.1% y-o-y in February, marking the third consecutive month of decline. Given that Croatia's economic recovery is only in its nascent stages, it is unsurprising that industry has yet to pick up. BMI is forecasting that the Croatian economy will emerge from two years of recession in 2011, but the forecast is for weak real GDP growth of 1.9%.
The recovery will be largely export-driven, benefiting from a positive eurozone growth story, as consumer demand remains constrained by high unemployment of 19.6% in February and weak credit growth. One positive aspect for the growth outlook for Croatia is tourism. Croatia is heavily dependent on tourism for economic growth and it is therefore encouraging to see that tourist arrivals have already rebounded strongly. The rebound in service exports will, in turn, reduce unemployment, which BMI sees moderating in 2011 as seasonal employment picks up. BMI forecasts 2.0% growth in private consumption in 2011, following a 0.9% drop in 2010.
Demand for Office & Retail Space:
Logically, demand for office space and retail space is barely growing. Industrial space demand has also barely ticked up. BMI saw falls of 20-30% in rental prices for office space between the first half of 2009 and the second half of 2010. Retail rents fell by 30-40%. Industrial properties bucked the trend, with rents recovering 20-30% in the same period. However, industrial property rents have now stalled. The research sees rents and yields remaining essentially flat through 2011 and 2012.
Broadly, this report demonstrates that rates are somewhat vulnerable in the Zagreb area, they will remain unchanged on low activity in the Zadar area, but have upside potential in the area around Split where some new commercial properties are to be developed by foreign investors.
Future Outlook:
It is difficult to envisage any pronounced recovery within the forecast period. The economic recovery will be slow and export-oriented. Unemployment remains stubbornly high. With its economy on a slow growth trajectory there is no reason to expect a significant recovery for Croatia’s commercial real estate sector at this stage.
Some of the key opportunities currently in the real estate market are:
- The economic environment improves more than expected, assisted by export growth, tourism growth and an improvement in consumer demand. Unemployment would need to begin to fall.
- Extension of credit availability to both developers and residential house purchasers, adding more space and more demand. This may indeed be boosted if Croatia’s accession talks are positive.
- Strength in the office sector means that vacancy rates have dropped but that projects coming online in 2011 will ensure that demand can be met. Some key risks to the current real estate market are:
- If Croatia does not complete EU accession this may indeed prove a negative for investor sentiment and in investment in Croatia, which would have a negative knock-on effect on the commercial property sector.
- Should ongoing widespread political protests return to violence, as was seen in February, this would likely weigh heavily on Croatia's appeal as a tourism hotspot.
Executive Summary
SWOT Analysis
Croatia Real Estate/Construction SWOT
Croatia Economic SWOT
Croatia Business Environment SWOT
Real Estate Market Overview
Table: Croatia’s Real Estate Markets – Historic Rents, 2009 And 2010 (m2/month, EUR)
Table: Croatia’s Real Estate Markets – Net Yield, 2010 And 2011 (%)
Table: Croatia’s Real Estate Markets – Terms Of Rental Contract/Lease, Mid-2010
Table: Croatia’s Real Estate Markets – Available And Vacant Space, Mid-2010 (m2)
Forecast Scenario
Real Estate Outlook
Table: Croatia’s Real Estate Markets – Rentals, 2010-2012 (m²/month, EUR)
Table: Croatia’s Real Estate Markets – Forecast Yield, 2008-2015 (%)
Construction And Infrastructure Industry Overview
Table: Croatia – Construction And Infrastructure Industry Data, 2009-2020
Croatia’s Macroeconomic Outlook
Table: Croatia - Economic Activity, 2008-2015
Business Environment
Real Estate/Construction Business Environment Rating
Table: Europe Real Estate/Construction Business Environment Rating
Croatia’s RECBER
Eastern Europe Infrastructure Project Finance Ratings
Table: Design And Construction Rating
Table: Commissioning And Operating Rating
Table: Overall Project Finance Rating
Croatia’s Business Environment
Table: BMI Business And Operation Risk Ratings
Table: BMI Legal Framework Rating
Table: Labour Force Quality
Table: Emerging Europe – Annual FDI Inflows
Table: Trade And Investment Ratings
Competitive Landscape
Company Profiles
GTC Real Estate
Konstruktor inženjering
Landmark Property Management
Orco Property Group
TriGranit Development Corporation
BMI Methodology
How We Generate Our Industry Forecasts
Construction Industry
Bank Lending
Real Estate/Construction Business Environment Rating
Table: Weighting Of Indicators
Project Finance Ratings Indicators
Table: Design And Construction Phase
Table: Commissioning And Operating Phase – Commercial Construction
Table: Commissioning And Operating Phase – Energy And Utilities
Table: Commissioning And Operating Phase – Transport
Sources
- GTC Real Estate
- Konstruktor inženjering
- Landmark Property Management
- Orco Property Group
- TriGranit Development Corporation
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