OFFICE MARKET RESEARCH Montenegro 2018 Overview Summary Recent Trends Prognosis In the past decade Montenegro has shown considerable With the country directing its inflow of investments into growth, and many consider the country one of the fastest tourism, it is very likely that new structures will continue to rising tourism markets in the world. With its stable economic be built to accommodate the demands of the market. The growth over the past few years, it is sure to continue to new road infrastructure and air connections should allow not attract foreign investments in the foreseeable future. The only a better and faster connection between the southern only downside of such trends is that development has and northern region, which would again present a valuable largely been concentrated on retail and hospitality sectors, opportunity for new projects in the northern parts of the whereas the industrial market has been largely left in the country, but this will largely depend on external factors. backdrop. Office Market Overview Summary Demand The core of business activity is located in Podgorica, Demand is driven by new companies, expansion of those therefore it presents a business hub of Montenegro. already present on the market, as well as companies Currently, Podgorica’s Central Business District (CBD) is currently occupying lower standard offices. located on and around the Roman Square which is The majority of demand will continue to come from commonly referred to as Vektra Square after the international and local companies that are actively looking to construction of the first major development, Vektra business relocate from older and lower standard office buildings to center. The secondary business district of Podgorica is newer and modern buildings. located east of the Roman Square, towards the city center. This area has historically been called “Across the Morača“, Modern Office Building Stock originally a residential suburb with uniform high-rise Business Project GLA apartment buildings. The city center and its neighboring District areas are also considered to be the secondary business Ex Hypo Alphe Adria Bank Central 4,500 district. Even though a few new office buildings are present, Kroling Central 3,000 it is unsuitable for investors to develop large office Building between T-HB Central 4,500 developments within this area due to smaller land parcels. “Professor’s Building” Central 3,000 Business districts Cijevna Komerc Central 5,500 Normal Tower Central 6,515 Europoint Central 8,895 Capital Plaza Central 16,000 Universal Capital Bank Secondary 6,000 Hidromol Secondary 3,000 Palada Secondary 1,000 Šofranac Secondary 1,100 Čelebić Building Secondary 6,000 Total 69,010 Source: Colliers International Montenegro Source: Colliers international Montenegro Class A Offices location Rents Rental levels for modern office space in Podgorica range between 14 – 22 EUR/m²/month. Class A office buildings on good locations can be rented at 17 EUR/m²/month. Lower quality office space price varies between 10 – 14 EUR/m²/month. The range of the rental prices for office space units in prime downtown streets and around the Roman Square which are located within residential projects is between 10 – 15 EUR/m²/month, depending on the age, size, condition and visibility of the unit. Office units that are a part of residential buildings, on unattractive position command lower rental prices of approximately 5 – 7 Source: Colliers International Montenegro EUR/m²/month. Modern Class A office buildings include Europoint, Normal Tower, Capital Plaza, Cijevna Komerc/Societe General headquarter, Millennium Center and Celebic Business Center. 2 Office Market Research | 2018 | Montenegro | Colliers International Office Market Yields New Class A office stock supply in 2016 in Podgorica Lack of comparable evidence and a limited amount of deals amounted to approximately 8,000 m² of gross leasable area. has been experienced during the previous months. Hence, This new stock relates to the completion of the Čelebic City there is uncertainty regarding yield rates for the office Center. premises in the area. However according to experts opinion, prime yields are estimated at around 9 % - 10%. Čelebić City Center Pipeline and Prognosis Project Business center by investor Čelebić brought to the market new 8,000 m2 of office space and 5,900 m2 of shopping mall, with 140 parking places. Besides this, Normal Company started building a 5000 m2 A class office building in the area across river Morača in 2017, next to the hotel Podgorica. Selling prices range from 1,800 to 2,100 EUR/m² while the object is still under construction. Due to the new supply and lower demand for the A class office space we are expecting further decrease of rents in the next year. Source: www.skyscrapercity.com The Capital Plaza is located close to the Delta City mall, one of the busiest areas of the capital. The complex started Asking Rental Price business in September 2015, and most capacities have 2 Project Business District Rent EUR/m2 been put to use. The office has approximately 4,000 m of office space remaining for sale in the gray phase (ground Capital Plaza* Central 14-22 floor, 1st,2nd,3rd and 8th floor), with prices ranging from 1,900 2 Normal Tower* Central 13-17 to 3,300 EUR/m , and the price depending largely on the floor where the space is located, with prices on higher floors Europoint* Central 13 being more affordable. Čelebić Building Secondary 16 In early 2018 construction company “Zeta Gradnja” started Cijevna Komerc Secondary 17 building a new large scale project, located between the Capital Plaza and the Delta City mall. The complex will Source: Colliers Montenegro *Additional service charges not included consist of eight buildings, and all available capacities will be Demand for office space in Podgorica significantly increased intended for sale. The complex is planned to concentrate on in 2016 compared to the previous periods. The vacancy rate selling office and retail space, with a focus on office in Podgorica is around 15%., with expectation of capacities. Construction completion is planned by the end of stabilization below 10% vacancy by the end of 2018 when 2024, with a total capacity of 10,000 m2, but sales are the new developments are properly absorbed. planned to start while it is in its gray phase, by the end of 2019, when around 2,500m2 of space will be ready for sale. Prices are estimated to average at about 2000 EUR. 3 Office Market Research | 2018 | Montenegro | Colliers International w Contact: Milovan Novakovic MRICS 554 offices in Managing Director [email protected] 66 countries on Colliers International, Montenegro Serdara Jola Piletica 8/1, 81000 Podgorica 6 continents Tel: +382 20 244 590 United States: 153 Fax: +382 20 244 590 Canada: 34 Latin America: 24 Asia Pacific: 231 EMEA: 112 $2.5 billion in annual revenue 2 billion square feet under management 16,000 professionals and staff About Colliers International Group Inc. Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is an industry leading global real estate services company with more than 16,000 skilled professionals operating in 66 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting. Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice that help clients accelerate their success. Colliers has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals’ Global Outsourcing for 11 consecutive years, more than any other real estate services firm.www.colliers.com Copyright © 2018 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 4 Office Market Research | 2018 | Montenegro | Colliers International .