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Emea Real Estate Market Outlook 2021 | Slovakia

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c b r e . c o m E M E A REAL ESTATE / s h o r t u r l RESEARCH C B R E MARKET OUTLOOK SLOVAKIA 2 CONTENTS 01 04 ECONOMY LOGISTICS The economy is seen contracting at a record pace this year before Automotive, as the most dominant part of the industrial & logistics rebounding strongly in 2021. The gradual easing of pandemic-associated segment in Slovakia, outperformed the expectations from the pandemic restrictions, coupled with EU funding, should ramp up domestic activity. beginning of the year. All 4 OEM´s are currently active. The most However, the unpredictable course of the pandemic poses a key downside dominant drivers of leasing activity are 3PL providers and e-commerce risk. retailers. 02 05 INVESTMENT RETAIL The investment activity in 2020 was mostly driven by the industrial As the most affected segment across the whole real estate market in segment, followed by office and retail. We recorded 17 transactions. Slovakia, retail is still slowed down. Shopping centers with worse expectations than retail parks. 03 OFFICE The vacancy rate is increasing, due to the strong pipeline and projects under construction. We have identified a new trend in sub-leases when the largest tenants mitigate the costs this way. E M E A REAL ESTATE MARKET OUTLOOK 2021 | SLOVAKIA CBRE RESEARCH | © 2 0 21 CBRE , I NC. EMEA REAL ESTATE MARKET OUTLOOK 2021 | SLOVAKIA 0 1 R E COVER ECONOMY 4 UNEMPLOYMENT GROWTH WAS DAMPENED BY GOVERNMENT MEASURES MACROECONOMIC OVERVIEW SLOVAKIA GPD GROWTH DEVELOPMENT 10% The COVID-19 pandemic was a determining factor in economic performance and Before COVID-19 After COVID-19 affected both domestic and foreign demand. After a gloomy second quarter in which we 5% saw a historic decline in GDP, the third quarter brought a rocket recovery. However, the recovery at the end of the year was affected by restrictive measures associated with a 0% growing number of infections. Restrictions should primarily affect the service sector during the winter. The industry should continue to develop relatively well, as it remains -5% untouched by European constraints and stable economic conditions in East Asia also provide help for long-term demand. FORECAST -10% MAJOR INDICATORS 2019 2020 2021 2022 2023 2024 2025 Source: Oxford Economics 2019 2020 2021 2022 2023 Gross Domestic Product (y-o-y % change) 2,3% -6,2% 4,3% 6,1% 3,4% UNEMPLOYMENT Consumer Price Index (y-o-y % change) 2,7% 1,9% 1,4% 1,9% 2,1% The labor market was not spared from the impact of the pandemic, However, the negative impact of COVID-19 was relatively low, due to the contribution of state Private consumption (in billion €) 49,80 49,40 50,10 52,00 53,40 measures that were aimed at job protection. Our estimates are therefore more optimistic than they were in spring when we expected more significant negative development in the Unemployment rate (%) 5,8% 6,9% 7,1% 6,1% 5,8% labor market. OUTLOOK We expect a return to GDP growth next year at a rate of 6%, with a visible recovery, Source: Oxford Economics starting from spring 2021. By the end of 2021, we can also expect the arrival of the European funds from the EU Recovery Fund program (New Generation of the EU), with GDP its results being visible already in 2022. In 2021, the unemployment rate could reach The economy grew by 11.6% quarter on quarter in the third quarter, and the year-on- 7.1%, with a subsequent gradual decline, visible mainly from 2022. This will go hand in year decline slowed down to -2.4%. The recovery came after a sharp drop in the second hand with more modest wage growth compared to the dynamic growth of recent years. quarter, which was hit hard by the pandemic and recorded a year-on-year decline in Our forecast, therefore, assumes an increase in consumer prices in 2020 reaches an economic activity by 12.1%. On average, the economy fell from January to September average of 1.9%. In 2021, we expect lower growth in consumer prices, at 0.9%. The by 6% however, the end of the year brought a second wave of infections and associated announced measures should help maintain favorable financing conditions and support measures to slow down the spread of the virus. economic recovery and price stability over the medium term. E M E A REAL ESTATE MARKET OUTLOOK 2021 | SLOVAKIA CBRE RESEARCH | © 2 0 21 CBRE , I NC. EMEA REAL ESTATE MARKET OUTLOOK 2021 | SLOVAKIA 0 2 R E BALANCE INVESTMENT 6 DESPITE NEW CHALLENGES INVESTMENT VOLUME REMAINS SOLID INVESTMENT ACTIVITY OVERVIEW INVESTMENT ACTIVITY IN 2020 INVESTMENT ACTIVITY IN 2020 BY The total investment volume transacted in 2020 reached € 516 million and was spread BY USE REGIONS among 17 transactions. The first half of 2020 with almost 90% of the total transacted Bratislava volume reflects the COVID-19 situation on the market throughout 2020. The pandemic 7% 11% Office outbreak in March 2020 negatively influenced the construction processes, with 49% 40% 13% Košice speculative constructions being postponed (if not withdrawn) too. 3% Industrial Senec Retail Žilina 37% Hotel 5% 35% INVESTMENT ACTIVITY BY YEARS Others € 876M € 826M € 676M Source: CBRE Research € 543M € 516M - 24% The majority of real estate investments took place in the Bratislava region. We (Y-o-Y) identified 4 large transactions over € 50 million there. All of these transactions were closed in the Bratislava region within the two best performing segments (office & 38 20 26 25 17 industrial). 2016 2017 2018 2019 2020 The largest transaction was the sale of Goodman logistics portfolio containing Total Investment Volume Number of Transactions industrial parks in Senec and Košice, by Goodman International to GLP and Source: CBRE Research amounted to € 105 million. Another significant transaction in the industrial segment was the sale of Palmira Logistics Park in Senec by Palmira Capital Partners to GIC In general, the dominance of the office and industrial segments continued during and amounted to nearly € 100 million. Both of these transactions contributed with a 2020 followed by the retail segment. The industrial segment dominated with a share total of € 205 million (40%) to the overall transaction volume. Within the industrial of 49% of total investment volume, closely followed by the office segment with 37% segment, we also recorded one transaction in the 4th quarter. It involved the sale of and the highly affected retail segment with only 11%. HORECA (hotels, restaurants & an industrial complex in Kežmarok worth more than 10 million. In the current catering services), as the most affected segment, accounted for about 3% of total situation, we assume that even during this year there will be the highest demand for investment volume. In terms of year-on-year comparison of investment volume, we industrial and logistics properties, despite the lack of premium quality developments record a decrease of 24%. ready for disposals- the trend which we perceive more often these days. E M E A REAL ESTATE MARKET OUTLOOK 2021 | SLOVAKIA CBRE RESEARCH | © 2 0 21 CBRE , I NC. 7 STRONG DEMAND FOR INDUSTRIAL & LOGISTIC ASSETS INDUSTRIAL PRIME YIELD DEVELOPMENT SHOPPING CENTRES PRIME YIELD DEVELOPMENT 8,75% 8,75% 8,50% 8,50% 7,20% 7,00% 7,00% 7,00% 7,90% 7,75% 6,90% 6,50% 7,50% 6,00% 6,00% 7,00% 5,75% 5,50% 5,75% 6,50% 6,25% 6,15% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: CBRE Research Source: CBRE Research Singaporean investors have the largest share of invested capital in 2020 with a total share of 40% of the total investment volume. Their share is represented by 2 significant The office segment registered 2 dominant transactions closed in 2020, being also the transactions from the first half of the year, totally amounted to € 205 million. most active segment of them all (in terms of the number of deals transacted). One of INVESTMENT ACTIVITY BY YEAR INVESTMENT ACTIVITY BY COUNTRY these transactions were closed in Bratislava, namely the sale of Rosum Offices by Penta PERIOD OF ORIGIN Investments to Austrian European City Estates and the sale of the BCT 1 by Penta Investments to Occam Real Estate. Both of these transactions contributed a total of 40% Slovakia almost € 90 million. 12% 1st half Czech republic OFFICE PRIME YIELD DEVELOPMENT 12% 2nd half Austria 88% 11% 7,40% 7,25% 7,25% 7,25% 7,00% 6,90% 6,75% 37% Singapore 6,25% 6,00% 5,60% 5,50% Source: CBRE Research 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 OUTLOOK Source: CBRE Research In 2020, the prime office yield even fell to 5.5% for the office properties. A partial correction can potentially occur within secondary real estate, but also at secondary The most significant retail transaction in 2020 – the disposal of Duben SC by SIRS to locations. The condition of retail is currently far from ideal, however, retail parks, which Atrium, reached the transaction amount of almost € 40 million. We recorded another 2 are less demanding on hygiene measures in times of pandemic, may be an interesting disposals of retail parks in Slovak regions. The overall investment volume in the Retail investment product in the coming months. With the increasing e-commerce penetration segment reached € 56 million in 2020. rate on the retail sales we also expect strong demand on industrial & logistics. E M E A REAL ESTATE MARKET OUTLOOK 2021 | SLOVAKIA CBRE RESEARCH | © 2 0 21 CBRE , I NC.
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