After the COVID-19 pandemic caused a shift in the commercial real estate market, the demand for office space in Belgrade continues to grow. What is new is that the supply is limited, and meeting the market needs is challenging. Currently, in the capital, there is around 1.4 million square meters of office space, with an availability of about 4 percent, which is insufficient compared to the requirements of incoming companies. Ongoing projects anticipate an additional 150,000 square meters to be available on the market by the end of this year, but even this figure does not promise to meet the needs of major clients, whose demands have increased on average to 20,000 square meters. This has also influenced an increase in prices, which have risen from the recent 15 euros per square meter to 20 euros, and there may be further increases, according to experts.
According to the latest publicly available data, during the third quarter of this year, the office space market in Belgrade grew by 35,000 square meters, while construction was underway for an additional 134,000 square meters. The share of Class A office space increased the most, by five percent, while Class B remained unchanged at 13 percent. Despite this, Belgrade cannot be compared to cities of similar size in the region, such as Bucharest and Budapest, where availability is around 10 percent, and they have up to three times more office space.
The supply is insufficient, and prices are rising
Nikola Đogatović, a real estate consultant, told NIN that foreign companies, which are increasingly present, are primarily interested in A category office space, specifically in the Central Business District, encompassing the entire New Belgrade and the downtown core. Despite the fact that most of them have settled in New Belgrade until now, the interest in the city center is surprising, where prices are higher.
“Certainly, prices have increased recently, and what used to apply to Class A and a price range of 15 to 17 euros per square meter has now risen to 16 to 18 euros. This has been influenced by inflation, as well as indexation since lease agreements in 99 percent of cases are in euros. Despite the previous trend of avoiding the city center due to parking issues, we have seen a change recently, with central locations commanding the highest prices,” says Đogatović.
He also explains that in recent years, there has been an emergence of tenants in the market looking for significantly larger areas. Previously, clients seeking up to 2,000 square meters were considered major lessees, while now they are looking for 5, 10, 15,000, and even 20,000 square meters.
“This rarely happened earlier in our market, but it is becoming more common lately, especially due to the conflict in Ukraine when a large number of Russian and Ukrainian companies relocated to our capital. In the meantime, many of them have grown and, therefore, have sought larger spaces. Generally, there is demand. New projects are in the pipeline, and some, when completed by the end of the year, will bring over 100,000 square meters of new office space. However, it’s essential to keep in mind that, although it sounds like a lot, these are just three or four buildings. On the other hand, companies are expanding, some are returning from the region, and all of this increases demand,” explains our interlocutor.
Everyone is returning to the offices
Miljan Krvavac, also a participant in the market, tells NIN that the current state of the commercial real estate market is very dynamic, and the lack of square footage is evident despite the trend of increasing supply through the construction of new business centers, as well as the renovation and repurposing of older buildings into new and modern ones.
“The high demand has been constant since the post-COVID period onwards, with a return of employees to office work. Belgrade is recognized as a hub for providing IT services to clients and companies worldwide, contributing to significant demand. Approximately 170,000 square meters are either under construction or in the planning stage for the near future; however, most of this space finds tenants even before the completion of construction. Judging by all indicators, the positive trend is expected to continue in the upcoming period as most businesses are returning to offices and regular working methods post-COVID. Subsequently, stabilization is anticipated, but with the continuation of positive trends in both supply and demand,” concludes the interviewee.
And it’s not just leasing that is popular; there is also significant interest in purchasing, but the market is unable to meet the demand.
Data from the Republic Institute for Statistics in the third quarter of 2023 show that the share of commercial space in the total market value during that period was €73.3 million (5%). Regarding purchases, the most expensive square meter of commercial space was transacted in the city municipality of Savski Venac (Belgrade), priced at €14,310 for an area of 141 m2. The highest amount of money, €2,017,728, was spent on this particular commercial space.
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