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Real Estate – Construction

Real Estate

For the third consecutive year, Serbia was awarded as the largest Greenfield investment location in SEE by OECD.
Total value of international real estate projects in 2005 reached $181 million, while in the first nine months of 2006 alone they amounted to $153 million.
Office market shows clear signs of strong development.
The net rental rates for Class A office premises in Belgrade ranges between €18-24 per sqm, while class B office space commands levels of €13-18 per sqm per month

Following the 2004 award for Investor of the Year in South East Europe (SEE) by the Organization for Economic Co-operation and Development (OECD) presented to Ball Packaging Europe (USA), Metro Cash & Carry (Germany) was the winner in 2005 and this year Airport City Belgrade (Israel) won as the largest Greenfield investment in the region.Growing investment opportunities for international real estate developers in Serbia have been reflected in recent FDI figures. Total value of their projects in 2005 reached $181 million, while in the first nine months of 2006 alone they amounted to $153 million.
The Belgrade speculative office market shows clear signs of strong development. Since the beginning of 2005, the total inventory of Class A and B office premises increased by 18.5%, reaching its current level of 226,000 sqm of leasable area. It must be noted that the intense development of office inventory in Belgrade started after 2000, and that the presented market characteristics are directly influenced by the modest inventory size.
130,500 sqm of Class A and B office leasable space is located in Belgrade’s Central Business District (which includes downtown and the central area of New Belgrade municipality), while the remaining 96,500 sqm is located in the wider center and suburban areas of the city. The largest number of new completions occurred in the area of New Belgrade, reinforcing its leading position in the overall country’s real estate development.

Due to steadily increasing inventory, rental levels for Belgrade’s Class A and B office space have also recorded a slight but steady decrease during the past 12 months. The net rental rates for Class A office premises in Belgrade range between €18-24 per sqm per month. Net rental rates for Class B office space command levels of €13-18 per sqm per month depending on location, accessibility, parking opportunities and amenities. Through the end of this year, rents should remain at their current levels, but the slight decreasing trend is expected to continue during 2007. If take-up and development completions follow the expected growth pattern, there is a strong possibility for this decrease.

Sales prices stabilized during the second quarter of 2006 and recorded a marginal increase compared to previous years. An increase in prices is recorded in New Belgrade, especially in the blocks along Jurija Gagarina Street. In general, sales prices in prime residential areas range between €1,200 and €2,000 per square meter. Most of the projects marketed as prestigious properties have asking prices above €2,000 per square meter. However, due to various factors including quality and location, their absorption rates have remained modest.

Construction
Long tradition of great achievements that have been attracting international attention
The most dynamic sector with a positive balance of $30 million
Serbian architects and builders are recognized as highly educated, innovative and reliable
Completed projects can be seen all around the world, from North America to Europe, from Asia to Africa and Middle East
Emerging real estate market led to a permanent and dynamic development of the domestic construction industry

Building and construction industry has been on the rise in Serbia in the past few years, mainly because of continued construction activity in the three largest cities – Belgrade, Novi Sad and Nis.During the first six months of 2006 value of construction works completed grew 20.1 %. The construction of transport infrastructure has showed the fastest growth, constituting 49.8% of total construction activities, followed by non residential buildings with 20.2%, then pipelines and electric power lines and residential buildings with 12.5% and other constituting the smallest share of 5%.Serbian construction market is characterized by increased investment activity, excellent prospects in the residential property market, security ensured by the macroeconomic stability and lowest company profit tax rate in Europe.

Furthermore, in 2006 construction industry constituted 3.5% of the total GDP and recorded growth of 9.3%.The general real estate market in Serbia is in its full bloom. The construction of business and residential premises, together with hotels is enjoying a steady rise. Belgrade as the capital is a leader of major construction investments, thus the Urbanization Bureau of the city issued the Belgrade’s Master Plan until the year 2021. The plan envisages 50,000 new apartments with around 4,000,000 sqm to be built.Production of building materials has been growing in the following sectors: metal and semi-metal beams for arches (68.3%), ceramics tiles (49.8%), cement (14.4%), bricks (11.5%), and facade blocks (9.1%).

Looking at the contracted works abroad, the total value in 2005 was more than $204 million. The majority of Serbian companies carry out construction works in Asia: Kazakhstan and Uzbekistan, then Europe: Russia, Germany, and Ireland; Africa: Uganda, Morocco and Nigeria and in America, mainly in Peru.