SREALE RESTABTE TODAIAY

2015 CONTENTS Contents

04,05 SERBIA AT A GLANCE

06,07 ECONOMY

08,09,10 EDUCATION

11 MOTIVATION PLATFORM

12,13 ACQUISITION OF REAL ESTATE

14,15 SERBIA OFFICE MARKET

16,17 BELGRADE SUBMARKETS

18,19 NEW TRENDS IN OFFICE SPACES

20,21,22 RETAIL MARKET

23 RETAIL WAREHOUSE MARKET

24,25,26 RESIDENTIAL MARKET

27 RESIDENTIAL LEASE

28 INDUSTRIAL MARKET

29 LAND

30,31 HOTEL MARKET

32,33 INVESTMENT MARKET

34,35,36,37 TAXATION ON REAL ESTATE IN SERBIA

38,39 CONTACT

40 MARKET PRACTICE 01 FOREWORD Dragan Radulovic, Managing Director No. 1 real estate consultancy in Serbia 4 years in a row market leaders 60% share in the office market Representing over 150 tenant companies Around 30,000 sq m office transactions in 2014 With the very active first half of the year and known brands are currently putting a lot of effort announced projects by key international developers trying to secure the position within the existing some being already present, the others just shopping schemes, especially in larger cities like watching for the opportunity to enter, we could be Belgrade, Nis and Novi Sad. CBRE Group Inc. CBS International is the part of the CBRE optimistic when it comes to the year 2015. Residential market has for the past two years Affiliate Network, the world's largest Serbian property market being as underdeveloped stabilized, both in terms of the sales prices and as § 70% of top Corporations choose CBRE commercial real estate services firm (in as it is, becomes more attractive for the developers, per the demand vs. supply ratio. Overall, the § First commercial real estate company in terms of 2014 revenue). CBRE network the Fortune 500 has over 370 offices in more than 60 seeing the present moment as most favourable, demand has been picking up from the second half countries throughout the world and especially having in mind the absence of the of 2013, and the well-defined residential concepts § Named as one of the 100 fastest construction activity in the last couple of years at key city locations, sell out within one year from growing companies by Fortune employ approximately 52,000 employees: experts in every imaginable throughout all industry sectors, causing significant the end of construction. lack of quality stock available. Those that will move § Named global No.1 in 2014 aspect of real estate, from agency and Industrial sector has been for quite some time Euromoney Awards timely may expect first mover advantage after the valuation to asset management and out of a proper focus and serious interest of full recovery of the market. § Named Lipsey Leading Global Brand investment. international companies in need for such in Commercial Real Estate Office segment, presently marks the lowest capacities, but the situation here is changing for 14 years running CBS International is the leading real estate company in Serbia. The office vacancy rate for the past four years, equaling just a quarterly. Real activity with several announced big § The only commercial real estate services today counts 45 professionals and dot below 8%, which means almost no or very size projects is about to happen almost next year. firm to be included in the S&P 500 index offers variety of services: limited choice of available modern office space. To Even with such development Serbia will be put it simple, the companies thinking of expansion massively lagging behind other countries in the CBS International § Valuation Advisory in short-to-mid-term might be facing a real region in short-to-mid-term, nevertheless § Part of the CBRE Affiliate Network Office Agency challenge of finding adequate space, as at the geographical position gives us advantage which is § Retail Agency moment only few office buildings may yet to be exploited. § The largest commercial real estate § Residential & accommodate requests of 1,000+ sq m as a whole. With all that said, some of the major foreign services firm in Serbia in terms of Mixed-use Sales & Leasing As a result, larger tenants looking for more revenue in the past four years § Market Research developers are confidently unfolding marketing sophisticated space are starting to seek for the § Industrial & Logistics and sales strategies for their long announced § Accounting for around 60% of all built to suit options or to anchor some of the § Land Agency projects, which at this moment represents strong lease acquisitions in the market announced pipeline projects. realized by real estate agencies § Project Management encouragement for the next year, while the § Facility Management Retail Market, stands an immense investment property market has been seriously investigated by § ISO 9001:2008 Certified by SGS, § Property Management potential, being one of the most underdeveloped some of the developers that have not been the global leader in certification § Marketing and quality control segments compared to the region, and can be present in Serbia in the past decade, most of them denoted by the opportunity for both the retailers coming from the Middle East, Asia and the UK. § Recognized RICS certified valuers of key international and domestic and the developers. Hence, having all of the above in mind, it is definitely not too early to be optimistic. banks, entitled to evaluate 2 million city - 3 western type shopping centers, no properties with no value limitation need to elaborate more. Retail is one of the most All the best, § Awarded The Employer of the Year active segments out of Belgrade as well, with Dragan in the category Small and Medium numerous present and pipeline retail parks Enterprises - Serbian Association of throughout Serbia. In addition, a couple of globally Managers, 2014 Annual Award 02 03 SERBIA AT A GLANCE

Subotica Position: Situated in the south- FACTS THE LARGEST CITIES IN SERBIA eastern Europe, in the centre of the Serbia is the largest country in this part of Europe, > 1.5 million inhabitants Balkan Peninsula, Serbia is on the both in size and population. 150,000 – 350,000 inhabitants Serbia at a Glance geographic borderline between the Novi Sad Population: 7,186,862 Zrenjanin 100,000 – 150,000 inhabitants East and West. It borders the EU at Surface: 88,361 sq km the Hungarian, Bulgarian, Romanian Capital: Belgrade (1,659,440 inhabitants) Pancevo and Croatian state lines, while Time Zone: Central European Time (GMT + 01:00) Sabac CITY POPULATION offering the benefits of working Currency: Dinar (RSD) Belgrade Beogr ad 1,659,440 outside the EU. Smederevo No vi Sad 341,625 Pan European Corridors: Serbian Climate: Serbian climate may be Nis 260,237 territory lies at the intersection of two considered as a moderate continental Kragujevac Kr aguje vac 179,417 Cacak important European Corridors, 7 – on the north, and a more Adriatic Lesk o vac 144,206 Kraljevo the River Danube and 10 – the climate in the south. The average Subotica 141,554 Krusevac international highway and railroad, temperature levels during winter Kruse vac 128,752 Nis providing excellent connections with range between 0-5°C, while the Kr alje vo 125,488 Pance vo 123,414 Western Europe and the Middle East. temperatures in summer vary from Zr enjanin 123,362 In terms of the infrastructure 25-30°C. Springs and autumns are Leskovac Novi Pazar Sabac 115,884 developments, the Corridor 11 that very pleasant with temperatures Cacak 115,337 connects Belgrade with Montenegrin ranging between 15°C and 25°C. Pristina Smeder e vo 108,209 coast is currently under construction. No vi Pazar 100,410

Source: Statistical Office of the Republic of Serbia, Census 2011

CORRIDOR 7 CORRIDOR 10 EU INTEGRATIONS Oslo, 2252 Stockholm, 2269 Moscow, 2220 Copenhagen, 1691 Membership in the EU is the strategic goal of Serbia. It has been at the forefront of all Warsaw, 1044 governments since the democratic changes. Berlin, 1229 Amsterdam, 1736 Brisel, 1682 Prague, 833 Stabilization and Association Agreement, a precursor to EU membership, was signed in London, 2045 Bratislava, 567 2008 and entered into force in 2013 after ratification of all member countries. Viena, 600 Budapest, 369

Paris, 1.788 Bern, 1365 Formal EU accession negotiations with Serbia began in January 2014 with first chapters Bucharest, 614 to be opened on financial regulation and rule of law. Serbian government has set a goal to enter the EU in 2020. Up to 3hrs Sofia, 379 London Up to 2hrs The EU accession path will lead Serbia into more reforms and alignment with the EU Moscow Berlin Up to 1hr Istanbul, 947 standards and regulations. EU is Serbia’s historical and natural most important trade Stockholm Duserdolf Bucharest Frankfurt Istanbul Amsterdam Rome, 1261 partner, so the market will drive towards the harmonization with the EU as well as the Kiev Ljubljana official policy that is on this course. Milan Rome Munich Vienna 04 Paris Zurich Atina, 1.043 05 Prague Tivat ECONOMY

Since the democratic changes in 2000 Serbian economy has gone through a transition process. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 This led to massive privatization of state owned companies, as well as substantial foreign investments. GDP growth rate (%) 5.4 3.6 5.4 3.8 -3.5 1.0 1.6 -1.5 2.5 -1.8 Main drivers of the economy are industrial production, agriculture/food production and exports. Despite the world economic crisis, the Serbian exports have seen continuous growth in the past several years, Unemployment rate (%) 20.8 20.9 18.1 14.0 16.6 19.2 23.7 22.4 20.1 18.9 going up 30% in 2013 alone. Value of exports now covers 75% of the value of imports. FDI (€ million) 1,303 4,234 2,848 2,434 1,810 1,139 2,236 239 750 1,236

Economy Main trade partners are EU countries, namely Germany, Italy and Austria, as well as the Russian federation. Inflation (%) 17.7 6.6 11.0 8.6 6.6 10.3 7.0 12.2 2.2 1.7

Due to its skilled work force, favorable tax system and geographic position, Serbia has become home to Source: Statistical Office of the Republic of Serbia, National Bank of Serbia some of the biggest companies in the world.

GROSS DOMESTIC PRODUCT (GDP) GVA STRUCTURE LARGE INVESTORS Source: Statistical Office of the Republic of Serbia

40 4,783 Services Agriculture Industry 4,586 4,620 Continental PepsiCo

4,800 59% 10% 26% 3,990 4,187 4,626 ) Coca-Cola Hellenic Gazprom

R 4,401

U 30 4,082 Subotica Calzedonia Heineken

n E 3,297 33,705 3,600 34,263 33,424 o 33,059 i

l Apatin 31,683 STADA l 30,655 Siemens i 29,452 29,766 Backi Maglic b 2,836 5% ( (EUR per capita) Construction Telenor P Swarovski Celarevo Novi Sad 24,435 D 2,400 Sremska G GDP

21,103 Source: Statistical Office Mitrovica Vrsac Delhaize AB InBev of the Republic of Serbia, 2012 Ruma GVA - Gross Value Added is a measure in Pecinci Mobilkom Austria economics of the value of goods and Carlsberg 1,200 services produced in an area, industry or Belgrade Intesa Sanpaolo sector of an economy EATON Koceljeva 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Eurobank Gucci Valjevo Svilajnac Agrokor Lapovo MARKET TRADE REGIME Robert Bosch Droga Kolinska Kragujevac European Union Preferential Trade Regime Serbia enjoys free trade Dr.Oetker Nestle The United States Generalized System of Preferences agreements with numerous Rauch Krusevac Mercedes Russia, Belarus and Free Trade Agreement countries. This gives a good Kazakhstan Gorenje Nis basis for setting up Prokuplje Panasonic CEFTA Free Trade Agreement production in Serbia and Fiat (Albania, Leskovac Kronospan Bosnia and Herzegovina, exporting to these markets Magneti Marelli Michelin FYR Macedonia, Moldova, without customs duties. Vranje Pirot Montenegro, Johnson Controls Philip Morris UMNIK in Kosovo) International EFTA Free Trade Agreement Meggle United Colors (Norway, Switzerland, of Benetton Iceland, Liechtenstein) Cooper Tires Leoni

Turkey Free Trade Agreement Geox Falke 06 07 230,000 Students Pool ICT Sector Potential 180,000 in Belgrade Over the past few years the fastest growing sector in Serbia is ICT, with 1/3 growing rate of about 20%. at Technical EDUCATION Faculties IT Companies in Serbia are mainly engaged in outsourcing of the software Education development, software testing and Some 230,000 students attend all faculties WORKFORCE POTENTIAL designing websites, but also in providing across the country. The biggest university is various software solutions. Services are State Universities: Private Universities: the one in Belgrade, with some 180,000 High unemployment rate leads to the high availability mostly exported to Germany, the USA, University of Belgrade Alpha University Great Britain and the Netherlands. Some students attending. Business-related studies University of Novi Sad European University of the workforce, especially young population, under are the most popular, while one third of all University of Nis Educons University 30, that makes 26.5% of the total unemployed. of the leading global ICT companies students choose technical faculties. University of Kragujevac Megatrend University present in Serbia are: Cisco, HP, University of Novi Pazar Metropolitan University Labor costs in Serbia are one of the lowest in Eastern Microsoft, Oracle, SAP, Siemens, Telenor, Out of over 53,000 students enrolled in University of Arts in Belgrade Singidunum University Europe with average net salary of 380 EUR in March University of Defence Union University VIP, but there are also a lot of Serbian ICT higher education in Serbia in 2012, nearly Economics Academy Novi Sad 2014, 520 EUR gross (with contributions on behalf of companies that thanks to the strong 27,000 of them started studying in Belgrade. the employee). technical skills attract partnerships with

The highest salaries are in the Belgrade region where international companies. Good geographical position in Eastern Europe and duty-free exports to the market of almost 1 billion people, average net salary in March 2014 was about 470 EUR especially The Russian Federation, makes Serbia particularly attractive for foreign investors and manufacturers. In order to encourage ICT sector (655 EUR gross 1), and the lowest are in the Central Apart of the interest in the manufacturing sector, some of the companies are interested in establishing Shared development, Serbian Government has and South-eastern part of the country with average Service Centers and Business Process Outsourcing. In the business environment that is more than ever facing introduced financial incentives of up to net salary of 320 EUR (443 EUR gross 1). difficulties to attract new customers and retain the existing ones, to provide quality service and at the same EUR 25,000 in subsidies for start-ups and time to control costs, there is the huge need of finding appropriate locations for opening SSC and BPO. Global Income tax and national insurance contributions are education sector adjustments to meet companies have already recognized Serbian potential in the field of customer service, such are NCR and Sitel, also among the lowest in Central and Eastern Europe the needs of the IT industry.

but also a lot of ICT companies, which record the highest growing rate. with about 65% on net salary for total labor cost. Serbian engineers seem to be very competitive in the global market. AVERAGE GROSS SALARY (EUR), 2014 Technical education in Serbia is particularly strong, with 33% of university 1540 Slovenia graduates coming from technical Croatia 1042 schools. Engineers are competent in a Czech 933 broad range of technologies that support

Poland 906 an effective development of software and systems integration. Slovakia 840

Hungary 768 Serbia has highly skilled ICT workforce; 70% are University graduates and Montenegro 723 produces over 1,500 of IT professionals Serbia 524 yearly. Serbia has impressive science Macedonia 508 tradition, with more than 220 prizes at Romania 513 the World Science Olympiads since 1968. ce: Bulgaria 423 Sour The Vienna Institute for International Economic Studies, 2014 08 09 GROSS MONTHLY TOTAL Finance & Accounting guaranteed cash (EUR) Accounting Specialist 1.000 with tax and contributions Financial Specialist 950 Finance & Accounting manager 2.300 on behalf of the employee Head of Finance & Accounting 4.900 Customer Service Call center operater 700 Call center team leader 1.300 Customer Service Manager 1.850 IT/Technical support System Administrator 1.300 Software Developer 1.350 Information Systems supervisor 1.500 Education Motivation Platform Information Systems manager 2.200 Head Of Information Systems 3.800 HR Processes Human Resources Specialist 1.100 Human Resources Manager 2.500 Head of Human Resources 4.300 Manufacturing Production Worker 550 Production Supervisor 1.300 Production Manager 2.200 MOTIVATION PLATFORM Head of Production 3.800 Purchasing Buyer 1.000 CHANGE-ORIENTED Purchasing manager 2.000 CHARACTERISTIC Is competent, able to manage and motivate people BENEFITS FOR Sales & Marketing EMPLOYEES Sales Representative 850 ROLE ORIENTATION Growth and training Sales manager 2.400 Head Of Sales 4.000 Tends to search on his/her own, albeit In order to have reliable compensation and Marketing specialist 1.100 acknowledging the importance of relations benefits data and get better understanding of Marketing manager 2.700 Besides the high unemployment Head of marketing 5.200 JOB A key driver when choosing a search and selection local market remuneration trends, OD&M SEARCH rate, the companies are struggling company is the use of advanced technologies Consulting, a GiGroup Company for HR For the total employee costs, contributions on DRIVERS for experienced managers and Consulting and Training and Development, every behalf of the employer should be added (17.9%) Ascribes importance to fixed pay, job security, and professionals. In order to attract, MONTHLY TOTAL GUARANTEED CASH = MONTHLY training and development opportunities year conducts CORE compensation research, motivate and retain the right BASE SALARY + ALL GUARANTEED ALLOWANCES DRIVERS FOR Fixed pay, job security and working environment combining local expertise and knowledge of the (transportation, food allowance, holiday allowance, people, companies have to be STAYING aware of the Main Motivating market whilst applying the most rigorous length of service, shift allowance) WITH THE Among benefits, ascribes importance to personal standars and international know-how. Source: 2014 CORE Compensation Research for COMPANY health, status and the family Factors of the Workforce. Serbia; n=88 companies Source: Wyser a GI Group Company, Exploring the middle manager World; September 2013; n=100 NON-SALARY Mobile phones LTI Schemes BENEFITS English language proficiency is Training and education particularly strong. Serbia is ranked In addition to the cash Subscriptions to a sport clubs fourth nation globally by the Business reward, non-monetary Loans English Proficiency (BEI) in 2012 out of benefits are becoming Company cars 76 reviewed countries. Serbia scored also important part of Private medical benefits 6.38 while the average BEI score the total remuneration Disability insurance (in addition to… across 108,000 test takers around the 6.38 3.79 4.11 4.32 4.56 5.07 package Private retirement benefits world is 4.15 (on 1-10 scale). Serbia Hungary Czech Germany Romania Poland

Yes No 0% 20% 40% 60% 80% 100% Source: Global English Corporation Source: 2014 CORE Compensation Research for Serbia by OD&M Consulting 10 11 ACQUISITION Current norms regulating the construction of real property in Serbia are USAGE PERMIT OF REAL predominantly to be found in the Law on Planning and ESTATE How Foreigner may become Construction which was § the owner of property in Serbia enacted in 2009 and BUILDING PERMIT Report by the commission significantly amended in for technical inspection in §Excerpt from the design for which is determined that

Acquisition A foreign natural person or legal entity that is the end of 2014. Building Permit and Design for facility is ready for use and In accordance with Serbian law, a real estate ? Building Permit, made in engaged in business activities in Serbia can purchase with proposal for issuance transfer agreement (e.g. sale and purchase accordance with the rulebook of Usage Permit construction land and buildings in the Republic of governing the content of the § agreement) must be in written form, with Design for execution or Serbia necessary for its business operations, subject technical documentation design of constructed § signatures certified before the notary. It Proof of payment of the facility to reciprocity i.e. the terms of treaties to which Serbia LOCATION administrative fee for must specify in detail the property subject §Study of geodetic works for submission of request and is a party. In practice, a foreign entity should register constructed facility and to acquisition and must also contain explicit CONDITIONS issuance of a decision on special parts of the facility some form of legal presence in Serbia (e.g. subsidiary, Building Permit consent from the seller that the buyer may §Study of geodetic works for representative office, branch office, etc.) in order to §Proof of adequate right on the register as the owner (clausula intabulandi). land or facility in accordance underground installations acquire real estate directly. § Customarily, the agreement also contains Location Conditions Request with the Law, unless that right is and certificate on the §Conceptual design of the registered in the public register energy performance of the Foreign natural persons, who are not engaged in representation and warranties from the future building or part thereof or established by law building, if obligation to

seller in respect to the property, and business activities in Serbia can acquire apartments Request (such as sketch, drawing, §Agreement between the investor submit such certificate is specifies the property being taken into or residential buildings in Serbia just like a domestic graphic) and financier, if such exists prescribed by the Law. possession by the buyer. Both the buyer citizen, subject to reciprocity. Foreigners are explicitly

val THE COMPETENT AUTHORITY FOR THE ISSUANCE OF A BUILDING PERMIT MAY BE EITHER and the seller can give power of attorney to banned from acquiring ownership of agricultural o THE RELEVANT MINISTRY, THE AUTONOMOUS PROVINCE OR THE LOCAL AUTHORITY, DEPENDING ON THE TYPE AND SIZE OF FACILITY FOR WHICH THE PERMIT WAS REQUESTED another person to sign the agreement on land. However, if a foreign person or entity Appr the sale-purchase of real estate. Just as with establishes a company in Serbia, that company is The competent authority is A building permit is issued by The authority competent for an agreement on the sale-purchase of real treated in the same manner as any other local entity obligated to issue the means of a decision, within 5 issuing the building permit

estate, the power of attorney must be acquiring land and buildings, regardless of the origin ame Location Conditions, by days from the submission of also issues the usage permit, means of a decision, within a proper request by means of a decision, within certified before the notary. If this power of of the founder or its controlling share. Therefore, 5 days of the submission of 5 days from the receipt of the

attorney is given outside of Serbia, it must foreign persons and entities may indirectly own real Time fr a proper request findings of the commission for be accordingly certified (e.g. before a estate in the Republic of Serbia through their Serbian the technical inspection, which determines that the facility is notary) and afterwards it must be apostilled companies without any distinguishing limitations. suitable for use or in another form properly legalised.

Ownership rights over real estate assets are INTERNET CADASTRE SERVICE The amendments to the Law which were enacted by the end of 2014, have introduced a large number of generally formally created upon registration APPLICATION – “KNWEB” changes the goal of which was to speed-up the issuance of documents and permits necessary for of the holder's interest in the relevant The Republic Geodetic Authority have commenced a new construction through the introduction of the unified procedure. In accordance with these changes it is registry. The relevant registry which contains internet service which allows all persons to have envisaged that the Building Permits are issued within approximately 28 days as of request for their issuance, data on real estate and the rights thereon is online access to the electronic database of the which is a significant improvement in comparison to the terms which were common before the amendments the Cadastre of Real Estate. Before real estate cadastre. There are two were introduced. Also, the amendments envisage that all necessary conditions for the construction of the proceeding with a transaction, it is well possibilities for searching the KnWeb: facilities from the holders of public competencies are obtained by the authority competent for issuance of advised that the buyer checks the status of necessary documents and permits, thus relieving the investor from the necessity to deal with these entities. the targeted property i.e. obtains an excerpt u by number of the cadastral lot In this way the so called “one stop shop “ system is introduced since the investor has to come into contact of registered data and, if necessary, u by the address of the property with only with one state authority in order to obtain necessary documents and permits for construction. conducts further investigations. The introduction of the unified procedure as well as shorter deadlines for holders of public competencies to issue necessary conditions, is expected to significantly speed-up the issuance of relevant permits. 12 13 Serbia property market underwent rapid growth over the course Starting from year 2000, BELGRADE OFFICE STOCK of the last ten years, and attracted much attention from users, construction activity marked investors and developers, however its evolutionary path to an upward trend, but the real maturity is relatively slow. Although considerably improved, clear expansion phase started in Class A Stock Owner-Ocuppied Stock deficiencies compared to established property markets remain the year 2005 and continued GLA sqm Class B Stock Development Completions et burden in promoting country for cross border capital inflow. It is through the period 2006- 700,000 very limited in the range of investment opportunities it provides, 2010, during which minimum 600,000 especially speaking about alternatives to direct property 50,000 sq m of modern 500,000 ownership. Being less mature, it is less able to respond quickly speculative office space was Office Mark and fully to new information and opportunities. developed each year. 400,000 300,000 As of 2011, the development activity in Belgrade entered 200,000 SERBIA OFFICE MARKET the phase of slowing down, 100,000 with limited number of

completed office schemes 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 The Serbian office property market is more or less FACTS (less than 15,000 sq m was 2015 Belgrade modern office stock represents the sum of speculative focused on Belgrade with very low supply or Belgrade modern stock: 738,000 sq m GLA completed in New Belgrade in Class A and Class B office stock and owner-occupied stock demand for modern office space away from the Speculative stock: 516,500 sq m period 2011-2014). capital. The majority of businesses in the secondary Owner-occupied stock: 221,500 sq m Belgrade total contemporary towns tend to have their own office space or to use BELGRADE VS. REGION Vacancy rate Q1 2015 7.8% office stock stands at the level retail space instead, or even rent apartments for Source: CBRE Group, CBS International, part of the CBRE Affiliate Network, Q1 2015 Take up 2014 63,000 sq m of 738,000 sq m of GLA, out that purpose, with the exception of Novi Sad and Total stock represents the sum of speculative stock and owner-occupied stock Take up Q1 2015 21,566 sq m of which 70% is speculative, Nis, where the supply of modern office space is Rents Class A EUR 15-17 /sq m i.e. 516,500 sq m. GLA sqm limited to one or two modern office buildings. Rents Class B EUR 11-12 /sq m 10,000,000 Besides, Indjija saw the development of the first IT Park in the country, with infrastructural capacities 8,000,000 designed to support the start-up and incubation of 6,000,000 innovation-led and knowledge-based businesses. The first 10,000 sq m are available to the market, 4,000,000 while over the next five years, the park could be 2,000,000 expanded to offer 250,000 sq m

Speculative office buildings, built exclusively for eb

occupation market by specialized developers in est ade ague Sofia arsaw

order to realize profits are almost exclusively seen Vienna Zagr Pr atislava W Belgr Budapest Br in Belgrade. Novi Sad is the only city which has Buchar seen modern office developments of speculative character at good locations, but still as a part of larger mixed use complexes with predominantly residential use.

Majority of other cities in Serbia have significant number of office buildings built in the past thirty years, which could be refurbished and used as an excellent value for money office space. 14 15 BELGRADE SUBMARKETS et

NEW BELGRADE Belgrade office market continued to TAKE UP VS VACANCY u Stock: app.515,000 sq m record renewed demand which Source: CBS International, part of the CBRE Affiliate Network u Established over years as major CBD commenced with the second half of Total take-up (sqm) Vacancy u Holds the highest share of modern Class A office space 70,000 21.0% ade Submark 2011. In fact, in 2014, Belgrade set a

60,000 18.0% TE (%) u 80% of tenants targets New Belgrade new record take-up. 50,000 15.0% Belgr

Demand for high-quality office space AKE-UP (SQM) 40,000 12.0% CITY CENTRE T CANCY RA 30,000 9.0% u Stock: app.184,000 sq m is driven by IT, high-tech and VA 20,000 6.0% u Less developed area, due to the construction density and telecommunication companies, 10,000 3.0% limited availability of the land lots international banks, pharmaceuticals 0 0.0% u Only small-scale office developments and refurbishments and professional services. 2007 2008 2009 2010 2011 2012 2013 2014 *owner-occupied transactions are excluded from the total take-up WIDE CENTRAL AREA Limited supply of Class A office space u above 500 sq m is likely to put upward Stock: app.40,000 sq m PROJECT SQ M GLA STATUS u The office stock is dominated by owner-occupied buildings pressure on rents in the short term, Deneza 3,000 Under construction due to extremely limited new market GTC FortyOne 27,000 Under construction The Tenant’s expectations have drastically changed from the moment class A office buildings appeared deliveries. phase I: 10,000 th on the market. The first phase of this transition was going from converted residential spaces towards ACB 4 phase 60,000 Under construction phase I: 12,000 Effective rental values in Class A office standard office buildings with all of the management and services necessary. The most common Societe Generale HQ 10,000 Under construction buildings are starting to pick-up, and situation, nowadays is that the large international names are paying more and more attention to the Immorent Sirius 15,000 Planned our participation in day-to-day tenant office design, with a specific focus on the non-business related needs of the employees. This is very Navigator Business Center 25,000 Planned renewals negotiations is clearly typical for software development companies which tend to have various creative ideas in terms of the Delta Holding HQ 20,000 Planned indicating the shift from tenant’s to design (industrial design, office lofts,…), accompanied by big break out areas, a gym, creative rooms, MPC Tri Lista Duvana 9,000 On hold canteen, billiards room, even basketball courts or swimming pools. landlord’s market. Verano B23 35,000 On hold

PRIME OFFICE SCHEMES OFFICE MARKET RENT CYCLE Q4 2014 SQ M PROJECT DEVELOPER THE LARGEST TENANTS GLA RENTAL DECLINE RENTAL DECLINE RENTAL GROWTH RENTAL GROWTH ACCELERATING SLOWING ACCELERATING SLOWING 19 Avenue GTC 16,000 EU Delegation, Australian Embassy, JTI, Oriflame

Airport City Belgrade Africa Israel 70,000 Telenor, UniCredit Bank, Banca Intesa, Elsys, PwC Serbia Brussels B M Moscow Helsinki H Belgrade Office Park CA Immo 26,000 Pepsico, S Leasing, VIP Mobile, Generali Vienna V I Istanbul Berlin Dublin D B Blue Center Bluehouse Capital 30,000 NCR, SITEL, Microsoft, Ernst&Young, OSCE C Copenhagen Z Zurich Paris M Munich Grawe Grawe Insurance 11,400 Grawe Insurance, AIK bank, MK Group, Abbott G Geneva P M Madrid Oslo R Rome O Stockholm GTC House GTC 13,000 Phillip Morris, L’Oreal, ORACLE, Carlsberg W Warsaw S Barcelona F Frankfurt A Athens B GTC Square GTC 24,000 Erste Bank, PS Tech, Roche, Bosch, Tetra Pak L London P Prague L Lisbon A Amsterdam Sava Business Center CA Immo 18,500 Piraeus Bank, Credit Agricole Bank, NCR, Ericsson B Budapest B Belgrade Usce MPC 20,000 Hypo Alpe-Adria Bank, IBM, SEE Offices B Bucharest Vig Plaza Wiener Städtische 16,000 Wiener Städtische, Pfizer, Telesign

Source: CBRE Group, EMEA, Q4 2014 16 17 NEW TRENDS IN OFFICE SPACES ends r

Working environment has drastically changed in the last AS OUR WORKING METHODS Flexibility

decade on Serbian market. Following the world trends, the MOVED FORWARD, WE NEED CE CE in working A market started to implement new ways of designing office The office concept and layout should TO IMPROVE YESTERDAY’S places means we

Office Space - T do not need to be buildings, and explore new possibilities of organizing layouts support the organisation and work STRUCTURE SO WE DON’T devoted to specific work of individual offices with much more advanced care for processes, therefore it is important to HAVE TOMORROW’S ORK PLAORK SP W stations. Whether we want specific needs of various industries. start with an analysis before PROBLEMS. I n t h e VS W to use call room, desk within developing the layout or design. INTERA department or simply break- DIFFERENCES IN DESIGN CONCEPTS times when out area, we will have multiple The goal of creating a new work space we all need to be OLD OFFICES NEW OFFICES options to make our one enables the company to intensify thinking global and CTION small office spaces open plan offices working day different than internal collaboration, achieve a more act local, working places the previous one. less meeting areas more meeting areas cost-effective and environmentally organization has the same responsible office environment and concepts. Employees are A s w e a l l big storage space small storage spaces spend more increased overall employee working in their own depart- CE and more time in assigned working places flexible working space A productivity, while improving the ments but are more interac- office or in the field, 15-20 sq m per employee 8-12 sq m per employee employee motivation. tive within the whole working, we need to c o m p a n y . form a sense of office space OFFICES AS a s h o m e e n v i r o n m e n t . Serbian market recognizes two international New Way of Working Brainstorming A HOMEEmotional SP design has become certifications for energy efficient buildings. One in a relaxed envi- Workplace360 Program CREA an important part of new offices, is USA-based LEED certificate, globally much ronment with the forcing architect to think harder AREAS more present in the world. t e a m w o r k i s m o s t TIVE and make office an intelligent interface as a base to The second one is UK-based BREEAM, which is productive. Once we find ourselves in informal space with p e r f o r m b e t t e r . more adjusted to European standards and bright colours and lazy bags, we can Everyday therefore more popular in CEE and SEE relax and think out of the box. progress in markets. Creative areas are interactive as a Y T t e c h n o l o g y i s place where we can fuse work and Serbian property market has at the moment changing the way we privacy with the increasing only one internationally certified building, w o r k . O u r n e e d f o r s e n s e o f c o m m u n i t y. whereas several other office and retail projects MOBILI stationary work place is have initiated the certification process with history and we are in constant either BREEAM or LEED certification houses. adjustment of the work pace, The only BREEAM certified office building in HOW TO DEVELOP with ever greater mobility and Belgrade is the office complex Blue Center, THE IDEAL WORKSPACE independence to work ?} Inventory and analysis developed by Greek investor Bluehouse Capital. outside the office. } Activity measurement Undoubtedly, these certifications stand for } Office concept (blueprint) much more than simple energy efficiency rating, } Program of Requirements as they are truly adding value to the building be } Test fit it office, retail or residential scheme, in all } Presentation aspects of the environmental impact. CBRE Office, Belgrade 18 19 Size of units <150 sq m > 150 sq m

LOCATION PRIME RENT EUR/SQ M/MONTH Knez Mihailova Street Up to 100 40-60

et Terazije Square / Kralja Milana Street/ RETAIL 45- - Kralja Aleksandra Blvrd 60 30 40

Secondary high street - - MARKET (Pozeska, Gospodska) 25 40 20 30 Retail Mark Despite the lower standard of Modern Shopping Centres 50-70 15-60 living, Serbian urban population FACTS Since Belgrade has limited modern can be primarily characterized Belgrade retail stock 245,000 sq m shopping center stock, the high street as that of consumers, with keen Western-style retail schemes 105,000 sq m remains very important retail environment. spirit of shoppers. Stock per 1,000 inhabitants 148 sq m The high street zone has strong footfall

Although Belgrade market noted the opening of Zemun park and represents vital retail spot in the Although Serbia is still underdeveloped as in May 2015, totalling nearly 16,000 sq m, Belgrade continues consumers’ mind set. Often new market compared to the rest of the region, the retail to suffer from a lack of modern retail space, with app. entrants initially aim to build brand market continues to pick up after the economic 245,000 sq m to serve around 2 million people. awareness with a high street presence. downturn. The current time is considered Belgrade high street brand offer recorded attractive for international retailers as they The retail stock of 245,000 sq m GLA includes all types of a noticeable increase in the last years. have the opportunity to position themselves shopping centres: western-style shopping centers, neigh- in the market which is expected to grow bourhood malls, department stores and secondary SC moving closer to EU accession. schemes, whilst only three schemes are considered as ANCHOR TENANTS modern western-style shopping centres (app. 105,000 sq m). According to global CBRE annual research Delta City (“How Global is the Business of Retail”) on Having substantial catchment area, Belgrade can support H&M, Zara, C&A, Terranova, Maxi, the presence of leading international higher shopping centre provision rates. Also, Belgrade NewYorker, Cineplexx, DexyCo brand retailers, in 2014 Serbia’s remains relatively under-supplied market given the size of th positioned at 46 place on the global list, the economy and population, therefore represents the Usce Shopping Center with 19% of share. Belgrade itself holds excellent opportunity for shopping centre developments. In C&A, Zara, XYZ, Deichmann, Sport Vision, th NewYorker, Cineplexx, DexyCo, IDEA 114 place, among 188 cities which the next couple of years, the construction of several western participated in the research across the world. type shopping centres that are in planning phases will greatly Stadion Shopping Center increase the total stock and bring new retail brands to Serbia. H&M, Zara, C&A, Roda, NewYorker

SELECTION OF LUXURY BRANDS PLANNED RETAIL SCHEMES PRESENT IN MULTI-BRAND STORES: Leading chains are steadily increasing market presence by replacing poor At the moment, Belgrade witnesses the construction of D&G, RALPH LAUREN, VERSACE, VALENTINO, GF FERRE, 70,000 Delta Planet performing tenants in large-scale retail Aviv Park Belgrade, located in Zvezdara municipality, GALLIANO, SALVATORE FERAGAMO, ROBERTO CAVALLI, establishments and high street area. 42,000 Plaza Visnjica which will comprise 11,000 sq m and Rajiceva Shopping ICEBERG, YSL, BALENCIAGA, CHLOE, STELLA MCCARTNEY, Center which will encompass 15,000 sq m of GLA and Great success story was H&M market 35,000 Skadarlija Mall VIVIENNE WESTWOOD, JUICY COUTURE. which will be located along the main pedestrian zone, entry, which as per our market intelligence 35,000 GTC Ada Mall Knez Mihajlova street. boosted not only average footfall, but had SELECTION OF MONO-BRAND STORES: significant spin-off effect on overall 20,000 Capitol Park Rakovica With several large-scale projects in pipeline, this market segment is expected to experience the most extensive HUGO BOSS, TOMMY HILFIGER, PAUL&SHARK, MAX MARA, shopping center retail turnovers. 15,000 Ashtrom Rajiceva development in medium term. However, at the moment, BALLY, SHERRY HILL, GUY LAROCHE, MARCIANO BY GUESS, 11,000 Aviv Park Beograd the completion dates for many projects remain uncertain. PINKO, MAX&CO, FLY LONDON SQ M GLA 20 21 arsaw

1,500,000 W 1200

et 1,200,000 1000 est oup, Q4 2014 ague Budapest 800 Pr Gr

900,000 / Vienna eb sq m 600 Buchar CBRE atislava

ade

600,000 GLA Zagr Br ce:

Sofia 400 GLA et

300,000 Belgr ehouse Mark Sour sq m 200 1,000 inhabitants ar

Shopping Center Stock Stock sq m/1,000 inhabitants RETAIL Retail Mark Belgrade retail stock per 1,000 inhabitants is still significantly below the Retail W regional average which amounts to cca 475 sq m per 1,000 inhabitants. WAREHOUSE MARKET

LARGEST RETAIL SCHEMES IN SERBIA The market share of major hypermarkets and retail chains in Serbia has been constantly growing LOCATION PROJECT SQ M GLA STATUS during the past years. In more developed regions of the country, such as Belgrade, there is a } Elsewhere in Serbia, the Novi Sad BIG CEE 34,000 larger participation of hypermarkets and supermarkets, while in Eastern Serbia the participation intensive development Pancevo Aviv Park 23,000 of classic shops and self-service groceries/small groceries is larger than in other regions. Kragujevac Plaza Centers 22,000 commenced in 2005 and was Nis Merkator 21,000 mainly oriented towards cities Novi Sad Merkator 18,000 RETAIL WAREHOUSE STOCK Novi Sad, Nis and Kragujevac. Kragujevac Roda centar 15,200 } Indjija Fashion Park 15,000 Nowadays, the interest in GLA sqm Total Serbia (incl. Belgrade) THE LARGEST opened Kragujevac Delta Park 14,000 Serbian retail market in 700,000 Belgrade OPERATORS: Krusevac Roda centar 14,000 smaller towns is constantly food: Cacak Roda Centar 12,000 600,000 increasing; several locations MAXI, TEMPO, RODA, Sabac Roda centar 11,400 500,000 Sabac Capitol Park 10,000 already saw new modern METRO CASH&CARRY, Jagodina Vivo shopping park 10,000 developments, such as Indjija, 400,000 VERO, INTEREX, Novi Sad Sad Novi Bazaar 9,000 UNIVEREXPORT, DIS Pancevo and Sabac. 300,000 Nis Forum 8,000 } Throughout the previous furniture: Cacak Stop.Shop. 6,300 200,000 FORMA IDEALE, Zrenjanin Aviv Arlon 25,000 years, the Retail Park segment 100,000 MATIS, EMEZZETA Nis Stop.Shop. 13,500 was the most active Subotica Stop.Shop. 11,000 planned development sector in Serbia, diy: Subotica MPC 10,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 URADI SAM Sabac BIG CEE 10,000 which continued in 2014. Source: CBS International, part of the CBRE Affiliate Network Source: CBS International, part of the CBRE Affiliate Network

While the financing of larger-scale projects remains difficult, there is still a strong appetite for quality retail The structural change in Belgrade’s retail market actually began in 2002 with the entrance of two assets at the right location. It appears that investors are prepared to buy, since retail property, particularly international chains, Slovenian Mercator and Greek Veropuolos. These projects brought prime retail, has historically seen lower vacancy rates than other sectors during economic downturns, innovative concepts to the Serbian retail scene (for example, extensive grocery areas were not making it a good defensive asset. Prime retail in particular tends to be the last to experience vacancies part of shopping centers at that time). and the first to benefit from an economic recovery. Further market expansion was fuelled by the entrance of the German Metro, French Intermarche According to the CBRE Global Research and Consulting recent research, for many retailers opening stores and Belgium Delhaize which bought local chains Maxi and Tempo Cash&Carry and continued in new markets is a priority, so overall a steady growth in new retailer openings is expected in 2015. their expansion throughout Serbia. However, two factors are likely to limit the rate at which retailers expand into new markets in coming years. Firstly, the ability of retailers to access the prime locations will be restricted by the limited pipeline In terms of future supply and new entrants, German Lidl and French Carrefour are looking for of new space in many markets. Secondly, and partly as a result of the above, more retailers will look to proper locations in Belgrade and Serbia. Also, after a longer search for appropriate locations in grow their business via an online platform. Whilst some will downsize their store presence, the vast Belgrade, Swedish IKEA is in the final phase of land acquisition. IKEA’s first department store majority are embracing the multichannel approach – they are developing their online presence, but they should be built along highway E75 in Bubanj potok and their plan envisages the construction of are also investing in new store openings and their existing stores. four more facilities across the country. 22 23 et RESIDENTIAL MARKET

NUMBER OF CONSTRUCTED UNITS Belgrade Serbia Residential Mark 19815

19049 A f t e r a c e r t a i n s t a n d s t i l l i n 18162 19103 18449 18648

16417 construction activities due to global 15223

16388 financial crisis, a number of constructed residential units in Belgrade continued the

13871 positive trend and grew by 26% in 2012 as 13505 compared to 2011, generating the number of 8,096 10496

10713 units, thanks to the joint efforts of the government and the 10372 private investors being active in several Belgrade m u n i c i p a l i t i e s . 1577 2989 2132 3325 4977 7292 7379 7601 7860 6150 5684 6416 8096 7596

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Statistical Office of the Republic of Serbia

Residential property market is constantly showing that driven by intrinsic market fundamentals, products benefiting from well-balanced price to quality ratio can In order to support the construction With the inflow of international developers, the standards of count on fair absorption rates. With a steady general economic recovery and sector, Serbian government passed quality of the construction works and level of finishes are at housing market movements, Belgrade construction trends are expected to pick up New Law on Planning and Construction, a far more sophisticated level, moving the standards ahead in the following years. The persistent demand should attract prominent developers which will help investors speed up their with almost each new larger-scale development. willing to offer quality condominiums and houses. This trend will result in a higher building process. quality-price ratio of the residential products on the market. The location, the mix of units, the apartment structure, level In addition, Government entered of finishes are key parameters differentiating the unique LARGEST RESIDENTIAL PROJECTS IN BELGRADE development sector, with the two selling points and competitiveness of the individual projects. Project Address Developer No of Apartments leading projects at the location of Stepa Examples of a successful projects with strong sales dynamics Belville Jurija Gagarina Blok 67 Associates 1,858 Stepanovic, featuring 4,616 units and in even during the construction phase presume careful ABlok Omladinskih Brigada Deka Inzenjering 840/296 first phase Dr Ivana Ribara settlement in New elaboration on the expectations of the target group. West 65 Block 65 PSP Farman 514/150 first phase Belgrade, with 707 units. The sales As the market has shifted the focus to predominantly buyer- Central Garden Dalmatinska AFI Europe and Shikun & Binui Group 500/89 first phase prices are set at EUR 1,290/sq m. centered market, mid-end projects as the most common Savada Omladinskih Brigada Neimar V 303 The government has also introduced a category are introducing certain high-end features as per Alpha City Zivka Davidovica International Alpha Construction 299 special support package for the buyers the choice of finishes and accompanying amenities, by Dunavske Terase Vojvode Micka Aramont 270 in the projects financed by the adopting these as a standard of equipment. Maxima Center Blok 11a Imperijal gradnja 181 government, allowing for non-interest Marmil Land Juzni Bulevar Marmil 159 These among the rest presume: wood-aluminum joinery, loan equaling 20% of the sales and Golf 8 Beogradskog Bataljona Peteg 153 slide glass doors, suspending ceilings with the decorative purchase price, to cover for the deposit Blok 61 Vukasoviceva Neimar V 140 lightning, smart house system, centralized heating and air- needed to apply for the housing loan, Galerija apartmani Francuska Ocean Atlantic International 113 conditioning system, reception and 24/7 security, private with a 10-year repayment period. Obelisk apartmani Dzona Kenedija Gradina Zemun 108 mini park, gym for the tenants only and alike. Paunov Breg Paunova CPI 107 first phase 24 Source: CBS International, part of the CBRE Affiliate Network 25 During 2012 and 2013, the ASKING SALES PRICES (EUR / SQ M) sales prices of residential RESIDENTIAL EUR/sq m units remained mostly mid-end high-end incl.VAT et stable, due to the more 3,200 LEASE balanced demand-supply 3,000 ratio. The asking prices of 2,800 The demand in residential lease sector is generated by mid high-quality projects 2,600 and top management expatriates coming from large depend on the location, 2,400 international companies, diplomats and various project- investor and municipality 2,200 based experts involved in implementation of various Residential Mark and start off from EUR 2,000 projects both with companies and the government. 2,200, while mid-end 1,800 In general, couples and singles are manly looking for 1-3 projects, characterized by 1,600 bedroom furnished units in more urban parts of Belgrade medium quality of finishes, like the city centre and Vracar, while Senjak and Dedinje are usually range between EUR Vracar City Center New Belgrade Vozdovac Dedinje still favourite choice for the families with children, largely 1,500-2,100. Source: CBS International, part of the CBRE Affiliate Network due to the fact that most houses feature nicely landscaped yards, whereas the majority of the international schools are Belgrade downtown has long been the most desirable location for living, but unfortunately offers very few in immediate proximity. newly built residential opportunities. This is primarily due to the fact that it is one of the most densely populated areas in the city with almost complete lack of available land lots, except for smaller-scale projects New parts of New Belgrade are also witnessing the increase in the wider city center, or the refurbishment options. of demand, manly influenced by those expatriates looking to be within the walking distance from their offices. Furthermore, Belgrade is one of the rare European cities lying at the confluence of two international rivers, which has not exploited this extraordinary potential at all. As elsewhere in the world metropolises, the most With regard to the supply, most of the offered properties luxurious residential properties are overviewing the river, which inspired a number of the pipeline projects are individual listings at attractive parts of Belgrade, while to target the riverbanks and offer a whole new concept of high-end living. only few owners have constructed the building as per the standards of the foreign tenants for speculative use. The most recent announcement and by far the most colossal mixed-use scheme Belgrade Waterfront, by UAE developer Eagle hills company, will definitely change the market perception and move the standards Market is definitely offering good supply of properties ahead. The project is expected to fully remodel the old Belgrade banks, shaping them to suit various located at the most attractive parts of Belgrade, furnished commercial and residential contents, while it will certainly inspire other investments in the years to come and decorated in a way to meet the expectations of the that would add a special long-awaited value to the river banks and the city center area. most sophisticated tenants.

ASKING RENTAL LEVELS IN BELGRADE Source: CBS International, part of the CBRE Affiliate Network

Newly Built Properties EUR / sq m / month Renovated Properties 14 - - 13 - - 12 11 10 9 8 7 6 Dedinje / Senjak Vracar New Belgrade Downtown 26 27 INDUSTRIAL / LOGISTIC FACILITIES (RENT / SQ M)

Popular locations for development of industrial/logistic facilities 4-6 EUR

et within Belgrade city boundaries are: 1 Highway towards Zagreb 3-5 EUR 2 Highway towards Novi Sad / 3-6 EUR

Batajnicki road 4-6 EUR 3 Pancevo Road 4 Zrenjanin Road Industrial Mark Land 5 Highway towards Nis 2-4 EUR (Lestane area)

The rental prices of modern logistics space usually range between EUR 3-6/sq m/month, depending on the quality, size and features of the property, while more sophisticated logistics premises may exceed this level thanks to highly advanced amenities and limited offer on the market. The rental levels for older facilities that lack modern features vary between EUR 2-3/sq m/month.

INDUSTRIAL MARKET LAND

The Serbian legal framework recognises two land categories most commonly used for In general, logistics market in Serbia is still immature, with small portion of modern logistic centers. investment purposes: construction land and agricultural land, with freehold or The logistics offer is rather scarce and is generally tailored to specific occupiers needs. leasehold ownership. Land prices for industrial land in Belgrade surrounding area and Roughly estimated, the total stock of modern logistic space exceeds 900,000 sq m while app. in key towns in Serbia vary between EUR 10-30/sq m, while the land suitable for 500,000 sq m is located in Belgrade and in the settlements in its close proximity, such as Stara Pazova, commercial/retail development in Belgrade vicinity range between EUR 50-100+/sq m, Pecinci, Simanovci, Dobanovci and Krnjesevci. depending on the location, access, infrastructural amenities and development efficiency. The prices for land suitable for commercial developments in attractive parts More specific, the number of companies that provide outsourced logistics services is increasing, at of Belgrade usually stand around EUR 200 per square meters of gross buildable area, the moment third party logistics (3PL) operators stock amounts to app. 200,000 sq m. while the premium locations in Belgrade can command even higher prices.

As per the land for residential development in Belgrade, the land prices may vary Previously, investments in logistic facilities were mostly coming from THE LARGEST OPERATORS significantly, as they are determined by location and the position of the plot and local companies in need of facilities for owner occupancy. development potential. In case of land lots enjoying solid residential investment MILSPED potential, key city locations mark the following price ranges: prime Dedinje area EUR However, stronger development has commenced in recent period, LAGERMAX 800-1,000/sq m of the land lot, lower Dedinje area 400-600/sq m of the land lot, Vracar with the introduction of several local and foreign investors that have GEBRÜDER WEISS and city center area EUR 200-400/sq m of gross buildable area. plans to develop modern facilities across the country or are able to NELT execute built-to-suit options for the tenants, which became more SCHENKER One market segment that is maybe ahead of the curve is agriculture. Rampant capital sophisticated, searching for modern and flexible warehouse space LOGISTIC TEAM SEKULIC appreciation trend was recorded for large tracts of agricultural land in Northern Serbia with set transportation infrastructure at attractive locations. KUEHNE NAGEL as average prices doubled over the course of the last two years. What used to be Requirements also include proper floor-to-ceiling heights of 9-12 AWT INTERNATIONAL commanding prices EUR 4,000 to EUR 5,000 per hectare is now trading for EUR 8,000 to meters, independent power supply, temperature control, loading PRO-TEAM EUR 11,000 per hectare, strongly outperforming comparable property interest in docks, adequate security systems, WMS systems, etc. Hungary or Croatia for example. 28 29 5-STAR HOTELS

Hotels Address Keys

Hyatt Regency Belgrade Milentja Popovica 302 Metropol Palace Kralja Aleksandra Boulevard 239

et President Kovilovo Zrenjaninski put 27 Square Nine Studentski Trg 45 Belgrade’s Charm Is Simply Irresistable Source: CBS International, part of the CBRE Affiliate Network “It is a city where you can dance until sunrise seven nights a week, where hospitality Belgrade, with less than 20% share of Hotel Mark 4-STAR HOTELS crackles in the air, and where looking good is a international brands, is significantly below birthright and a religion in one.” major regional cities that host between Hotels Address Keys Source: CNN Traveller 40 to 80% of global chains out of the total 88 Rooms Takovska 88 stock in each city. Aleksandar Palas Kralja Petra 9

Consequently, it is expected that Balkan Prizrenska 88 international hotel chains will play an Beograd Art Hotel Knez Mihailova 55 HOTEL MARKET important role in the forthcoming period. Best Western M Oslobodjenja Boulevard 180 Best Western Sumadija Sumadija Square 110 Even though Belgrade hotel market has experienced considerable improvements over the previous Constantine the Great 27.marta 49 years, the market still lacks a satisfactory number of high-end hotels and global hotel chains. Crowne Plaza Vladimira Popovica 416 According to Kongres Magazine, Falkensteiner Tresnjinog cveta 170 } Belgrade hotel supply holds 613 keys in 5-star hotels, and 3,207 in 4-star hotels and garni-hotels. which is one of the leading Holiday Inn Spanskih boraca 140 } Hotel market is under-serviced by international operators communications medium in the IN Hotel Arsenija Carnojevica Blvd 187 field of meetings industry in Jump Inn Zagrebacka 49 Tourist Arrivals Tourist Overnights Central and Southeast Europe, Majestic Obilicev venac 88 t h Year Domestic Foreign Total Domestic Foreign Total Belgrade is ranked as 7 Moskva Balkanska 138 2010 223,046 395,408 618,454 509,807 809,822 1,319,629 destination within TOP 10 BIG Mr. Prezident Karadjordjeva 61 2011 178,777 440,347 619,124 466,227 870,972 1,337,199 A N D M E D I U M M E E T I N G S Palace Toplicin venac 86 2012 189,375 471,299 660,674 493,531 937,853 1,431,384 DESTINATIONS for 2013 Prag Kraljice Natalije 82 2013 182,006 536,937 718,943 453,526 1,036,275 1,489,801 Prestige Vojvode Misica Blvd 28 2014 155,977 597,765 753,742 393,156 1,142,185 1,535,341 Radisson Blu Vojvode Misica Blvd 236

Source: Statistical Office of the Republic of Serbia Zepter Terazije Str 34 Zira Ruzveltova 127 In the previous few years, the number of NUMBER OF PASSENGERS BELGRADE GUESTS PROFILE Zlatnik Zemun Dobanovacka 37 tourists, more specific foreign tourists in Source: CBS International, part of the CBRE Affiliate Network Belgrade marked the growing trend, as

well as the number of tourists using 5 4.64 30% hotel facilities for the accommodation. PLANNED HOTELS 4 3.54 20% 70% Corporate/Business guests 3.12 3.36 The number of passengers using 2.70 Hotel Address Keys Opening 3 2.51 2.65 10% international airport Nikola Tesla also 2.22 2.38

millions Courtyard by Marriott Vasina Str 108 2015 2 0 rises, especially those travelling on Envoy Cika Ljubina Str 49 2015

business. 1 -10% MICE (meetings, incentives, InterContinental Block 20 220 n/a 15% conferences and exhibitions) Rajiceva Rajiceva Str 200 n/a Abu Dhabi’s Etihad Airways has acquired 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 Leisure (city breaks, cultural Kempinski Nikole Tesle Blvd 280 n/a a 49 percent stake in Serbian airline JAT 15% and sports events, private) Airways, renamed into Air Serbia. Annual Passengers (millions) Annual growth (y-o-y) Source: CBS International, part of the CBRE Affiliate Network Source: Nikola Tesla Airport, Statistics 30 31 Serbia as a small country is far from being seen as an institutional investment destination; however, there are few countries in the region which currently meet institutional investors’ criteria. Clear categorisation into value-add and et opportunistic investment markets bears adequate premium to ‘core’ CEE markets. As of beginning of global economic crisis, Belgrade market lacks any recorded investment transactions, with only several non-income transactions recorded in owner-occupied segments, generated by end-users (corporates and owner-occupiers). Besides end-users, on several occasions, opportunistic buyers made the trade of properties in vacant possessions, aiming to renovate the Investment Mark property into hotel or an office building.

WHY HIGHEST & BEST USE ANALYSIS INVESTMENT MARKET ?AND FEASIBILITY STUDY ARE IMPORTANT ?

The overall economic climate in the CEE region continues to remain varied as each of The main driving force behind any real estate INVESTMENT ALTERNATIVES the individual countries has differing degrees of success, stability and challenges, both development success story is to identify unsaturated Belgium Experience in economic and political spheres. The Central & Eastern European (CEE) property market segment or even to create demand by visionary investment market was steadily recovering during 2010-2011 after reaching a cyclical converting desert into Las Vegas or Dubai. Analytical Like most other European countries, low in Q1 2009. tools aiming to comprehend proposed project concept, Belgium is confronted with a quick ageing uniform it and test if from financial industry perspective of its population. This is the direct result Year 2012 was very sluggish, however 2013 proved to be one of the most active years is where our team comes on board. of longer life expectancy and continuous for commercial real estate investment in CEE since the financial crisis. From a cross- improvement in living standards. border investor perspective, Poland continues to be the most active market in the Highest & Best Use Analysis will tailor made initial idea so region, ranking high on most investors target lists. Russia and Poland remain the that profit maximization on one hand and development Belgium counts 136,272 beds in elderly drivers of CEE’s 2010 to date volume, together accounting for over 80% of the volumes. risk minimization on the other, both become clearly homes today, but will need 37,000 visible from today’s perspective. Answers to the question additional rooms over the next 20 years. OFFICE SHOPPING CENTERS whether the profit generating potential is adequate to PRIME YIELDS (%) PRIME YIELDS (%) The bricks and mortar component of the market risk to be undertaken and sufficient to service senior housing has attracted growing development finance structure will result from feasibility Belgrade 9.50 8.25 interest from investors over recent years. study. It will objectively and rationally uncover the strengths and weaknesses of proposed venture, Since 2006, the sector has quickly Bratislava 7.25 7.00 opportunities and threats as presented by the emerged as an alternative investment Bucharest 7.00 6.90 environment, the resources required to carry through, class for those investors looking to and ultimately the prospects for success. diversify their portfolios. Budapest 7.75 8.00 Our extensive experience across various lines of Prague 6.00 5.50 property industry, together with continuous investment in human capital are improving quality of service Vienna 6.00 5.90 provided on daily level, where although nobody really Warsaw 4.55 4.95 knows what tomorrow will bring, CBRE team will be at you service to build our future together. Source: CBRE Group, Q1 2015 32 33 TAXATION ON According to International Financial Reporting Standards which are applied for statutory financial REAL ESTATE reporting purposes, investment property can be accounted for by IN SERBIA applying the historical cost method, CORPORATE INCOME TAX or the fair value method. Once an Planning an investment in real estate Type of tax Tax rate accounting policy is selected it has to axation

T requires consideration of a wide range of Corporate income tax 15% be consistently applied to all the commercial and financial matters. Tax is VAT 20% / 10% 15% properties of the same type and often an important aspect that needs to be throughout the time. Property tax max 0.4% addressed as it impacts the overall financial According to the cost method, the performance of the investment. Transfer tax 2.5% Taxable profits of a Serbian company value of the property is the historical Capital Gains tax 15%-20% holding and leasing the real estate will acquisition price, less the be subject to 15% corporate income Withholding tax depreciation. The acquisition price on payments 20% / 25% tax. In case the tax loss was incurred, will be depreciated over the useful life to non-residents it can be carried forward for up to five of the property, and increases in TAXES ON PAYMENTS TO NON-RESIDENTS years to offset future taxable profits. market value of the property will not Serbia levies 20% withholding tax on dividends, interest, be subject to corporate income tax royalties, and lease fees for immovable and movable property until the property is sold. On the paid to non-resident entities, and 25% withholding tax on interest, other hand, under the fair value royalties, lease fees and services paid to companies in tax havens (51 method any changes in the fair value countries that have no or low income taxes, per list published by the Ministry of Finance). of the property are directly reflected in the income statement of the Also, 20% tax is levied on capital gains of non-resident entities on sale of shares in Serbian companies. company and, consequently, subject to corporate income tax in the period in which they were occurred. The above taxes can be DOUBLE TAXATION TREATIES reduced or eliminated by an applicable as of January 2014 Gains from sale of real estate by the company double tax treaty Bulgaria 10% between Serbia and u Albania u Austria u Azerbaijan u Belarus u Belgium are taxed with 15% corporate income tax. recipient’s country of Bosnia & Herzegovina u Bulgaria u Canada u China u Serbia 15% Taxable gain represents the difference between residence. Some of the Croatia Cyprus u Czech Republic u Denmark u Egypt u the sales price of the property and the net tax favorable double tax Romania 16% Estonia value. Net tax value is the historical acquisition treaties provide cost decreased for accumulated tax reduction of tax on Finland u France u FYROM (Macedonia) u Georgia Czech Republic 19% dividends to 5%, to nil Germany u Greece u Hungary u Iran u India u Ireland depreciation. Poland 19% on interest and on u u u u u Italy North Korea Kuwait Latvia Libya Lithuania Tangible and intangible assets of the company capital gains, provided Malaysia u Malta u Moldova u Montenegro u Netherlands Hungary 19% that certain conditions are classified in five tax depreciation groups. Norway u Pakistan u Poland u Qatar u Romania u Russia are met. Serbia has a Croatia 20% Buildings are classified as the first tax u u u u network of 54 double Slovak Republic Slovenia Spain Sri Lanka Sweden depreciation group, and depreciated at 2.5% u u u Slovak Republic 23% tax treaties. Switzerland Tunisia Turkey Ukraine annual rate. Land is not subject to tax United Arab Emirates u United Kingdom u Vietnam Austria 25% depreciation. Other assets of a company are depreciated at rates from 10% to 30%.

34 35 VALUE ADDED TAX PROPERTY TAX INDIVIDUALS

20% MAX PERSONAL INCOME TAX VALUE ADDED TAX 10% 0.4% Income of individuals owning and leasing the real estate is subject to 20% personal income tax. Tax base is 20% decreased by 25% deduction for standard costs. VAT on real estate is one of the most complex Property tax is, amongst others, levied on right 10% Individuals whose annual net income exceeds prescribed areas of taxation in Serbia. The first transfer of of ownership over real estate, the right to use

axation threshold of three average annual salaries in Serbia

T newly constructed buildings (i.e. buildings construction land and the use of publicly (approx. EUR 18,000 for 2013) are also subject to constructed partially or in full after 1 January owned immovable property. Tax rate is set by VAT rules shall be observed and applied if additional 10-15% supplementary annual income tax. 2005) or their economic units (e.g. flats) is municipal authorities, and cannot exceed 0.4%. individual has a status of VAT payer. VAT subject to 20% or 10% VAT rate, which depends registration is mandatory if in the 12 months CAPITAL GAINS TAX on the purpose of the building (business or period threshold of RSD 8 mln is reached TRANSFER TAX residential). Input VAT charged by the seller can Capital gains of individuals on sale of real estate are and if individual intends to continue with the be recovered if the purpose of the acquisition subject to 15% personal income tax. Capital gains on business activity. is not further sale or lease of flats for property owned for 10 years or more are not subject If registered, individual VAT payer will not residential purposes. 2.5% to personal income tax. apply VAT on rental of flats for residential Any subsequent transfer of new buildings and Property transaction: purposes but will not be entitled to recovery sale of old buildings (including their first of any input VAT incurred. Standard VAT Sale of real estate is subject to 2.5% transfer u Tax payer who, within the 90-day period, invests the transfer) are VAT exempt, but subject to rules apply in case the building / its part is tax. If VAT is payable on the sale, it is exempt funds obtained from the sales of the property into the transfer tax. Alternatively, application of VAT is rented for business purposes. from transfer tax. The tax base is the sales purchase of the residential property for his personal or an option in case the sales contract envisages price, but the Tax Authorities have the right to his family's needs, i.e. the needs of his household the application of VAT and the buyer is eligible Sale of new flats is subject to lower increase the tax base to market value of the members, is exempt from the tax on capital gains VAT rate. Buyer is eligible to refund of for input VAT recovery. Under this scenario property if they determine that the sales price VAT paid subject to meeting certain transfer tax is not due. v requirements. is below the market value. Tax payer who, within 12-month period, invests the funds obtained from the sales of the property into the Lease of business premises is subject to Transfer of ownership over old flats and purchase of the residential property for his personal or general VAT rate. Subsequent investments in buildings to an individual for residential his family's needs, i.e. the needs of his household purposes is not subject to VAT but one’s own or leased property can be subject to transfer tax. members is entitled to the reimbursement of the paid input VAT recovery adjustment if certain criteria tax on capital gains. are met (e.g. if tenant leaves the premises, if the decision is made to sell the building instead FIRST TIME HOME BUYERS of leasing it to third parties etc). Transfer tax exemption / VAT refund is available to first time home buyers First transfer for who are Serbian citizens, up to 40 square meters plus additional 15 square residential apartments The choice of the accounting policy will also have implications meters per member of the family. and buildings on the property tax liabilities of the real estate company. If the property is accounted under cost model, property Requirements for the applicants: Tax exemption tax base will be determined based on officially published +15 sq m u the Buyer is an adult citizen of the Republic of Serbia, with the per family prices of square meter at similar locations by the member permanent place of residence on the territory of the Republic of Serbia; municipal authorities based on the First time home buyers previous year data. If the property v the Buyer buys the apartment for the first time, and has not previously 40 sq m is accounted for under the fair 2.5% been the owner or co-owner of any other property on the territory of the or value model, the tax base will be Republic of Serbia, as of July 1st 2006 till the moment of signing the Sales 10% the fair value of the property. and Purchase Agreement for the subject property. 36 37 FINANCIAL FEASIBILITY STUDIES

OFFICE HIGHEST & BEST USE STUDIES SHOPPING CENTERS DCF ANALYSIS CONTACT RESIDENTIAL & MIXED USE BEST EXIT STRATEGY INDUSTRIAL & LOGISTICS INSURANCE VALUATION DEVELOPMENT LAND LEASE VERSUS PURCHASE ANALYSIS CBS International

LEISURE & ALTERNATIVE APPRAISAL REVIEWS INVESTMENTS CAPITALIZATION RATE CONSULTATION GLOBAL CORPORATE SERVICES INVESTMENT & VALUATION ADVISORY Goran Zivkovic, Deputy Managing Director Nenad Suzic, Head of Valuations HOTELS VALUATION ADVISORY +381 11 22 58 777, +381 64 70 81 917 +381 11 22 58 777, +381 63 11 58 732 PORTFOLIOS [email protected] [email protected] OFFICE AGENCY HOTELS NEW LEASE ACQUISITION Milica Nikolic, Head of Office Agency Srdjan Teofilovic, Senior Consultant OFFICE +381 11 22 58 777, +381 64 26 95 023 +381 11 22 58 777, +381 65 230 30 34 RENT REVIEWS AND RENEWALS AGENCY [email protected] [email protected] TENANT REPRESENTATION RETAIL AGENCY MARKET RESEARCH LANDLORD REPRESENTATION Jelena Radulovic, Retail Agency Director Tamara Kostadinovic, Head of Market Research PROPERTY SALES & ACQUISITIONS +381 11 22 58 777, +381 65 65 00 146 +381 11 22 58 777, +381 64 70 10 880 [email protected] [email protected] GLOBAL CORPORATE SERVICES RESIDENTIAL AGENCY PROJECT MANAGEMENT Mina Kalezic, Sales & Marketing Manager Vladana Talic, Project Manager SHOPPING CENTERS & HIGH STREET +381 11 22 58 777, +381 64 70 100 12 +381 11 22 58 777, +381 65 22 73 387 RETAIL & OUTLET PARKS RETAIL [email protected] [email protected] RETAIL WAREHOUSE AGENCY INDUSTRIAL & LAND AGENCY PROPERTY MANAGEMENT Dusan Tripkovic, Senior Consultant Miroslav Vukovic, Head of Property Management +381 11 22 58 777, +381 65 22 73 383 + 381 11 22 58 777, + 381 65 48 88 577 NEW HOMES SALES RESIDENTIAL [email protected] [email protected] SECOND-HAND HOUSING MARKET AGENCY TENANT REPRESENTATION LANDLORD REPRESENTATION

DEVELOPMENT LAND SALES LAND & ACQUISITION SERVICES AGENCY

NEW LEASE ACQUISITION INDUSTRIAL & TENANT REPRESENTATION LOGISTIC AGENCY LANDLORD REPRESENTATION PROPERTY SALES & ACQUISITIONS OFFICE Associates RETAIL RESIDENTIAL MARKET RENT ANALYSIS LEGAL INDUSTRIAL & LOGISTICS karanovic / nikolic SPECIALIZED MARKET OVERVIEWS MARKET Milan Radonić HOTELS RESEARCH +381 11 3094 200, +381 11 3094 223 [email protected] MARKETING STRATEGY DEVELOPMENT HUMAN CAPITAL MARKETING DESIGN, COPYRIGHT & PRODUCTION Gi Group HR Solutions Jelena Kostić, Consultant MEDIA PLAN DEFINITION +381 11 3087 331 ADVERTISING & PR PROJECT [email protected] CAMPAIGN MANAGEMENT MANAGEMENT TAX ADVISORY EVENT MANAGEMENT PricewaterhouseCoopers Consulting doo Dragan Draca, PwC | Senior Tax Manager PROPERTY & FACILITY +381 11 3302 100 ONE-STOP PROPERTY SHOP MANAGEMENT [email protected] 38 39 MARKET PRACTICE

Lease length In modern office buildings, commercial leases run for a limited number of years, and terms

actice usually for 3-5 years with possible exit clauses with penalties for early termination. The tenant has a right of renewal only if stipulated in the lease. et Pr Rent Rents are stated in Euros and paid in Euros or in Serbian Dinar (RSD), payment according to the exchange rate on the day of payment and are payable Mark monthly/quarterly in advance. Rents are quoted exclusive of VAT. The turnover rent is available in shopping centres, percentage based on tenant’s sector of business.

Security Deposit Typically a cash deposit or bank guarantee, equivalent to three months rent is required.

Service charge The tenant pays service charges. and other For Class A office buildings, service charges are generally around EUR 4/sq m/month, expenses depending on costs included. For shopping centres, service charges are, depending on costs included, around EUR 6.0-6.5/sq m/month with marketing expenses of EUR 2.0-2.5/sq m/month. The real expenses are calculated on open book policy. High street properties usually require no service charge. Electricity consumption (excluding the heating/cooling) is metered for each tenant and this cost is not included in service charges. Phone and IT services are also tenants’ cost.

Insurance The tenant covers cost of insurance of its own premises and civil liabilities. The Landlord covers costs of building insurance (usually recovered by service charges).

Fit-Out In office buildings, the Landlord shall provide a standard fit-out package of the leased area and deliver them to the Tenant in accordance with the technical specification, which usually vary from building to building. Any divergence from the standard layout that may incur costs, is to be agreed between the parties. In shopping centres, fit-out expenses are negotiable between the parties. For anchor tenants, Landlords may fully cover the costs of fit-out.

Incentives Tenant incentives may be offered by the Landlord. It is usually rent-free periods, free parking spaces or capital contributions for space fit out. High street retail incentives are not common practice and are deal dependent.

Basis of Basis for measurement are net floor areas quoted in square meters, measurement which includes kitchens and rest rooms, internal walls and circulation space, but excludes vertical shafts and structural walls.

Property taxes Value Added Tax (VAT): VAT at 20% is payable on rent, service charges, agents’ fees, and other costs legal fees, notary costs, retail units purchase and car parking; VAT at 10% is payable on newly built apartment purchase. Most companies (not banks, federations and associations) can recover VAT. Property Tax: The local real estate tax is 0.4% of the property value, for all classes of office space, and is recoverable from the tenant as a part of the service charges. The amount of tax is based on a complex calculation, done by the local authorities.

Agents’ fees Lease: Fees vary from 12% - 15% of yearly rent in office segment. In residential and retail segment one monthly rent is more common. Sales: The usual fee is 3% of the sales price. SREALE ESTRABTE TODAIAY

CBS International doo 88b Omladinskih brigada Str, 11070 Belgrade T: +381 11 22 58 777 M: +381 64 70 100 12 www.cbre.rs | www.cbre.com

The information presented herein reflecting the choice of properties and the photos used is strictly informative. CBS International doo is not liable for any changes that may take place as these are subject to the business decision of the developers. This Publication is the copyrighted property of CBS International doo ©2015. All rights reserved.